The Fastbrick Robotics Ltd (ASX: FBR) share price has been one of the biggest movers on the local share market today.
At lunch the shares of the company behind the Hadrian X bricklaying robot are up an astonishing 54% to 27 cents.
Why have its shares rocketed higher?
This morning Fastbrick Robotics announced that it has signed a memorandum of understanding with the Kingdom of Saudi Arabia that could see the construction of a minimum of 50,000 new homes in the country by 2022 using Hadrian X robots.
According to the release, a construction project of this magnitude would require around 100 Hadrian X robots.
These 50,000 new homes are part of a massive construction project by the Kingdom which is aiming to build 1.5 million new homes by 2022. Approximately 500,000 of these are to be constructed using innovative construction technologies like Hadrian X.
I believe this could mean that if the agreement goes ahead and Hadrian X performs well, there’s a reasonable chance that more new homes are assigned to be built by Fastbrick Robotics.
Should you invest?
Based on its current share price and approximately 970.5 million shares Fastbrick Robotics has a market capitalisation of $262 million.
Whilst this may sound excessive, it is worth noting that the company has previously suggested that its robots will sell for $2 million each.
So if the Kingdom of Saudi Arabia does in fact end up ordering 100 robots, the revenue generated from these sales, assuming no discounts are applied, would be $200 million. In my opinion this would justify a market cap significantly higher than where it is now.
But at this stage it is still just a memorandum of understanding that has been signed and there is no guarantee that it will go ahead.
I would suggest investors keep a close eye on developments.
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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.