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Why Mercury Systems?


Mercury Systems (MRCY)

Although dominated for decades by NASA, the recent proliferation of commercial ventures for satellites and deep space exploration has made the race to the "Final Frontier" more accessible. In 2017, of the $348B generated by the Global Space Economy, only 22.7% came from government space budgets.1 Goldman Sachs research suggests growth has hit an inflection point and that the space economy "will become a multi-trillion dollar market within the next two decades."2

While private companies such as SpaceX and Blue Origin draw the lion's share of today's headlines, there are numerous public companies that focus on vital parts of the ecosystem of the space economy. Mercury Systems (MRCY), a core constituent in the Kensho Final Frontiers Index, is one of them.

Based in Chelmsford, Massachusetts, MRCY designs, manufactures and markets real-time digital signal processing computer systems. Its Space-Qualified Microelectronics division manufactures over 20,000 products including amplifiers, filters and storage devices that can stand up to radiation- intense environments. Without hardware like this that can function in the extremely harsh environment of outer space, many satellites and space payloads would become useless.3

MRCY has been trusted to supply components to every NASA Rover project in the last 20 years,4 including Curiosity which is still used on Mars today. Expanding its non- government revenues to attempt to capitalize on the growth of the space market affords MRCY a "market-leading position in the development and commercialization of innovative, affordable and highly reliable microelectronics for space application."5

Figure 1: Mercury Systems (MRCY)

Market Cap ($M) $2,678
GICS Sector Industrials
GICS Industry Aerospace & Defense

Source: Bloomberg Finance L.P., as of September 28, 2018.

Aerojet Rocketdyne Inc. (AJRD)

One of the key hurdles to tapping the potential of outer space has been the cost to launch. NASA's space shuttle program, which ran from 1972-2011, cost an average of approximately $1.5B per launch over 135 missions.6 A study conducted by The Space Review found that it would cost the Space Shuttle program $272,000/kilogram in 2017 dollars to ferry cargo to the International Space Station. However, SpaceX can deliver that same cargo for $89,000, a 67% reduction.

Even as technological innovation and the expansion of the private sector make the final frontier more accessible, the barrier to entry remains too high for many companies. At the forefront of innovation, Aerojet Rocketdyne (AJRD) is destined to change this dynamic in the years ahead and play a growing part in the role the private sector will play in outer space.

AJRD develops and manufactures propulsion systems for defense and space applications, as well as armaments for precision tactical and long-range weapon systems applications. The company is one of the largest US-based suppliers of propulsion systems used for missiles, maneuvering systems, launch vehicles, spacecraft and satellites.7

AJRD has been 3D printing parts for its rocket boosters for years, helping to reduce costs and waste to make launches more affordable.8 One of those boosters partially manufactured by 3D printing is the AR1 Booster Engine. Currently being tested by AJRD, it is "on track for flight readiness in 2019," according to CEO Eileen Drake.9 This engine presents an opportunity for the company as the US government is seeking to end their reliance on the Russian RD-180 engine as the primary launch engine for national security payloads. Successful development and adoption of the AR1 engine would elevate AJRD to a well-known company with a reputation for safe and efficient launches into the final frontier.

Figure 2: Aerojet Rocketdyne Inc. (AJRD)

Market Cap ($M) $2,570
GICS Sector Industrials
GICS Industry Aerospace & Defense

Source: Bloomberg Finance L.P., as of September 28, 2018.

ROKT: View Fund Page

Other Stock Stories

  • 1 Satellite Industry Association, "2018 State of the Satellite Industry", June 13, 2018.
  • 2 Goldman Sachs Research, "Profiles in Innovation: Space", April 7, 2017.
  • 3 Mrcy.com, October 5, 2018.
  • 4 Mrcy.com, October 5, 2018.
  • 5 Global Newswire, "Mercury Systems Receives $9.2M Order for Custom Radiation- Tolerant Solid-State Drive Devices", September 27, 2018.
  • 6 NASA.gov, 2011.
  • 7 Bloomberg Finance L.P.
  • 8 DefensweNews, "Aerojet bends rocket engine cost curve with 3-D printing", January 12, 2016.
  • 9 GlobeNewswire, "Aerojet Rocketdyne Completes Critical Design Review for AR1. Engine", May 8, 2017.

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