Surface Transforms Share Discussion Threads

[fillspectre] 24/4/2018 22:04

Longshanks - from your 911 link:-
"The new generation 911 is based on the evolved MMB platform, which will see more weight savings on the new car." Here's hoping the weight saving extends to a variant with carbon ceramic brakes specifically SCE's!
The October unveil would more fit in with my gut feel of timescales and would be very nice ahead of the November SCE AGM.
A trickle of share purchases today - will be nice if they are followed by some more this week. Fils

[longshanks] 23/4/2018 19:41

There are some interesting vehicle launches planned for this year.

The one that most attracts my attention is that of the new Porsche 911 series.

There was a teaser preview in February:

"Porsche is expected to unveil the new generation 911 at the Paris Motor Show in October this year. So expect more details to be out as we get closer to the official unveil.".

[longshanks] 19/4/2018 23:06

Nobody wants excessive share dilution but in large part companies are listed on markets in order to raise cash.When I spoke to DB it is worth mentioning that he reaffirmed his view that there is sufficient cash to see the company through to break-even. In that respect my concern is maybe misplaced. Psychologically though I am still prepared for the eventuality because we are still at least a year away from a sharp upturn in turnover.Personally I think they should raise more cash as and when they get a significant nomination (OEM 3 or OEM 5). They won't need much but I think they would be foolish to run the operations too lean.

[fillspectre] 19/4/2018 22:32

Ok so unlikely an OEM takes a stake but is there any other mechanism by which an OEM could temporarily assist SCE over working capital issues caused by their delays when to do so may benefit them in the long term? The oft stated desire for the industry to have the option of dual sourcing option would start to be weakened if Brembo took a stake.

I didn't mean to pour troubled water on a becalmed oil slick.

I still feel there aren't many AIM companies with this sort of valuation which has a compelling realistic investment case. Fils

[longshanks] 19/4/2018 07:02

The concept of an OEM making an investment has been discussed before - both on this B.B. and also at an AGMWere any OEM to take a stake in ST, it would undermine the company's relations with all others. More likely is an approach from another brake manufacturer or Brembo.

[fillspectre] 18/4/2018 21:26

Longshanks it is only right and proper that we take off our rose tinted spectacles on a frequent basis and ensure that we question management as is our right as shareholders. As I have already said I am bought into the story we have been sold.

In terms of enough cash to maintain working capital through to cash flow break-even- DB has assured investors several times he has confidence they have this. Having said this he is banking on a timetable they have penned down when talking to OEMs and the Aircraft customer. We know customer's requirements and timing appear to change quite often (the OEM3 race car disc requirement being a classic example). Assuming there is such a thing as gentlemanly conduct in the automotive industry, having been given a nod and a wink that the next expectation was the development of an OEM volume cell - one would hope perhaps a temporary shortfall in working capital may be made up by one of the OEMs taking a small stake in SCE to acknowledge the vagary of their requirements has led to the problem. Is this a wild expectation - a ridiculous notion? Such a move could still be dilutive to existing shareholders. Perhaps a different and better way may be to be paid for more development work - even the Aircraft customer may throw us this bone. There is also the possibility in my mind of Aston Martin nominating SCE brakes on a further model and for revenue from sales of retro kits to be increased. And what about all those share options - they could be taken up (still dilutive) to give some cash to the Company coffers. Fils

[longshanks] 18/4/2018 09:48

I find my own rose tinted glasses dim every so often, but I think this is still a stonking investment proposition.I take comfort on several fronts:1) it is relatively de-risked given the current share price, the scale of OEM activity and the large production footprint due to be available soon.2) they have a number of very supportive fund managers on the share register3) I am pretty sure that OEM 5 is AMG with launch supply being scheduled for their new Hypercar. News on that must be imminent for SOP to commence in 2019 as planned.4) the response to the AM-RB001 nomination was muted but with income starting to be generated, interest in the cash flow security and visibility of such deals should increase.5) OEM 3 whilst irritatingly niggly in their test requirements (no other OEM thinks the ultra-low temperature test is reasonable) stand to be an amazing long term partner that will be truly transformative for the company's growth.My concerns - and I have some - are principally around:1) when will product testing be complete for OEM3.2) do the company have enough cash to maintain working capital through to cash flow break-even.As and when concern #1 is satisfied, (and/or comfort #3) I suspect I will be satisfied on concern #2.Having a clearer route to profitability will make the shares attractive to more conservative fund managers. They may be able to pick stock up in the market but I think they will approach the company for a top-up fundraising.

[graham1ty] 18/4/2018 08:46

I do hope we get some news soon. My rosy coloured specs appear to be slightly scratched

[longshanks] 18/4/2018 08:39

You may well be right on timing but OEM 3's anticipated 2017 nomination was due by September, so I personally expect it to coincide at/around the time of this years Frankfurt motor show.My only concern around the OEM cell 1 was that it could become a bit of a white elephant: sitting around idle whilst waiting for orders. However, as far as I can gather, the SVP will utilise the higher efficiency of the OEM Cell furnaces but use the finishing equipment of the SVP. I suspect that a lot of the standard CMC machinery for the OEM cell 1 will be purchased and installed nearer the time that increased production merits it. Likewise the less efficient SVP furnaces (as brought over from the Ellesmere Port site) will stop being used once the OEM cell furnaces have completed commissioning until such time as there is capacity constraint on those furnaces.

[fillspectre] 18/4/2018 06:52

So nomination is a committed step by the OEM and represents that a high confidence level has been achieved with the supplier. For OEM 3 therefore the half year report seems clear - that step is expected in 2018 pending completion of product testing.
I still feel that this will be late in 2018 and well past the June report.
For OEM cell 1 (reference to OEM cell 2 in my previous post was a typo) the final pieces of the jigsaw were ordered post period end 30th November.
Again in my mental model I see that OEM cell 1 is being steadily built up and commissioned to coincide with nomination. It still seems a strong possibility that like buses we will have three positive news items all at once - OEM3 nomination, OEM cell 1 tested and commissioned and a successful VDA 6.3 audit.
What we might have at June is a concrete and positive update of progress on all fronts which the markets react to. Fils

[longshanks] 17/4/2018 22:21

On VDA 6.x - my research was just to help me clear up in my own head what the standard is and its extent.VDA 6.1 is a systems standard and has generally not been required if a company, like ST, is qualified to ISO9001. That has now been updated to require IATF 16949 as an acceptable alternative.To be a supplier of parts, the company needs to have VDA 6.3 process audit qualification. That is the standard we are waiting on.VDA 6.5 is one I wasn't aware of before. Were OEM3 to nominate ST for series supply (as has been suggested as a medium term goal) then my understanding is that ST would need to satisfy that standard too. However to be clear - to supply brake disks to OEM3 for a single model - all they will need is IATF 16949 and VDA6.3.Brake disks whether from the SVP or OEM Cell 1 are all constructed in the same manner - it is just that the OEM cells are much larger scale: furnaces in OEM cell 1 are also to be used for part of the SVP process too.I understand nomination as the binding declaration by an OEM that they are to use disks from ST for a certain model or models with a fixed production schedule. As with the AM Valkyrie, ST were nominated for supply in January last year but SOP is not until 2019.In essence nomination provides certainty that orders will be placed but there is still a delay before start of production.Product testing is not about which machines are used but whether the product construction satisfies all operating requirements. The remaining test has been a salt chamber test to replicate road conditions in extreme cold climates. The product variants being tested can be made in either the SVP or OEM cell 1.As far as I am aware, the OEM will be named at the time the nomination is made.My understanding is that the VDA 6.3 audit does not require a fully commissioned production line in OEM Cell 1 - it is the quality management of the production process not the process itself that is audited.

[fillspectre] 17/4/2018 19:47

Longshanks in the 27th February half year report VDA 6.3 is specifically mentioned but not 6.1 & 6.5.
OEM 3 product testing must be taking place with discs from the SVP.
What do you understand by the term "nomination"? Is this a distinct and time disconnected step from order placement? Could OEM 3 product testing complete with discs from the SVP and OEM3 move to a stage where they nominate the ST disc ahead of final commissioning of OEM cell 1. Would nomination be an official announcement by OEM 3 into the public domain - or is it possible at nomination stage the OEM would continue to remain anonymous but ST could report they had been nominated.
Following this I still believe for contract placement ST would have to demonstrate two things - 1) that the OEM cell 1 can produce discs to the same technical standards as the SVP (would this involve a repeat set of product tests?) and 2) that the OEM cell 2 is reliable and can produce the repeatable volumes required at the requisite quality in accordance with a quality system. I am labouring under the mental model (possible erroneous) that the checking of these two things is in effect the remit of the VDA 6.3 audit. Only after this done will we get an order placement. I see this being for OEM3 at the earliest just before the November AGM if not 2019. That is if nomination and contract placement are distinct. Product nomination should be in 2018 as stated in the half year report. Fils.

Please let me know if I am talking rubbish!

[longshanks] 17/4/2018 12:29

I have done some research on VDA 6.x standards.


The standards themselves were updated in January 2017 and there is a requirement for all suppliers to have adopted the updated standards by September this year.


The ones that apply to ST are VDA 6.1, VDA 6.3 and possibly VDA 6.5. VDA 6.2 is targeted principally at car dealerships and VDA 6.4. covers the supply of tools and equipment to OEMs.


VDA 6.1 is a quality management system audit. This is a required certification for all manufacturers of vehicle parts for supply to German OEMs. It would appear that IATF 16949 satisfies this standard.


VDA 6.3 is a quality management process audit which is used to assure standards in the manufacturing process of parts used on cars.


The interesting one is VDA 6.5. This is a quality management product audit qualification. It is not often required but is when a component becomes critical to the OEM. E.g. VWAG require VDA 6.5 qualification when nominating a product for series supply.

[longshanks] 17/4/2018 06:37

My understanding is that OEM3 nomination is contingent principally on final product testing.Completion of OEM Cell 1 is really a given and with successful IATF validation we should anticipate smooth VDA 6.3 audits as the two standards are almost identical.Completion of product testing in this respect means that OEM3 can keep to its own internal deadlines for nominating ST. That may well be in the autumn.---As to capacity constraints in OEM cell 1, it is true that the company could within a short period of time be operating at full capacity. That does mean there is good reason for OEMs to not delay the nomination process unnecessarily if they wish to secure supply contracts.

[longshanks] 17/4/2018 06:20

I am inferring that the timing of DB's ISA transfer may be based on anticipated positive news flow. I was also inferring that if we don't get value enhancing news in the June trading update, the price may well weaken further.In that case, if positive news flow is not anticipated, why transfer now?As to what news to anticipate: I was going by what was written in the interim results: SOP for OEM5, product testing completion for OEM3 and IATF quality validation.No doubt we will hear of the status of OEM Cell 1 in the June TU, but those other items could well trigger RNS statements ahead of June.

[fillspectre] 17/4/2018 00:01

Longshanks - in your post of the 13th April - are you suggesting a further share price fall in July should the OEM3 nomination move back to a later model and hence DB could have transferred more SCE shares into his ISA? Or rather he could have reserved his ISA allowance for other things? I think DB will have more disappointment that the timetable outlined for SCE was not moving to plan. I'm by no means certain we will have an OEM3 confirmed order by June.
Interesting you mention SOP for OEM5. In my mind the race between OEM5 and OEM3 seemed to have recently dissipated. It really would be good news for SCE to have two OEMs vying for the capacity available.
Regards OEM3 product testing - the conclusion of this must surely be co-incident with the final commissioning of the OEM cell 1. Which will also be co-incident with VDA 6.3.
I rather think we need to hear more news about the commissioning of OEM cell 1 before we hear anything of OEM3 product testing and the VDA 6.3 audit being completed.

[goldman] 16/4/2018 19:44

Well spotted longshanks, a couple of interesting articles there, lets hope you're right in that ST turn out to be the supplier, that would be another feather or two in the companies cap.

Thanks also for your valuable input on this board.

[longshanks] 16/4/2018 18:19

One car that has managed to avoid my radar - and surprisingly so - is the AMG Project One supercar.



Unveiled at the 2017 Frankfurt Motor show - 275 models are to be built in 2019.

On the Daimler website - they describe the brakes: "...the ceramic brakes are distinguished by a longer service life, higher corrosion resistance and higher thermal stability".

However there is no mention anywhere (that I can find) of an announced brake manufacturer. That phrase "higher thermal stability" inspires hope that they will be supplied by ST. Given the car is likely to be manufactured in the UK - that makes sense to me.

Likewise, the car is being pitched as a direct competitor to the AM Valkyrie - and in looks it is not dissimilar.

Elsewhere it is good to note that the forthcoming AMG 2020 Black Series will be sporting "uprated brakes".

[longshanks] 13/4/2018 12:59

You may be right that timing of an ISA transfer is insignificant but there is precedent: DB transferred in March and April 2016 (for two tax years) just prior to there being the surge in the share price to almost 30p over the summer.As to speculating on the next (positive) RNS, I have no inside knowledge but do perhaps have a clearer picture than others that the company remains very active on all fronts. News could come from a number of quarters. We should hear soon on SOP for OEM 5 but the most likely news is confirmation that product testing for OEM 3 is (finally) complete. There are the quality audits for IATF 16949:2016 due to be completed in May, and one would hope those to be coterminous with the VDA 6.3 audit from OEM 3.If product testing is completed and the processes are approved to VDA 6.3 then OEM 3 will be in a position to nominate ST.Naturally, if by the trading update in June, these events don't come to pass, it could be that OEM 3 are forced into moving nomination on to another later model. Should that happen I am sure that DB will have wished he had waited until July this year before doing his ISA transfer.

[fillspectre] 13/4/2018 08:48

Well at least the board has woken up! I wonder how many sleeper investors we have interested in surface transforms - just maintaining a watchful eye - fully conversant with the technical and commercial implications the announcement of a significant OEM volume will bring and not least of all the likely upward momentum in the share price.
Regards your theory Longshanks about the timing of DB's bed 'n' ISA compared to last year - I think it a bit of a stretch to read as much into it. Let us not clutch at straws.
So to move to a stronger thread - Longshanks what in your opinion is the next most likely positive RNS given everything you know. Regards Fils.

[goldman] 12/4/2018 21:47

That's a very good and valid point longshanks. Hopefully the longer we wait the nearer we are to the expected good news in one form or another. Rome wasn't built in a day and neither are companies like SCE, these things take time.

[longshanks] 12/4/2018 15:24

Worth also noting that DB did his 2017 bed 'n' ISA in July.Undertaking the transactions this early in the current tax year should be taken as a positive indication IMO.

[backwoodsman] 12/4/2018 10:06

Using what is now quite a valuable ISA allowance is positive to me. Given the higher rate tax on dividends there is much to be gained by keeping income generating shares in ISA so he has forgone that opportunity. Alternatively if the aim is to shelter capital gains in the long run then it is a positive signal that he has chosen to use his, and his wife's, allowances by putting SCE shares in their ISA's.

[fillspectre] 12/4/2018 07:16

I have my answer in the form of an RNS this morning.

[fillspectre] 11/4/2018 22:36

The trades showing at just after 4pm today - are they likely to be someone transferring 40K of shares into an ISA? Does someone have access to better data than myself?
Talkman I'm appreciative of a dissenting voice on this thread but would prefer any comments to be more ably picked up to form a discussion. You had a valid point making reference to Kevin's shareholding a while back - we could have developed that further - as it is one area I, despite being overall positive on SCE, have a concern. Quite happy to talk through on this board.
May I ask Talkman - whether the announcement of a race car contract from a well known OEM would convince you to invest despite the years that investors have been waiting? Or would you only invest on a firm announcement of a large volume OEM contract? From what I remember Longshanks view at the investor day last year was the market would sit on its hands until a volume contract win is announced. However that may not be the next major RNS - we could get another Aston Martin contract or even the Aircraft contract finally unblocking! Fils