Surface Transforms Share Discussion Threads

[sharesoc] 02/1/2019 16:19

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[graham1ty] 02/1/2019 12:38

Happy New Year to all holders. Let us hope that 2019 is a transformative year for SCE and a flood of OEM contracts recognise the world breaking technology.

To avoid jinxing the Company, and for balance:

Let us hope this is not another year of waiting, delayed OEM contracts, further fund raising and continued jam tomorrow.

Now, at the end of the year, whichever happens, I can claim I was right!

[goldman] 24/12/2018 12:45

Longshanks, thanks for your continued input on here. Seasonal greetings to you and all on this board, hopefully next year will be our year in an eventful and positive way. Merry Christmas everyone.

[longshanks] 24/12/2018 12:18

Merry Christmas everyone and let's hope the markets all get back to normal in the New Year.

[longshanks] 24/12/2018 12:17

It is worth noting that Brembo Ceramic brakes come in two variants: the Brembo (Italian) and SGL (German) manufacturing processes and end product are very different. When the companies merged - they blurred where these products were used...but suffice to say: Porsche use SGL; Ferrari use Brembo.The SGL process produces brakes that are significantly better than Brembo's but without the structural integrity inherent in those produced by ST. Regarding performance from cold, I believe ST and SGL have comparable performance with the additional friction layer.

[rivaldo] 24/12/2018 10:58

Jeremy Clarkson reviewed the new Ferrari GTC4Lusso T in yesterday's Sunday Times. He loved it, but noted that the only big thing wrong with it was the carbon ceramic brakes, which "didn't really work when they were cold".

I assume that Ferrari use Brembo brakes. I note that SCE on the front page of their web site say "Outstanding performance, even from cold". Have SCE or anyone else ever done a comparison between the two from cold?

[toffeeman] 21/12/2018 09:23

There is no such thing as a niche market - just a size continuum from minuscule to huge.

So you need to estimate the potential market size and then look at what share of that market SCE could command.

Then look at the price they can charge.

After that you will get an estimate of annual revenue and profit.

Take the profit and discount it and if it comes to more than £20m buy, if not avoid.

(£2m earnings discounted at 5% gives a value of £40m)

[graham1ty] 21/12/2018 09:22

Sorry, amt. the £50m is from their slide show on the website

[graham1ty] 21/12/2018 09:21

Amt, the “pipeline̶1; of OEMs that SCE are working with delivers £50m pa. Gross margin is also far, far higher than you suggest.

As we know, that pipeline has been in place for years, and converting an OEM has proved time consuming.

If, big Happy Christmas if, then if again, if they do convert the pipeline, then the upside is much much more than you suggest. I have been invested for 6-7 years and there has been no knock out RNS that doubles the price. However, I keep the faith and do believe they are close as they have ever been to a breakthrough.

I fully understand why my faith can be seen as overly optimistic. A first look at the track record and you would not touch this with a barge pole. However, having met the management probably 25 times now, I do still believe this will come right. And a few other holders and institutions now think the same.

See you on here next Christmas and we shall see whether they are producing discs for Aston Martin, cash flow positive, signed up for their first major OEM.

Or whether, it is still just around the corner, one more engineering hurdle to cross, a delay with a model, two more Placings......

Happy Christmas

[amt] 21/12/2018 08:53

Having revisited this and read recent reports this looks like a niche market so potential might be say 10m sales in 5 years or so and say couple of million profits. With market cap of 18m I don't see a huge upside. I tend to look for shares that have huge upside like say Zoo Vrs Bgo etc. Not sure this falls into that categories. Am I right?

[longshanks] 17/12/2018 10:33

Interesting to find this on "DirectorsTalk"https://www.directorstalk.net/mclaren-720s-spider-is-britains-newest-212-mph-convertible/This link is associated with ST and yet if you follow the referring link to the story there is a mention of carbon ceramic brakes being used by McLaren but no actual mention of Surface Transforms.

[graham1ty] 17/12/2018 07:43

Timbo, excellent write up. Many, many thanks

[rivaldo] 12/12/2018 09:39

Cheers longshanks and timbo, much appreciated.

It seems to me to be just a question of time (especially as SCE appear to be satisfactorily funded). Anyone should realise that becoming an approved supplier to a multinational auto or aircraft manufacturer will be difficult and require patience, but SCE appear to be in prime position to secure fully-fledged production contracts within say the next six months to a year if all goes well.

[goldman] 12/12/2018 09:02

Longshanks and Tim, Many thanks guys for keeping us up to speed with what you learned regarding the companies progress. To me it’s all pretty positive, slow it may be but the end results will be very rewarding I’m sure, a little longer if needs be won’t hurt.

[spookies] 12/12/2018 08:36

Thanks Longshanks and Tim. It would seem you both have restored some life back into the share price.

[longshanks] 12/12/2018 07:57

OEMs 1, 2 and 4 are sister companies of OEM 3 and so are waiting on completion of tests for OEM 3.A point was made that it is no accident that OEM 3 is seen as a leader in sports car design and development: they are exacting in the scope of testing which, while frustrating, does deliver a degree of excellence from their suppliers that ensures the ongoing technical edge that underpins their brand.

[albert_einstein] 12/12/2018 07:52

Thanks guys for attending the meeting and your in-depth reports.

Everything seems really positive (as usual) but it's these constant delays that is undermining investor confidence.

A major positive announcement on any of the projects would be a welcome fillip at this juncture.

[balcony] 12/12/2018 07:17

Many thanks,You have both put in the extra mile.

[toffeeman] 12/12/2018 05:48

Longshanks and Tim:

Many thanks for taking the time and trouble to attend and report. It is much appreciated.

Nothing on OEMs 1,2 and 4?

[longshanks] 11/12/2018 23:48

Fantastic notes Tim. Well done on getting them down verbatim: makes mine pale.

[timbo003] 11/12/2018 23:09

Thanks Longshanks, that was quick!

A few supplementary notes from me which will hopefully fills any gaps:

Formal AGM

There were around 20 attendees, which included the directors, two managers (Geoff and Kerry) and around 6 - 8 ordinary private investors

All resolutions were passed with circa 26m votes in favour of each resolution and a few thousand against (total votes cast represented around 22% of the shares in issue). There were no questions on any of the resolutions.

Kevin's presentation lasted about an hour with Q&As as we went along, Michael Cunningham (the new CEO) had a five minute slot (after Kevin) at the end


OEM6:

150 new "V" cars are due to be built (worth £2m to SCE) in a 18 month window, all 150 cars have been sold (deposits paid). There will be another £0.5m revenue from selling “track pack”.

A track pack customer ends up with two sets of SCE discs, they would typically just use the track pack discs on the track and then change back to standard SCE discs for regular use and have the track pack discs put into storage. The two types of discs differ in their cooling pattern.

The gossip regarding a possible delay in launching the new model is due to a part that does not fit properly, it has nothing to do with SCE.

There is a future model (different series) which is intended to have SCE discs, this will be a higher volume and is likely to have a production life of 3 – 5 years.

OEM5:

Scheduled for introduction in single model road car in 2021, 6 year production run anticipated, they are currently testing in the next model up (analogous to introducing into BMW 3 series and testing BMW 5 series).

Everything approved for supply except engineering sign off which involves testing with new copper free brake pads supplied by TMD (copper free will be a mandatory requirement from 2025). The test involves a track test whereby drivers rate performance and comfort on a 1 – 10 analogue scale (pass mark 7.5).

SCE see this as a sign of positive commitment from the OEM and are confident that the disc and pad are compatible and will meet the required standard.

OEM3:

Nomination window for our target model is open until summer/autumn 2019. Still need to pass the salt spray test, the only reason why this is required is that in a few markets they use a particular kind of road salt which has caused problems in the past with carbon ceramic brakes (Brembo do not include this test for their discs). It is a destructive test, the test disc has to survive at least n cycles and five test discs have to survive at least n cycles in succession for a pass. The SCE discs survive the test, but the scatter is too wide (I’m unclear as to whether that means n is too variable). SCE are confident they know how to pass the test and will meet the timings for the current nomination window. There is a test rig in the UK, but test takes 2 weeks to complete. The test results go to the OEM before they come to us which is definitely not ideal

Aerospace OEM:

SCE partnership is with a Fortune 500 aerobrake supplier (not Airframe manufacturer), they are currently waiting for Airframe manufacturer approval. The intention is to provide retrofit on existing fleet, as well as new aircraft. Aircraft carrier helicopters might also benefit from SCE brakes, one trial ongoing, but not at an advanced stage.

Retrofit for McLaren:

There is a big pent up demand for McLaren kits, so the plan is to launch in 2019. Kits will be suitable for all models (except 720S and 600LT)

Working Capital:

Cash position looks ok, £3.3m at end of November, £0.5m R&D credit to come, £200K surplus inventory. No need for more cash assuming OEM6 comes on line later next year.

Possible milestones for next year:

• OEM3: pass salt test to meet 2019 nomination window
• OEM6: announcement that SCE discs will be on next model
• OEM5: announcement that SCE officially selected
• Possible left field: USA automotive and/or USA aerospace

Electric Vehicles:

OEM3 presented to SCE on this subject recently. Around half of braking on EVs is through traditional friction brakes. Proportion of braking through friction vs regenerative braking is determined by complicated algorithm which will depend on many factors, including speed and level of charge of EV batteries. With this and the benefits on weight saving vs traditional metal discs, SCE regard EVs more as an opportunity, rather than a problem.

Brexit:

SCE are quite relaxed, the majority of current production (retrofit) goes to the USA, so this will be unaffected. It will probably be more of a problem getting raw materials in from the EU, rather than getting finished product out to the EU. OEM5 and OEM3 seemed unphased. If absolutely necessary SCE could arrange for the final assembly of the discs to be conducted in Europe.

[longshanks] 11/12/2018 20:26

Brexit is clearly something that they have discussed with the German OEMs and I was genuinely surprised at the relaxed mood music that seems to be coming out of these discussions.The details weren't elaborated on but it is clear that ST is seen as becoming a vital strategic partner for the OEMs. Any border controls and/or tariffs are not likely to be seen as a major impediment to them wanting to source disks from the UK.

[markm1980] 11/12/2018 19:58

Thank you also, Longshanks.

Was there anything more specific about Brexit? I am surprised that there is not more concern over this.