Surface Transforms Share Discussion Threads

[bones] 29/9/2020 15:59

Thanks for the update, pinkfoot2

[pinkfoot2] 29/9/2020 15:56

Good investor call today-nothing new but CEO spoke well and clearly upbeat without drifting into telephone numbers.Its quite compelling when you realise they won OEM from a competitive tender-on quality, process and price so not a fluke.

With a viable alternative to Brembo, company should see dual source as a great base line going forwards and from my own experience, this win should not be underestimated when it comes to hard verification of the product and team

I’m very positive

[rivaldo] 29/9/2020 09:54

That's a shame - I presumed the reason for making the page available was that SCE might have arranged such access for anyone who wanted it. C'est la vie!

[knownowt] 29/9/2020 09:20

+No they can't - MIFID regulations, or somesuch.

[rivaldo] 29/9/2020 08:55

SCE have now opened a research feed on their web site to all the analyst research reports on the company:



I already have access to Research Tree and Finncap's web site, but I assume that these links/PDFs can be opened by those without such access?

[bones] 28/9/2020 22:01

That’s a shame, quemaster. It will probably be double the price by the next meeting and they will say it’s too expensive!

[bones] 28/9/2020 17:23

Agreed, amt, the operating leverage is likely to be spectacular, but it still needs to be well executed. This board know what they have to do.

[amt] 28/9/2020 15:32

If they need to raise finance for a further cell to get to 60m annual turnover at say 70% margin, they are going to be valued at ten times current share price and 10m would hardly be noticeable.

[bones] 28/9/2020 14:12

Thanks for those links, Longshanks. How interesting:

”A spokesperson added that the first model is expected to enter the market in the second half of 2021. The company expects to complete its production facilities in Shanghai and Guangdong Province by the end of this year.“

(my bold emphasis)

First of six models according to that article. Any correlation with the OEM8 timetable and references by Kevin Johnson of “more than one model” are, I would emphasise, purely coincidental and mere conjecture.

[longshanks] 28/9/2020 12:36

Totally agree bones. Expansion comes with some risks - but having got one cell completed with all the teething problems resolved, does remove many of them.

On your earlier point with the reminder of Chinese deep pockets. It is worth looking at Evergrande, the parent company that now owns NEVS: no shrinking violet.



Their ambition in the EV space to compete with Tesla is also well documented with a plan to build 1m cars per year within 5 years.

[bones] 28/9/2020 11:14

Thanks LS. Yes David Bundred did make reference to asset financing potential. Get this expansion right and they are off to the races.

[longshanks] 28/9/2020 10:39

At 65% gross margin and with firm orders from large multinational businesses, they have a number of options available for financing the new cells.

I wouldn't discount an equity fundraising, but if it happened, I would expect it to take place at a significant premium to the current DCF valuation of a fully operating single cell.

[bones] 28/9/2020 10:34

LS, How will they fund those builds ahead of production?

[longshanks] 28/9/2020 10:31

Ferdy - I thought you went by Ferry?

My expectation is that the company have already pencilled in remaining capacity from OEM cell 1 and most of new OEM cell 2 with the contracts due to arrive in the near future.

I wouldn't be surprised if separate to that they negotiated a deal to build and operate OEM Cell 3 dedicated purely for supply to OEM 3 (and sister companies).

[toffeeman] 28/9/2020 10:22

OEM 3 will be the biggie IMO

regards

Ferdy

[longshanks] 28/9/2020 10:06

Worth noting too that gross margin has increased to 65% from ~60% historically.

Clearly operational efficiencies from the new plant are starting to feed through,

[rivaldo] 28/9/2020 09:37

Agreed longshanks - the hints on OEM3 and OEM1 are encouraging.

Great also to see SCE state that their aim of halving production costs has now been achieved with OEM Production Cell One.

Similarly to Zeus Capital, Finncap have retained their 55p price target, but note that:

"the DCF is based on one cell only and equates to c13.5x full capacity earnings. More contract flow triggering the next cell investment could drive further significant valuation upside. As the business becomes more established, the discount rate would also likely fall further as well. As a result, we see our 55p target as a staging post on a much longer journey of upside."

[bones] 28/9/2020 09:12

I also recall from the July Q&A, David Bundred saying:

“As it happens in respect to EV question I think our first mainstream electric vehicle client was the Chinese backed Koenigsegg Gemera. Do not underestimate the combination of Koenigsegg’s Technical brilliance and Chinese deep pockets.”

(My bold highlighting)

The size of the Chinese EV market must be huge so if Surface Transforms have effectively used Koenigsegg as a trial for a wider use of CC brakes by NEVS, then might that help flesh out the meaning of that comment about Chinese deep pockets?

[longshanks] 28/9/2020 08:57

OEM3 have certainly not gone away, but it is clear that ST will now reach significant production volumes with or without them.One shouldn't forget though the large investment in money and time made to date by OEM3 in getting the best CCST product for their parts bin.The fact that a data driven OEM selected CCST over the best that Brembo could supply won't have been missed. I am sure they are evaluating options for implementing the brakes on a single model much as OEM5 did as a toe in the water.The item from this RNS that interests me though is the mention of OEM1.

[bones] 28/9/2020 08:45

Snippet from Zeus Capital update note (with TP of 57p):

“Two-thirds of new projects are now for EVs.“

It’s not clear what they mean by “new”. Pipeline or existing?

[bones] 28/9/2020 08:31

”OEM 3: This customer has a unique environmental test that the Company has been endeavoring to pass for some time now. It is encouraging to report that considerable progress has been made over the last year with discussions on target models continuing.“

Is it possible that OEM3 is one of those customers that the company hopes or even expects to convert to contract within the next 6 months? They seem confident of the profitability timelines in 2021 and 2022 despite the accelerated cost profile resulting from the OEM8 SOP target. OEM3 would help to reinforce the targets.

[condom2] 28/9/2020 07:54

I thought the previous price target at 45p a tad light ,but after 15 years of patience not an issue. These numbers reinforce the confident tone from the board.Very well done. IMHO.

[graham1ty] 28/9/2020 07:46

Zeus raise target price to 57p

[montynj] 28/9/2020 07:22

Great results