Surface Transforms Share Discussion Threads

[quemaster] 07/1/2021 13:54

It was mentioned in a recent presentation how important it was to their customers that ceramic brakes discs still look good after use compared to rusting iron discs and the wheels being cleaner due to reduced dust particles from ceramics.

[bones] 07/1/2021 13:07

In September 2020, OEM8 (an EV manufacturer) committed to a 5 year, sole supplier contract for SCE CC brakes, at a possible £27.5M value for one single model, to commence mid-2021 (a very quick interval to SOP). Kevin Johnson, in recent Q&A, said there would be “more than one model” taken up in due course.

For me, this information tells me to have confidence that EV manufacturers will be seeking the best CC brakes in town. I look forward to the next announcement which David Bundred has just been quoted in the RNS as saying will be “...in the near future...”.

[graham1ty] 07/1/2021 12:47

Backwoods, the weight saving is so great that it can be used either a) to just replace the weight with more battery and extend range or b) to keep the weight reduction, and extend range. A win win.

EV buyers are going to focus on range as one of the key attributes ( though that is also a function of many other things, such as charging time).

Lastly, EVs are not cheap. As a % of the total cost, CC brakes vs iron discs, is not great.

[backwoodsman] 07/1/2021 12:28

Longshanks, I agree, but...the EV manufacturers have to consider the greater cost of ceramic brakes as being worthwhile. Whilst batteries are so expensive there could be a race to the bottom with the cheapest brakes possible being thrown into EV's as they are hardly used. However manufacturers of the higher end EV's will also appreciate the weight saving of ceramics. In the longer run, it might not be best for SCE turnover but could one expect CC brakes to be recycled from old EV's, refurbished and put into new cars? There really is that little brake use on my Tesla M3.

[condom2] 07/1/2021 10:02

Hopefully. Once the contracts roll in this won’t be an Aim company!

[swiss paul] 07/1/2021 09:54

fils, a lot of pollution emanates from tyres.

As an aside I 've not really investigated regenerative braking but do we have any backup that SCE's are a better producer of regen braking power than say a normal brake?

[longshanks] 06/1/2021 16:41

The price movements are relatively unimportant unless you are trading or holding on a short term basis.This is AIM and the market is still illiquid. The news flow will determine some of the big changes but equally there is a growing body of investors that will buy on weakness and lead to a hopefully steady upward trend.

[geko5trade] 06/1/2021 15:23

Don't entirely agree cheese666. The stock held much of the gain from the OEM8 announcement and moved into a new trading range. It's moved up and down within that new range and looks as though it has every chance of breaking out again particularly with news flow almost nailed on and more information about current agreements inevitably filtering out into the public domain.

[cheese666] 06/1/2021 15:12

My experience of SCE, which is much less than many other on here, is of a share price that tends to only significantly rise on clear contract awards based news. I think the recent details further add to the underlying case without necessarily feeding through to the share price
If you look at our recent performance we shot up with OEM8 and then drifted as the impact of that news dissipated. Part of this is our size and low profile.
The lack of market influence is demonstrated today as the FTSE is up 3% today and we're down.
I find this disappointing and hope that as we grow and investors gain confidence in us, the situation changes. As with all growing, innovative companies there is a history of false dawns and hopes being dashed but I feel this is well an truly behind us and that phase of development is done.

[graham1ty] 06/1/2021 15:04

And meant to say, higher revenue from each Cell means quicker payback ( as they say the required capex for each has not changed)

[graham1ty] 06/1/2021 14:54

Really surprised at such muted price reaction generally.

Confirms new contracts in pipeline and now “in the near future”. Tells us of higher ( much higher ?) average selling price. It is not as easy as just saying 50% higher than we earlier thought, as there will also be changed volume numbers for each Cell. But, combined, a 50% increase in revenue from each. That pushes out the immediate need for greater capacity ( ie they can get to closer to £20m from just the small volume cell and Cell 1 ( ie £5m + revised £15m) and to £35m revenue from just two cells. ( those are all rounded approximations).

But the effect on margins should be much more pronounced. Every £1 on average selling price goes straight through to the bottom line.

Anyhow, should provide ample support above 50p, and wait for the “in the near future” next nomination for the next step up

[jerarnie1] 06/1/2021 14:04

Short (positive) interview with analyst from Zeus following TUhttps://www.directorstalkinterviews.com/surface-transforms-the-disrupter-in-a-market-of-billions-analyst-interview/412951652

[pinkfoot2] 06/1/2021 12:38

Automotive usually works on 6 year model cycles.Electric is about to go nuts as the combustion engines unwind.We are in a fantastic position as it’s all about weight and of course emissions

[trickydicky1] 06/1/2021 11:02

ABS rollout took 7 years to become standard from 1985-1992 in Switzerland. Keen for someone to provide better statistics on this, though.

[fillspectre] 06/1/2021 10:23

Tricky - don't disagree with you about the eventual trickle down take-up of CC brakes. Your timescales seem very ambitious but then again we know this decade will see at the end the demise of combustion engine vehicle sales in the UK and perhaps largely elsewhere in the Western World. The case for CC brakes on electric vehicles is compelling as an EV selling point is the whole life vehicle cost. The reduced maintenance requirement for CC brakes sits nicely alongside the reduced maintenance requirements for an EV as a whole. I believe this is why Kevin Johnson has begun to stress this point in his powerpoint presentations. You can imagine the sales pitch - buy this electric car - yes this is the higher capital cost but you will hardly ever darken a service centre again. We also have other environmental levers to be pulled - I refer to a 16th December 2020 Southwark Coroner's Court ruling which found that air pollution "made a material contribution" to a nine year old's unfortunate death. Currently we are spending what it takes to save lives from a disease where the average age of those that have died from it are over 80. We don't yet know how levels of air pollution may increase risk factors for people to getting extreme Covid symptoms. Covid aside - the Southwark coroner's ruling is just the beginning of people questioning why we can ethically and morally tolerate high levels of air pollution particularly when technical solutions are available to us. If we can spend what it takes and disrupt lives and the economy to stop the NHS being overhwhelmed by mainly elderly people from Covid - then we can't argue that it isn't right to focus much more effort to reduce air pollution levels which can harm everybody including the very young. Fils. PS It seems mercenary to try to provide a selling point for CC brakes in this way - but I do believe the point is a valid one. After all some companies have directly benefitted from the Covid crisis.

[toffeeman] 06/1/2021 08:27

We are already on a £70k Merc

[trickydicky1] 06/1/2021 08:17

Let’s imagine they sign up OEM3 (and OEM2 & OEM4) and OEM9 and OEM10, say, and raise £15m to expand capacity, and buy a new site to ensure dual site robustness, which then increases potential sales to £200m (just a potential 10% market share).

Then imagine, like ABS brakes, that CC brakes move from £100k+ plus cars to £70k+ cars and then £40k+ cars. Is a market size potential of £10bn (assuming, say £250/brake disc) (c.10% penetration of all new car sales by 2030+) not unrealistic?

And what share of that might they have, given they presently have a market leading product? Would 25% be too ambitious? That’s only £2.5bn of sales ... which you’d value at, say, 3-5x sales??

Same dreaming as Tesla a few years ago (which still looks cheap IMHO).

[amt] 06/1/2021 08:14

Pe of ten takes into account that it will take a few years to get their. I agree a much higher valuation is possible eventually.

[trickydicky1] 06/1/2021 08:11

Why PE of 10? £75m revenue is what share of likely £2bn (and growing) market?

I’m getting £1bn+ every day of the week.

But there is a long journey with lots of pitfalls and cynics to get there (like TSLA).

[amt] 06/1/2021 07:54

75m revenue could increase ebit to 40m from 25.
Pe of 10 is 400m market cap.
About 2.50

[pinkfoot2] 05/1/2021 20:50

I would be very happy at £2 a share but with Brembo, you might get a special buyer premium.

Only issue for my is execution risk but today’s RNS was very reassuring and they are clearly backfilling on operational strength which is good to see

[t0pgrader] 05/1/2021 19:24

8 x ebit multiple @50% profit margin = 200p per share. Still seems too low.

[pinkfoot2] 05/1/2021 17:54

I think a multiple of 6 is off the mark given the margin and size of market-and lack of competitor pressure.I would be looking for 8x profit

[t0pgrader] 05/1/2021 17:07

With regard broker valuations it's worth revisiting what Finn Cap concluded in July '20 on the assumption of full capacity utilization & projected £50m revenue.

"Increasing capacity utilisation drives valuation: When the Knowsley factory
reaches capacity (100,000 discs/annum in five production cells), we calculate that
revenue could be c.£50m, gross profit c.£30m and EBIT c.£25m. Allowing for the
additional capex to build the incremental four production cells, we calculate that SCE
could have an EV of c.£150m at that point – more than four times the current value."

ie FC's 100p per share indicative value (£150m / 154m shares) rises to 145p assuming the same revenue multiple of 3.

FWIW that still seems like a gross undervalue given the rate and quantum of implied profit growth in an EV industry expanding at an extraordinary rate