Surface Transforms Share Discussion Threads

[pinkfoot2] 19/4/2022 17:51

Big volume today

[jerarnie1] 11/4/2022 12:43

Hardman Talks Video Event | Surface Transforms

Management Presentation and Q&A

We are delighted to announce Surface Transforms will be presenting a live webinar on Hardman Talks at 2:00pm on Thursday 28 April 2022.

The company is holding a Capital Markets Day at its factory in Knowsley on 27 April. This has proved so popular that it has not been possible to accommodate all those who would like to attend. The webinar will provide the opportunity to view the management presentation given at the site visit. This presentation will be followed by a question and answer session with the management team.


This webinar represents a key communication channel for investors to keep up to date with the company's strategy and progress. All investors, whether existing shareholders or not, are invited to watch the presentation and take part in the Q&A session afterwards. There is no charge for attending. Investors are encouraged to submit their questions when registering or during the event. A recording of the webinar will be available on the Hardman & Co website shortly after the event for those cannot attend the live presentation.

[jerarnie1] 08/4/2022 08:37

Surface Transforms launch event at Mosa Frein
Lunch looks good too

[tole] 06/4/2022 18:03

https://masterinvestor.co.uk/equities/small-cap-updates-on-ted-sce-flo-pier-blv-and-char/Surface Transforms (LON:SCE) – beginning to get ready for revving upI was pleased to see that analysts Raymond Greaves and Michael Clifton at finnCap have now upped their price objective for this group's shares.The announcement on Monday obviously pleased the duo, enough to heighten their aim from 69p to 80p a share.Their note is headlined 'FY2021 in line, all eyes now on FY2022 and beyond' and they are so right.This £108m capitalised carbon fibre reinforced brake discs maker has so much potential over the next few years.It is a 'developing situation' and I do see its shares, which closed at 56.5p, as destined for far higher climes – 100p, 150p, 200p within the next three years or so is more than possible.

[longshanks] 06/4/2022 09:47

ST are not sole supplier to any OEMThey are nominated for supply on a model by model basis. A-M may well select Brembo for the next model as may Koenigsegg or the other OEMs.It will come down to a number of factors which supplier is nominated each time but increasingly it will be down to available capacity. Brembo are constrained on this as much as ST.

[supernumerary] 06/4/2022 08:21

Small manufacturers can't afford the overhead of double-sourcing major components.

[knownowt] 06/4/2022 08:00

Perhaps it could be a matter of being a superior product.

[toffeeman] 05/4/2022 22:34

Then how come we are sole supplier to A-M, K, OEMs 5&8?

[pinkfoot2] 05/4/2022 15:16

Very unusual for any OEM to go sole global supply-and that is why SCE are a disrupter.The pandemic has shown the folly of stretched supply chains, notably sole supply.

I’m very relaxed

[cheese666] 05/4/2022 12:54

Toffees - that's possible but I don't agree that this is their motivation. If OEM 3 really want Brembo to drop their prices they are in a strong enough position to do that already I believe.
If you keep squeezing a suppliers profit margin something has to give. In this case that would be quality and the relationship between OEM 3 and Brembo. This would soon be noticed by car buyers and journalists alike. Some parts are about having the best available on your car. The dual supply is also important.

I have no idea if OEM3 will order from us but, I think your overstating the cost cutting. Let's not
forget that OEM3 is a highly profitable division and there are other extremely high profit and prestige brands in the wider group. There's a genuine drive for the best from these brands.

[fillspectre] 05/4/2022 12:52

Toffeeman others have expressed this concern in the past - that maybe ST dancing to a merry tune - but who knows. We know that David Bundred lists OEM8, 6, 10 and 5 ahead of any mention of OEM3 in the Chairman's statement. He then goes onto mention OEM9, Koenigsegg and Retrofit. Is their any relevance to this sequence in order of importance to ST's continuing future? Fils

[fillspectre] 05/4/2022 12:52

Toffeeman others have expressed this concern in the past - that maybe ST dancing to a merry tune - but who knows. We know that David Bundred lists OEM8, 6, 10 and 5 ahead of any mention of OEM3 in the Chairman's statement. He then goes onto mention OEM9, Koenigsegg and Retrofit. Is their any relevance to this sequence in order of importance to ST's continuing future? Fils

[toffeeman] 05/4/2022 10:14

OEM3 will use SCE as a lever to get Brembo to drop their prices and Brembo may just go so low that SCE will not bid for the business.

[graham1ty] 05/4/2022 07:40

Blood, salt and tears, surely ?

[jerarnie1] 05/4/2022 06:58

I agree Fils, and no doubt plenty of blood sweat and tears to get to this point since the Development Agreement was signed in 2016.The highlight of the RNS for me.

[fillspectre] 05/4/2022 06:27

Re-reading Chairman's statement this morning. If OEM3 are tasked with finding a second carbon ceramic disc supplier for its group - if not ST then whom do we think. I am reading the chair's OEM3 comments as Ball, Court, theirs. Fils

[supernumerary] 04/4/2022 15:57

The revenue comment contains the words 'at least' which I think apply rather strongly in this case. With a single contract of £70M over 7 years, growth of well over 20% is nailed on. Short of force majeure, of course, but that's true of all investments.

It was probably just a bit of boilerplate left over from an earlier version :¬)

[microscope] 04/4/2022 15:54

It's a very exciting story longahanks, and management do seem realistic about the risks, so I can easily understand the urge to be invested.The rising cost base is by choice, to ramp up production and therefore sales. They've budgeted for it, and if they can control cashburn while doing it, then I'm sure you'll be well rewarded.It's on my watchlist and will monitor this one closely.Good luck with it meantime

[longshanks] 04/4/2022 15:17

Fair points microscope. I hadn't picked up on the (minimum) 20% growth reference in the outlook statement, preferring to look at the anticipated volumes for 2023 through 2026.

I think the outlook is a conservative estimate in keeping with the recent approach of the company to temper expectations. Personally I still hope and expect significant outperformance on these numbers - which is why I guess I am invested and you are not.

[microscope] 04/4/2022 13:48

And if you ignore numbers you'll never have a grasp of where a company is at.You'll find the revenue comment at the end of the outlook statement.

[longshanks] 04/4/2022 13:39

Not sure where your 20 pct revenue growth estimate comes from, Microscope.


It was 20 pct last year, but growth is expected to be more than 600% in the two years through to 2023, and a further 340% growth from there to 2026.

If you use historic numbers then you are never going to see value here. If that is your bag, then that is fine, but in three years time you could well be kicking yourself for not having invested. If you look at the quality of the contracts in place, the secure gross margins above 60%, the lack of competition, then the prospective medium term earnings actually show this to be really cheap.

Like I said earlier, this is not without execution risk and this is shown in the healthy discount factors applied by Zeus and Finn Cap in their valuations. The brokers though do point out the remarkable upside potential for those valuations as milestones are reached let alone new contracts are won.

You point out the cash burn - but you ignore the fact that this is a company going from zero to 60 faster than the Tesla Plaid. The money was raised to finance this growth in production and not to keep the bailiffs at bay. Managing cash flow is vital in a growth business: to my mind they seem to be doing that effectively whilst having had several disturbances outside their control.

[microscope] 04/4/2022 13:14

Depends what you mean by jam longshanks. I do like the company in many ways, and the OEM 8 and 10 contracts have excellent potential. I held a few in Ofex days, so I have always had an eye on it.That said, my concern is more with valuation than anything. They will continue their 'journey towards profitability in 2022'. Suitably ambiguous and it's clear that in 2021 that journey took a bump on the way with losses of 2p per share, up from 1.5p - despite a big increase in shares in issue.They raised 19 million and have 10 million (plus a non funding related irrevocable 3 million). So they're burning through it at pace. And with an additional 2.5 million spend referenced for 2022 that is going to put additional pressure on return of sales to deliver targets as soon as possible.With a medium term outlook for 20pc per annum revenue growth, that road to profitability against a market cap of 100 million plus is taking a chunk on trust.There's lots to like as broker targets indicate, but for me they've rather glossed over some of the reality.For longer term investors I think this is a great growth story, but short term feel significant financial challenges remain.

[rivaldo] 04/4/2022 09:41

Zeus's research note this morning concludes thus, with a 110p valuation:

"Our valuation is 110p, offering good potential upside

We value the Group using a 10-year DCF of post capex net operating cash flows. Our analysis is updated for the recent OEM 8 contract. Our calculation of WACC is 8% for the Group using a riskfree rate of 2.5%, equity risk premium of 6% and a blended industrials, technology, and automotive sector beta of 1x. Our terminal growth factor is 2.5%. That said, potential risks remain on the path to achieving improved earnings, hence, we have applied a higher discount rate (vs. WACC) to price this execution risk. We apply a discount rate of 10%, this results in a valuation of 110p."

Finncap have upgraded to an 80p target price, but see scope to 150p - and "well beyond":

"As SCE demonstrates, its ability to scale volumes during FY2022, we should be able to drop this component of risk as well, which would drive the valuation to 100p/share. We calculate that adding (and filling) capacity to £75m revenue would drive the valuation to 150p/share, with plenty of scope to grow well beyond this level."

[longshanks] 04/4/2022 09:24

That is my understanding too G1TY: it was a test that evolved to validate ST as an alternative source. I doubt Brembo will have to satisfy the tests to maintain themselves as a supplier but they may well have to make a better product to compete effectively. Given the tests done by OEM8, it would seem that any OEM using ST and Brembo for dual supply would prefer to use ST for their premium models.

[graham1ty] 04/4/2022 09:04

Brian, for a reason I have never quite understood, I don’t believe Brembo had to satisfy this particular test.

Let us hope that the next big announcement is the first contract with OEM3 group of companies…R30;

If nothing else, Russian gas has shown the need for alternative suppliers. The Brembo plant was at the epicentre of the first wave of COVID, and I believe their plant closed briefly. OEM3 need a second supplier…..