Surface Transforms Share Discussion Threads

[balcony] 06/9/2022 10:43

Bit of buying moving the share price now.

[longshanks] 06/9/2022 09:21

Well put Riv. Couldn't have put it better.

[rivaldo] 06/9/2022 09:12

Hardman now forecast 3.62p EPS for 2024 and 4.8p EPS for 2025, the latter on £40m of sales.

Zeus Capital also forecast £39.7m sales for 2025, based only on current contracted orders, with 4.44p EPS.

It seems to me given the contracted order book and pipeline that the £50m production capacity will be achieved by then, leading to further upgrades.

£50m of sales would imply say 7p-7.5p EPS? At such growth rates, a multiple of anywhere from 20-30 would be appropriate, resulting in a share price of say 175p-200p.

Additionally of course, as Zeus say, there's the likelihood of further expansion - perhaps a second factory - in 2023. And the £400m pipeline doesn't include - yet - a bean from OEMs 2,3 and 4.

Much might happen between now and then of course. But assuming production is scaled up efficiently, one can argue all sorts of upside from the current share price.

[fillspectre] 05/9/2022 22:56

Just picking my way through the RNS in the quiet of an evening and trying to highlight content not yet mentioned on this board today. I hadn't realised the Company has fixed price energy contracts all the way until May '23 - I had previously thought they ended a lot earlier in 2023. By May '23 a lot more water will have flowed under the bridge plus we will have firmly exited the 22/23 Winter - I can't see the 23/24 Winter being any more unpredictable than this one in terms of the energy market.
Small beer I know but the retrofit and near OEM sales have risen to 1.3m in H1 2022. A 62% increase on H1 2021 figures. Let us not forget it is only 2022 in which ST has been a sponsor of the US International GT championship and in March they announced a track event tie in with RPM Technik. I can see retrofit and near OEM sales rising again in 2023. The ST name becoming more and more well known. Fils

[robinbell] 05/9/2022 11:23

Just tried a couple of dummy orders. I can buy at 47And I can sell at 47.033

[t0pgrader] 05/9/2022 10:18

@alan Nice article except given the predictable cash flow profile from the long-term off-take contracts and the surplus being generated it's pretty unlikely the next capital raise for capacity expansion will be fully equity funded as you assert.

[graham1ty] 05/9/2022 09:03

FinnCap increase target price to 100p.

In addition, they up forecasts for 2023 and 2024, so the latter has PBT of £6.8m and eps of 3.5p. Meaning a 2024 P/E of just 13x.

Blimey, might be valuing SCE on a multiple of profit, not a multiple of sales pipeline !

[rivaldo] 05/9/2022 09:02

Two broker upgrades today following the results:

Zeus Capital :

"Following upgrades to our estimates, our DCF-based valuation is lifted to 140p per share from 110p" - almost a 30% uplift

FinnCap:

"We increase our price target to 100p/share (from 80p)" a 25% uplift

[graham1ty] 05/9/2022 08:42

“The Company continues to expect to be able to announce at least one significant new contract in the remainder of 2022.“

Confident statement !!

[pinkfoot2] 05/9/2022 08:34

Very upbeat after reading this-controlled progress and very confident analysis.Well done

[longshanks] 05/9/2022 08:24

It is great to see some flesh added to the bones and concrete illustration that the company will reach FY profitability having successfully transitioned to a GBP20m annual run rate.The biggest issues now are successful commissioning of the new furnaces and meeting customer requirements that take production ahead of the GBP50m run rate that comes with these new furnaces.It would seem the company is now actively considering how best to further increase capacity given the massive potential contract flow. Next time I see DB, I will tell him 'you're gonna need a bigger boat'.

[alan00] 05/9/2022 08:19

Hi - if interested I have written up Surface Transforms here: hxxps://www.upsidedownsidecapital.com/p/the-transformation-of-surface-transforms

I think this is a very interesting company, which after many years of developing and proving their brake discs is now moving to much higher production volumes and profitability this year. Having built up an order book of c. £190m, and prospective contracts mainly for "carry on" models of c. £400m more.

They are expecting to hit a revenue run-rate of £20m in H2 2022 (i.e. shortly) which is c. 8x 2021 FY revenue.

Hope the post is of interest

[rivaldo] 05/9/2022 07:48

Nice:

- profit upgrades for 2023 through to 2025

- "Prospective contract pipeline ("PCP") now approximately £400m (lifetime value) in addition to £190m contracted sales order book"



Apologies GrahamITY, our posts crossed. Remarkable indeed!

[graham1ty] 05/9/2022 07:47

SCE has always been pretty conservative, including only contracts won. The blue sky has always been there, but they have been cautious about putting numbers upon it.

However, today they suggest they suggest a prospective customer pipeline of £400m, on top of the £190m already won. And this is a pipeline of specific, discussed models:

“In this category, the Company only includes active development programmes, where there is a known model, with realistic expected volumes, a customer SOP date, engineering activity and meaningful commercial discussions. On these criteria, the PCP contains programmes with OEM 1, OEM 5, OEM 6, OEM 7, OEM 8, OEM 9, and OEM 10.

In addition to the £190m contracted order book noted above the Company has a PCP of £400m lifetime value sales; on average the contracts are now normally 5 years and typically enter production 2 years after contract win.“

This is absolutely remarkable from the position of just a couple of years ago, when they had the best brakes in the world, but no customers !!

[pro_s2009] 05/9/2022 07:19

Results out.



.

[pinkfoot2] 31/8/2022 19:01

I’m in for the takeout at £3-naming the OEMs won’t alter that

[supernumerary] 31/8/2022 13:55

'You may feel the money is too far ahead for it to count' - no that's not what I feel, nor what I said. I do feel that most punters interested in AIM stocks don't have multi-year horizons, a trend which seems to me to have grown stronger over the many years I've been following them.

[longshanks] 31/8/2022 13:17

IMO, the lack of a reveal on the OEM identity has no impact on the marketability of the shares: anyone that wants to know the OEM identities can easily find out. A reveal might help form a bubble of interest but I doubt that interest could be sustained long term.As you point out, this is an AIM stock, but don't mistake it's ambitions to present a solid, defendable position in bidding for both OEM work and serious investors.Regarding future sales, I think you miss the point of these. Once a nomination has been made in automotive supply, it is as good as money in the bank. The OEMs hold all the cards prior to nomination but once nominated the power balance swings to the supplier. That is why the due diligence and testing process takes so long.That certainty of future income is rare for most manufacturers. You may feel the money is too far ahead for it to count, and that is fine, but for many investors myself included, it is a strong indicator of sustainable growth.

[supernumerary] 31/8/2022 12:53

guitarsolo - thanks for the info, and longshanks thanks for the welcome. However I've been here for over five years, so somewhat belated. Of course I've worked all this out, and like most on here I imagine, have a spreadsheet with numbers, names, models, dates, and revenues. All just guessing of course.

That has nothing to do with my original point which is that the company will continue to fly under the radar as long as its customers are anonymous to all but the cognoscenti, and large-scale sales don't start for years.

[graham1ty] 31/8/2022 11:26

In addition, I believe some of the OEMs can impose financial contractual penalties on SCE if SCE name the OEMs.

It is better if we all stick with the convention and keep referring to the OEMs by number rather than name

[longshanks] 31/8/2022 11:04

Welcome to this board GuitarSolo and Supernumerary

The relationship between ST and its customers is anonymised for one reason only: it is what the customers want.

On this board, we do our best to honour this and not openly speculate on the names.

In some cases the OEMs themselves have openly disclosed their use of ST discs but out of convention we still refer to Aston Martin as OEM6 and Koenigsegg as OEM7.

The reason why most OEMs want anonymity is that they generally prefer to be the brand under consideration rather than those of their components.

ST is one of only two manufacturers that are validated for The supply of CC disks to OEMs. As has been documented in the nomination RNSs, ST is also seen as the premium supplier.

Brembo has been increasing supply of CC discs at a CAGR of 18% year on year with €210m last year. That is with an inferior product and a belligerent attitude that alienates OEMs with demands that they publicise the Brembo brand.

I think STs approach of wooing OEMs with a better product and less overt needs to push their brand will win many hearts and minds.

For this reason, whilst most posters here know the names of all OEMs we do our best to maintain the mystique in open conversation.

[guitarsolo] 31/8/2022 10:06

Supernumerary, I know what you mean but with a bit of digging you can usually make a very good guess. We know that OEM 9 is American, and an EV manufacturer, and a "new disrupter" to the market......So it is American, but can't be Tesla, GM or Ford (the 3 established EV manufacturers). That leaves Rivian.....but they make trucks, vans and SUVs.....NIO, but they make more family saloons.....Xpeng, same thing.....So that leaves Lucid, who happen to make $250k super-saloons capable of 0-60 in 2 seconds and 0-100 in 4 seconds! Now a car like that needs some decent brakes!

Here is Lucid's Sapphire model: hxxps://www.motortrend.com/news/2023-lucid-air-sapphire-first-look-review/amp/

In the "stopping power" section you will see: "Also, the brake rotors "use a woven continuous carbon fiber rather than the discontinuous [chopped] carbon fiber" featured on most carbon braked road cars. The major benefit of a continuous carbon-fiber weave is three times more heat conductivity. Which, for a 2.5-plus-ton car capable of cresting 200 mph, is critical."

Now that sounds familiar!

Credit to some of the posters over on LSE (sorry, can't see who made which comment). We can work together for collective benefit!

Good luck all
Guitarsolo

[supernumerary] 30/8/2022 20:41

Well I think the muted response is because the world at large has no idea who 'OEM x' is, and doesn't really care. An endless supply of anonymous customers will never do anything much for market sentiment. This is AIM, remember?

And the other problem is that orders are always for delivery in 2024. Which for most ordinary people might as well be another dimension.