Saietta – swapping internal combustion engines for electric vehicles in Asia
31st March 2022 |
A note on nuclear
Before we get into this week’s edition of Frontier Tech Investor, you may have seen that we gave you two stock recommendations in last week’s update.
What’s more, the recommendations were sent out of schedule – we couldn’t wait a whole extra month to send it out to you.
That’s because the whole investment idea behind the recommendations – nuclear power – is a hot topic in financial markets at the moment, and a trend that we want you to get in on before the rest of the market jumps on the bandwagon.
The Russia-Ukraine conflict has exposed the urgent need for energy independence, whereby countries are self-sufficient in their energy production, and not reliant on external sources.
For example, the freezing of the Nord Stream 2 gas pipeline between Russia and Germany has put a strain on gas supply and prices in Europe.
Theoretically, nuclear energy would eradicate dependency on external, fossil fuel-based energy sources because it can be generated in power stations from almost anywhere in the world.
Not only this, nuclear would help create a more sustainable and cheaper energy system at a time where the world is seeking to deploy green energy alternatives and fight rising energy prices.
Collectively, these factors have contributed to the price of uranium, the essential ingredient in the generation of nuclear energy, shooting up to $56.70/lb, almost double the $33.75/lb figure recorded on 20 December 2021.
So, it made sense to introduce two uranium-centric stocks at this time, which we believe will play a key part in the accelerating transition to nuclear energy.
Now, on to this week’s Frontier Tech Investor update…
There is far more to EVs than just cars…
The electric vehicle EV story in Asia is very different to the one we are accustomed to in the Western world. There, two- and three-wheeled “light” vehicles, such as rickshaws and motorbikes, dominate the roads instead of cars.
In 2021, China and northeast Asia produced 47% of the world’s light vehicles, and India is home to the largest number (around 37 million) of light vehicles globally.
Both China and India, which are two of the world’s (and Asia’s) largest polluting countries, are in a race against time to meet the ambitious decarbonisation targets laid out during the COP26 summit talks.
As a reminder, China is vying to become “net zero” by 2060, and India by 2070.
India lags China and the rest of the world in terms of EV adoption, in particular. By 2040, 53% of new-car sales in India will be EVs, compared with China’s 77%.
In addition, India has just 1,640 operational EV charging points available to its 1.3 billion people, making a speedy transition to EVs look unlikely.
Indian policymakers know the country will probably have to target its transport industry if it’s to meet its emissions objectives.
It’s therefore not surprising to see that the Indian government is looking at new ways to drive EV adoption.
Indian Finance Minister Nirmala Sitharaman said in her budget speech last month that she is “developing policies” to stimulate the battery swapping segment.
In this instance, battery swapping simply means removing a depleted battery by hand from a vehicle’s system and exchanging it for a new, fully-charged one at a battery station.
This cuts waiting times at charge points, making for a more efficient EV network. Although the range of the batteries used is a little shorter, they’re a better fit for low-speed vehicles, such as rickshaws, because the batteries require less energy than those used in a higher-powered SUV, for example.
As such, the charge can still last up to a few hours at a time.
What’s more, battery swapping is perfect for crowded urban areas, where the rollout of spacious, traditional charging infrastructure can be difficult.
It also results in an incredibly cheap charging cost. Swapping a depleted battery for a fresh one in India costs just $0.67.
You can see how this process works here.
With this solution in mind, one option under consideration is to dip into the $1.3 billion EV spending pot set aside by the Indian government in 2019 in order to build battery swapping stations.
Battery swapping could prove to be the key that unlocks the potential harboured by the stagnating Asian EV industry, which is still very young in terms of commercialisation.
In view of this potential, our optimism towards Saietta Group (LSE: SED) is reinforced.
Saietta is an engineering company specialised in producing electric propulsion motors for the light EV market.
Its target market is Asia, and, in particular, it has a commercial partnership with Padmini VNA, one of India’s leading automotive suppliers.
The rise of battery swapping could therefore not only reinvigorate Asia’s transition to EVs but, also, Saietta’s role in providing EV technology to the world’s most populous continent. This, alone, is hugely encouraging for the company.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
Buy list update
Rolls-Royce Holdings (LSE: RR)
Rolls-Royce is an engineering company focused primarily on the production of propulsion systems.
With its main customer base being the aviation industry, the company endured a tough lockdown that saw air-travel restrictions bring the industry to a halt.
At the time of writing, Rolls-Royce’s share price is languishing at GBp103, way off its all-time high of GBp426.56 in December 2013.
So, why do we think now is a good time to take a position in the stock?
Although air travel is moving closer to normality again with the easing of lockdown restrictions, there is another fundamental reason why we are excited by Rolls-Royce right now, and that is its involvement in a new energy movement set to take the UK and the world by storm – nuclear.
The rise in nuclear power is what we discussed in detail in last week’s edition of Frontier Tech Investor.
In the UK, Rolls-Royce is a key protagonist in the latest transition towards nuclear-energy.
Rolls-Royce is in the process of getting approval for its own nuclear reactors from the UK government. Collectively, the reactors would generate up to 470MW of energy, equivalent to around 150 wind turbines.
The company has already received £500 million in public funding for its nuclear reactor project, and is hopeful that it can begin energy production in 2030.
Bearing in mind that the UK government seeks to increase the proportion of electricity it obtains from nuclear energy from 16% to 25%, the opportunity in nuclear, and indeed for Rolls-Royce, looks enormous.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
The Frontier Tech Investor “Top Three”
Sometimes, it’s hard to decide which stocks to invest in from our Buy list.
Below is our Frontier Tech Investor “Top Three” section, showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.
This doesn’t mean our other stocks are no good: it’s just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Team17 (LSE: TM17) – Team17 is a video game publisher. It has a large collection of games that contains some of the most popular products of the gaming world. One of these is Worms, the enthralling last-man-standing survival game born out of the nineties gaming boom. Team17 is keeping up with the times and offers its games across a number of contemporary technology platforms. It has even flirted with the idea of non-fungible tokens (NFTs), a megatrend which could revolutionise the gaming industry. At a time where sceptics think online gaming will come off the boil following the easing of lockdown restrictions, Team17 keeps gamers coming back for more. You can find the original recommendation here.
Aura Energy (LSE: AURA)-Aura Energy is an early-stage mining company focused on the exploration and production of uranium, a key ingredient in the generation of nuclear energy. The company is showing signs that is moving from uranium explorer to producer, after uncovering water deposits at its Tiris mining project in Mauritania. Water deposits are essential for a smooth mining process. Aura estimates its Tiris project will produce 12.4 million lbs of uranium over the next fifteen years. Aura should be a key player in the nuclear future. You can find the original recommendation here.
Yellow Cake (LSE: YCA)- Yellow Cake is a hoarder of uranium oxide, which is used to generate nuclear power. In this, it offers direct exposure to the spot price of uranium to investors, removing geopolitical and processing risks associated with mining. In fact, it currently has a bumper contract with the world’s largest uranium producer, Kazatomprom, which supplies it with $100 million worth of uranium every year (up until 2027). In total, Yellow Cake stores 8,527 tonnes of uranium oxide in storage facilities, meaning that the uranium is currently worth more than $1 billion. This is a lot more than the current market capitalisation. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Junior Analyst, Frontier Tech Investor
