Two big wins and one sizeable… not-so-good outcome
4th August 2022 |
During stock market downturns, it’s easy to become hyper-fixated on the negatives.
When fear spreads like contagion, and words such as “recession” get bandied about, it’s hard to remain optimistic as an investor.
However, recent activity in the Frontier Tech Investor buy list has shown that even during tough times, there are still reasons to be positive.
Firstly, AMTE Power (LSE: AMTE) gave us a reminder of its growth potential last week.
AMTE is a developer of battery technology to the automotive, oil and gas, and energy storage industries.
The company’s share price increased by around 27% between 27 and 28 July, after it confirmed the “preferred site” for its new mega factory.
AMTE has selected the Michelin Scotland Innovation Parc in Dundee, Scotland, as the preferred location.
AMTE estimates the facility will have the capacity to produce 25,000 batteries per day, and will generate around £200 million in annual revenue once at full capacity.
When you consider that AMTE’s latest full-year revenues were around £687,000, the upside potential given by the new facility looks massive.
The plant is expected to be operational by the third quarter of 2025.
The mega factory is expected to be funded by a combination of grant funding, as well as government assisted equity, to cover a total cost of around £190 million.
The new facility will focus on producing AMTE’s “ultra-high power” cells, which are optimised for the electric vehicle (EV) market.
It’s this what really excites us about AMTE. We believe it will give AMTE the foundation to develop into the EV-battery powerhouse that we’ve envisioned for some time.
What’s more, AMTE’s commercial expansion comes at a time when domestic EV battery uptake is being encouraged by policymakers.
For example, the UK government is seeking to ban the sale of petrol and diesel-engine vehicles by 2030. In addition, legislation is coming into force in two years’ time which will state that cars made in the EU or UK must contain up to 50% of locally sourced materials in order to avoid tariffs.
In our view, this gives further credibility to AMTE’s investment case.
Admittedly, it’s still early days, with the new facility not being officially confirmed and the funding still yet to be raised.
Nevertheless, AMTE appears to be not too far away from full-blown commercialisation. AMTE remains an active BUY.
Next, Ilika (LSE: IKA) had a solid bounce last week, with its share price increasing around 25% between 28 and 29 July.
The company is a producer of solid-state battery technology, targeting the medical, Internet of Things (IoT) and EV industries.
Commercial developments at Ilika are currently positive.
In its 13 July 2022 update, the company confirmed it has completed the commissioning of its 1,600 square-metre Stereax battery manufacturing facility. Stereax batteries are miniature solid-state batteries optimised for the medical and IoT markets.
On top of this, Ilika has completed process qualification of its Stereax batteries, which sees its batteries tested amongst commercial customers.
Commercial sales of the Stereax batteries are expected to begin in “late 2022”.
Also, Ilika’s larger solid-state Goliath batteries, designed for EV customers, should start to be manufactured in 2023.
Currently, Ilika’s Goliath battery production is restricted to small-scale pilot lines. However, Ilika is anticipating a scale-up to a mega-factory in the near future.
It currently has ongoing collaborations with major automotive manufacturers such as Honda and McLaren.
Like AMTE, Ilika is edging closer towards commercialisation and becoming more attractive to shareholders, as shown by its recent share price gain.
As a result, Ilika remains an active BUY.
Finally, current market conditions have hit several companies hard.
Trackwise Designs (LSE: TWD) hasn’t fared too well lately. The company is a manufacturer of printed circuit boards (PCBs). PCBs are a critical component in semiconductors, which are used to power devices such as phones, computers and vehicles.
On 28 July, Trackwise announced it will miss its full-year revenue forecasts, following contract delays with a key UK EV customer.
As a result, its revenue forecast will not fully materialise. Nevertheless, Trackwise is still anticipating an increase in sales growth for 2022 compared to the previous year.
Unsurprisingly, the stock market didn’t react well to the news, with Trackwise’s share price dropping 21% on 28 July 2022.
One of the main reasons we took a position in Trackwise was for the part it has to play in the UK’s electric vehicle (EV) transition. In particular, its PCB technology is ideally suited for EV batteries and battery packs.
The company is still largely pre-commercialisation, and as such is yet to make a big impact on the EV sector. Nevertheless, EV technology, whether that be PCBs, batteries or charging technology, is starting to be deployed at scale.
For example, EV sales in 2021 grew 76.3% on the previous year. With demand for EVs clearly on the rise, we believe Trackwise’s technology will come into focus and play an important role in the UK’s EV transition.
However, with current newsflow in mind, we are moving Trackwise to a HOLD.
You can find the original recommendations of each stock by clicking the date icon in the buy list.
Buy list update
Pod Point Group Holdings
Pod Point is a provider of EV charging infrastructure.
The company has a versatile range of EV charging technology, including home chargers, fast chargers and on-street chargers.
Pod Point’s latest financial figures are encouraging.
For the six months ended 30 June 2022 (H1 2022), the company recorded revenues of £41.5 million. This is a healthy 57% increase on the same period in the previous year (H1 2021).
In addition, Pod Point installed 45,000 charge points in H1 2022. This is a 63% increase on the 27,554 charge points installed in H1 2021.
What’s more, Pod Point’s market share in home EV charging increased from 17% in H1 2021 to 22% in H1 2022. The company attributes this to growing commercial success with car manufacturers.
Pod Point now has 20 contracts with automotive original equipment manufacturers (OEMs).
Losses before tax slightly increased between H1 2021 and H1 2022, rising from £6.7 million to £7.5 million.
However, we are not currently perturbed by this. Pod Point attributes the losses to headwinds resulting from the Russia and Ukraine crisis.
In our view, Pod Point’s figures speak for themselves, and show that it is on the path to business growth.
We believe it will continue to play a key part in reducing the UK’s EV charging deficit, which is expected to reach 250,000 by 2032.
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 on 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: this is just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Volex (LSE: VLX) – Volex is a global manufacturer of power and connectivity products. This includes power cables, fibre optics and charging plugs. It might sound a little basic, but these are critical mechanisms which are powering some of the key technologies of the modern day. These technologies include electric vehicles (EVs), artificial intelligence (AI) and big data networks. Volex has huge credibility behind it, particularly as it does business with some of most widely recognised companies in the world, including Tesla. You can find the original recommendation here.
Team17 (LSE: TM17) – Team17 is a video game publisher. It has a large collection of games which contains some of the most popular games 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 ease 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 of a shift 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 that its Tiris project will produce 12.4 million lbs of uranium over the next 15 years. Aura should be a key player in the nuclear future. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Analyst, Frontier Tech Investor
