Stock Alert: Britain’s manufacturing renaissance – the new “green” industrial revolution
8th April 2021 |
There are entire books, giant Wikipedia pages, online forums and blogs that discuss and praise the heroes of the UK’s Industrial Revolution.
Michael Faraday, Alexander Graham Bell, James Watt, Henry Bessemer, Charles Babbage, Isambard Kingdom Brunel… these guys were the “superstars” of a golden age of invention and development which had a global impact.
But for every historic “superstar”, there were many more people with equally important roles in the UK’s golden age that never got the attention they deserved.
The same is absolutely true today, as I’ll explain in a moment.
First, though, consider someone whose role in the golden age was completely underestimated and almost completely overlooked.
Robert Anderson, a Scot born in 1805, is probably not a name you’re familiar with. Anderson was one of the first people to develop an electric car.
Around 1832, Anderson demonstrated his “crude electric vehicle” to the amazement of the people of Aberdeen. It was the first electric car in the UK, and one of the first in the world.
The beauty of Anderson’s work was what lay beneath the carriage.
Inside the carriage of Anderson’s three-wheel, silent and (at 12kph – an eminently respectable speed for a horseless carriage of the day) fast vehicle was an array of “crude” electric batteries.
The reason they were called “crude” was because they were primary batteries (used until fully discharged, then replaced). Moreover, the primary fuel source used to create the electrical charge was crude oil.
This was decades before the likes of Karl Benz delivered their dirty gasoline cars. And it was around 190 years before the global resurgence of modern electric vehicles (EVs).
Anderson was a pioneer. A pioneer in the automotive world. A pioneer in the battery world. He was way ahead of his time, and an unsung industrial hero of one of the most prosperous eras in UK’s history.
Nearly two centuries later, a Scottish pioneer is, once again, set to take the world by storm.
We see this pioneer as one of the leaders in what should be another new and prosperous era.
This Scottish industrial leader, like Anderson, is an unsung hero of modern UK manufacturing.
Like Anderson, it is a pioneer in the battery world.
Like Anderson, it has a name that you haven’t heard about, and that rarely gets a mention in the press.
Over the next year or so , there are two catalysts for change that could make this battery manufacturing company a household name.
Indeed, the company may well soon be mentioned in the same breath as new industrial giants such as Panasonic, LG Chem, Tesla or Chinese battery group CATL.
One of catalysts for change relates to the UK’s battery industry in general.
The other catalyst pertains to the company itself.
Securing the UK’s supply of green batteries
The catalyst that affects the industry as a whole is government policy here in the UK.
One of the effects of the Covid-19 pandemic is that governments have become a lot more nationalistic in terms of economic policy.
What does that mean in practice?
If there is something that is seen officially as absolutely essential, but currently scarce, governments will do much more than they would have done prior to 2020 to ensure access from local suppliers.
A case in point at the moment is Covid-19 vaccines – over which the UK and the European Union (EU) are arguing.
What is true of vaccines today could very well be true of environmentally friendly – or green – batteries in the future.
Why is this so?
The UK government has outlined its vision of a green industrial revolution.
That vision includes green energy production, green energy storage and, of course, green batteries.
Already the government has pledged £12 billion in stimulus money in support of the vision. It aims to create 250,000 new jobs and to achieve “net zero” carbon emissions by 2050.
What’s really important is that the stimulus package includes £500 million which is specifically aimed at EV battery production.
Here are some other hard numbers to bear in mind.
Currently, the global battery market is valued at $27.3 billion. By 2027 it’s expected that the global battery market will be worth around $310 billion. By 2030, it’s forecast that the EV battery market alone will be worth around $212 billion.
The UK government cannot be sure of a green industrial revolution unless it can be certain that domestic supplies of green batteries are secure.
A locally-based champion should also be able to capture a good share of the global market.
So, who is the little-known Scottish battery pioneer of the green industrial revolution?
Introducing your latest Frontier Tech Investor recommendation…
AMTE Power (LSE:AMTE) is an AIM listed company on the London Stock Exchange, with a market cap of £94.3 million, and a current share price of 272GBp.
It is a newcomer to the LSE, having only listed on 12 March 2021.
AMTE is based up in the northernmost part of Great Britain, in a small town called Thurso. It’s not the kind of place where you would expect to find a pioneer and leader of UK manufacturing.
AMTE is a producer of “next-generation” battery cells. It provides battery technology to specialist customers in the automotive, oil and gas, and energy storage industries. What makes this a great manufacturing story is that AMTE already makes its own batteries at its factory in Thurso.
While it’s new to the stock market, the company’s origins go back 24 years.
It started as a joint venture between AEA Technology plc and GS Battery Finance UK Limited, known as AGM Batteries Limited. This was before being acquired by AMTE Power in 2013.
At the time of the acquisition, AGM’s 43,000 sq. ft. factory was “mothballed”. The facility had been involved in the production of lithium cobalt oxide and lithium manganese oxide battery cells.
In 2015 AMTE revived the factory, which now has the capacity to produce one million cylindrical cells per year (0.1GWh). It is currently the second largest UK battery cell manufacturer.
AMTE plans to build a gigaplant (i.e. a factory that is capable of producing lithium-ion batteries on a commercial scale) from 2020 in conjunction with Britishvolt. The new gigaplant should come online in 2023, with a capacity of 30GWh.
In other words, the new gigaplant would have capacity that is 300 times as great as that of AMTE’s current factory and broadly in line with that of the well-known Tesla-Panasonic Nevada gigafactory in the US.
The cost of the new factory is estimated to be £4 billion. This might seem a bridge too far for a tiny £94 million company like AMTE. But that’s why it’s not going it alone and is teaming up with Britishvolt to get this huge British project off the ground.
Britishvolt aims to initiate a phased plan, with £1.2 billion of initial investment needed for the first 10GWh plant, and another £700 million earmarked for the second 10GWh stage of expansion, and an equal amount for the final stage.
The new factory will require strong government funding and also involvement of the automotive industry. Yes, it’s a huge project, yes it’s expensive, yes it’s ambitious. But if AMTE and Britishvolt pull it off, well it’s the kind of “company-making” project we look for in UK-listed small-cap stocks.
AMTE is also looking to build a 2GWh facility in 2022. Analysis of design and engineering for three alternative sites is already underway.
It’s these catalysts, the UK government policy supporting the green industrial revolution and these new, critically important factories that we think will unlock the potential in AMTE.
Granting of planning approval for the factories will generate news.
Commencement of construction will generate news.
And with the completion and the switching on of the production line…
… interest in AMTE, its activities and its potential should surge.
We think that now is the time to buy AMTE – before its story becomes well known.
Green batteries of different kinds
AMTE has built up a strong portfolio of patents. Currently, it has over 150 patents and trade secrets on various manufacturing and technology development processes. This exemplifies the company’s drive for innovation, which it is bringing to the various markets in which it currently operates.
Put simply, AMTE offers or will offer four different types of battery.
The first is the “Ultra High-Power cell”, which provides electrification for specialist high-performance vehicles. This product is aimed at the EV and aerospace markets. Test results have shown that it has significantly higher charge/discharge rates than a typical off-the-shelf car battery. The aim is for this product to enter the market in the second half of 2021.
Next, there’s the “Ultra Energy cell”. It’s designed to be a market-leading product in situations where power is needed over long distances. It’s targeted at the aerospace and EV industries and is set for release in the fourth quarter of this year.
There’s also the “Ultra Safe” product, which targets the energy storage systems, remote location and other specialised markets where battery safety is of the highest priority.
The “Ultra Safe” battery, comprised of sodium, provides a safer and cheaper alternative to the widely used lithium-ion batteries. Lithium cells traditionally carry a greater fire risk, and they do not have the ability to operate in a wide temperature range in the way that sodium cells can.
Finally, the company has designed an “Ultra Prime cell” for its customers in the oil and gas market. It will be used to help power oilfield tools in drilling, testing and well intervention. The battery will boast excellent durability, being able to withstand temperatures of 125 degrees Celsius for up to six years.
The diversity of AMTE’s product range shows how important the company could be as a part of the UK’s green industrial revolution.
Their diversification across different target industries also makes AMTE’s growth prospects exciting.
Finally, in terms of development, AMTE is currently awaiting a patent for the process of attaching a semi-conductor to a battery cell.
This new technology would make AMTE’s batteries “smart”. For instance, the batteries could monitor their own degradation and/or optimise performance.
Financials and risks
In the 15 months ending 30 June 2020 (its prior financial year ended 31 March 2019), AMTE Power’s revenue was £1.26 million. This was up from £847,610 in the year prior.
What’s encouraging about that is the increase year on year in its commercial contracts. AMTE saw an increase of over £200,000 in its commercial contracts from the year ending 31 March 2019. This is growth from a company that’s only now starting to commercialise its products – a great sign.
But for the positive momentum of AMTE, the company still notes significant losses for the 2020 year. Before tax losses rose from £1.29 million in 2019 to £2.1 million in 2020.
More recently on 23 March 2021, AMTE also released its figures for the six months to the end of 31 December 2020.
Revenues were £620,000 for the six months to 31 December 2020, up from £580,0000 over the previous first six months of the 2019/20 year. There was a before-tax loss of £1.46 million, a big jump from a loss of £860,000 in the previous corresponding period – but in line with what management expected.
The cash balance was £220,000 but that was before AMTE raised £13.7 million (before expenses) in the initial public offering (IPO).
These figures are fairly typical for an innovative and pioneering company that is at an early stage of development.
AMTE is in the process of creating new manufacturing facilities. It plans to become the largest battery manufacturer in the UK, and one of the largest in the world.
In truth, I wouldn’t be surprised if we see further losses in 2021.
AMTE’s board is uncertain about the impact on the company of the Covid-19 pandemic. Some short-term damage is unavoidable in my view.
The pandemic aside, there are some other risks to be aware of.
For instance, AMTE may be negatively impacted by the UK’s withdrawal from the EU and by other geopolitical issues.
The directors are apprehensive of supply-chain disruptions that could impede battery cell production.
There are already signs that these fears are materialising in the wider UK economy. In mid-March, it was revealed that UK imports from the EU sunk by 29% from December to January, whilst exports dropped 41%.
Another issue is that AMTE will need to export if it is to realise its full potential. There is a risk that potential customers in the EU will seek to buy green batteries from countries other than the UK because of tariffs and bureaucracy.
There is also the risk that AMTE’s progress in particular national markets will be hindered by the determination of governments in those markets to promote local suppliers of green batteries.
However, the key risk pertains to progress with the new factories – and the gigaplant in particular. What really matters is that actual construction begins, and that manufacturing of batteries commences shortly afterwards.
Those outcomes are absolutely essential if AMTE is to deliver on its promise. Announcements of concepts and Memorandums of Understanding (MOUs) are not enough.
Assuming that construction and manufacturing do go ahead, AMTE will likely need new capital. Once the funds raised in the latest IPO have been used, there could well be further raisings. These raisings would have the potential to dilute the interests of existing shareholders.
Overall, though, AMTE is a very exciting company, in spite of the risks associated with the journey from development to construction to manufacturing.
AMTE has innovative and high-quality products.
The company should be at the centre of the UK’s green industrial revolution.
Thanks in part to the surge in demand globally for EVs, the long-term potential is huge.
AMTE is an investment opportunity that cannot be ignored.
Buying instructions
AMTE Power (LSE:AMTE) is an AIM listed company on the London Stock Exchange, with a market cap of £94.3 million, and a current share price of 272GBp.
Since the IPO in early March, its share price has rallied to a high of 337GBp per share, up from the opening price of 240GBp.
It has since fallen back to near its price on the first day of listing. This is, I think, a perfect point of entry for this UK manufacturing pioneer.
The volume in the stock is considerable, with an average of 509,000 shares changing hand per day. At the current share price, that is around £1.76 million. AMTE is liquid enough that we don’t expect a huge bump in the price from our recommendation.
Nonetheless, I still recommend sticking to our buy limits. If the stock trades over that limit, as it has shown some volatility of late, I suggest that you wait for a suitable entry below our buy limit.
Action to take: BUY AMTE Power Plc (LSE:AMTE). Current price 272GBp. Buy up to 285 GBp. I will set a trailing stop on this recommendation at 50% below the entry price. The stop will provide downside protection in the event of extreme volatility in this newly listed stock.
Name: Amte Power Plc
Ticker: AMTE.L
Price as of 08.04.21: 272GBp
Market cap: £94.3 million
52 week high/low: 337.03p/157p
Buy up to: 285p
Regards,
Sam Volkering
Editor, Frontier Tech Investor
