AMTE Power is the leading UK developer of advanced battery cells with two cells in the final stages of giga-factory scale production testing with first orders received for their sodium-ion energy storage cells.
Since I wrote my initial research note on AMTE Power the share price has somewhat fallen off a cliff. The general macro situation and war has been punishing stocks across the globe with micro cap plays that have IPO’d in the last year taking a severe bashing where pre-ipo and seed money gets out for a profit leaving retail investors scratching their heads.
Eventually though you should reach an inflection point where valuation needs to be looked at seriously. AMTE is one such company in my view. Do I advocate trying to catch a falling knife? No, but at the same time there could be an argument for scaling in to stocks that have been beaten up if there is a value play as often the flip to the upside can be swift.
In true AMTE style they updated the market with a chunky half year report which means a rather lengthy read but there is some key progress hidden within the report that’s worth noting. The company are improving their PR now with some interesting updates on twitter. You can follow them here
I’ll briefly summarise the salient points and then let you decide if you think at £24m Cap down from a high of £90m with £6.5m cash in the bank that will see them through into 2023, there is value on offer!
Two Cells in final testing pending certification
The company are testing two of their five cells in the UK BIC (Battery Industrialisation Centre) UE and UHP and commented ‘Trials using Giga-scale production equipment have achieved goals’ These are now pending certification at which point the company can mass produce the cells.
Most importantly and as highlighted by the latest house broker note, AMTE have increased client interest in off-take for the cells to over 120 client engagements and AMTE have quoted numbers to back this up that would equate to 6GWh. The broker forecasts that would translate to annual revenue of £600m (un-risked)
If you join the dots and see that AMTE are likely to certify their two ‘front-runner’ cells imminently with clients waiting then all that is left is to find a facility to mass produce the cells. No small ask of course and that’s why AMTE expect to select the site for their giga-factory this year. There is also a strong indication that the UK Automotive Transformation Fund will feature in the giga-factory funding, particularly as the Government focuses on the UK’s green agenda.
By the way the company are citing a modular ramp-up to 10GWh, using the brokers numbers that could equate to a c.£1bn in annual revenues. Those that invested in Tesla at at $40 in 2020 saw their investment explode to $1220 in just two years – 3000% in just a few years – could AMTE be the UK’s Tesla for early birds ?
Australian JV for Ultra Storage Cell
Alongside AMTE’s UK development efforts they have a partnership with Australian Infranomics whereby they have established a JV company Bardan Cells which AMTE will license its Ultra storage cell too. Giga-factory build out in Australia happens this year with an initial 200,000 cell capability scaling up. This gives AMTE near term revenue opportunity and exposure to the Australian market.
First commercial contract for Ultra-Safe Sodium-ion cell
Along with the half year update, AMTE announced their first commercial order for their Ultra Safe Sodium-ion cells. Whilst the initial order is a modest 1000 units it shows appetite for this newer battery technology which could be something to watch given this newer technology could have a role in replacing lithium counterparts longer-term.
Other moving parts
Aside of key developments above, AMTE are working on a number of joint initiatives with blue chip names such as BMW and BP such as the Ultra Fast Charging Government sponsored project. You can read more on this and other initiatives in my AMTE Research Note. It’s worth noting the likes of BP and other Oil majors are increasingly moving towards more green initiatives and if the likes of AMTE can offer the key technologies, it’s not beyond the realms of possibility that a major would snap them up.
The Early bird catches the worm
We are in a particularly challenging market at the minute with little risk appetite so this blog may fall on deaf ears but when you look at the progress AMTE are making, the fact they are a leading UK battery innovator and manufacturer with a manufacturing facility in Scotland that would cost an estimated £30-40m to replicate and £6.5m cash in the bank that sees them through 2022, the current Market Cap of £24m arguably provides a negative EV!
This isn’t a story about today, it’s a story about tomorrow and a story about scale especially given the doubling in customer engagements over the last year all with the back-drop of the ‘green’ agenda.
Early Birds in Tesla who took the risk are sitting pretty, could AMTE be a similar opportunity ? I think so, but I’ll leave you to decide.
One last thought
The house broker has a 283p price target for the company, when I add up all the sum parts, cash in bank, existing facilities and IP and of course the significant revenue potential, I find it remarkable the share price has dropped back to 70p (£24m Cap) but the market is irrational, it doesn’t care what we think! I believe initial pre-ipo money was in at 74p so I am hoping 70p is floor level – we shall see!
You can read my full research note here – see what you think!
Don’t forget to follow me on twitter for more updates https://twitter.com/TheMoneySponge
Disclaimer
Research materials prepared based upon my own analysis and research. Accuracy cannot be guaranteed and research notes should not be taken as investment advice. Please always do your own research.
