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#Bull Case
Last edited 5 months ago

The most comprehensive overview and investment case for this company can be found in a piece by Harley Grosser, with the assistance of @BkrDzn, over at Livewire: CarbonXT - Rapid Growth & Inflection Point. I recommend reading this first before continuing.

There's a few things I like about the business:

  • The activated carbon (AC) pellet business has grown from zero to $9m in revenue in 2 years, and is now half of the company's revenue. There is strong underlying demand for the product.
  • The value proposition for both AC powder and pellets can be articulated. It's non-brominated, which leads to less corrosion of plant equipment and issues with wastewater discharge. It's also manufactured in the US which creates more certainty for US customers regarding supply and avoids trade war tariff issues.
  • The non-bromine IP is a patented technology which the company has access to. There appears to be no competing products in this space with the same level of efficency.
  • It's closer to cashflow positive than the statutory full year result suggests. Growing pains in the 1H of FY19 led to a large hit to gross margin, but this has largely been resolved in the 2nd half as they posted a NPAT of around -$1.7m. With the fast rate of growth, I'm going to cut the company some slack here. The guided 31 - 58% revenue growth for FY20, should see the company in cashflow neutral/positive territory by financial year's end.
  • It's been sub-scale up until this stage. Continuing growth in the top line, should see a larger percentage fall to the bottom line.
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Last edited 5 months ago

I did a little more work on the effluent rule change covering Bromide. It can be good as EPA flagged 70 power plants that would have issues based on their review. So a big customer set that would need new AC, in theory. Also why the company is saying competitors Cabot, ADA et el would likely buy off CG1. However, the rule change covers 6 new elements. Bromide seems to have the most emphasis of the 6 in their supporting documentation for the rule change. EPA also showed that all 6 elements can be 95%+ removed via membrane filtration. So I posit that a power plant doesn't have to change its AC if it needs filtration for the rest anyway. Unless many plants don't have issues with the other 5 elements or if catching bromide at the AC level means cheaper membrane solution at the FGD wastewater backend (net net cheaper). A such, the non-bromide AC switch may not be the obvious growth accelerator previously expected but more like an option on top of the existing growth trend. The proof will be seeing Cabot or similar buy off CG1 or scramble for non-brominated AC as that will tell whats' the easiest/cheapest way to mitigate bromide release to meet the standard. The report also reads like the EPA is catching up to states that have been on top of these element release for a few years too. Overall I think it will drive higher growth potential but its not as obvious how big or fast that extra growth may be than what I though previously. Essentially an option.

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Added 5 months ago

More recent research shows ADA has a non-bromine powder, however, the efficiency of it is similar to products rleeased years agao and only 30% of its latest halogenated powder. As such CG1 still retains a competitive advantage for non-bromated PAC.,%20Mercury%20Control-2018%20Year%20In%20Review,%20Sjostrom,%20ADA.pdf

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#ASX Announcements
Last edited 3 months ago

Less than a month after mangement "re-affirmed" their guidance for $24-29m now at the end of Feb they have backtracked to lower end of the guidance. There is still talk of new customers but no follow through.

As mentioned, in order to meet this gufiance they likely need to do two big quarters of $7-10m. Unless they are doing an LPE there is going to some positive annoucements with new customers and then a much better quarterly to come.

Doubts about management are starting to creep in.

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#Quarterly Report
Last edited 4 weeks ago

March 2020 Quarterly Report

Quarterly Cash Flow

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