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Consensus community valuation
$1.220
Average Intrinsic Value
11.4%
Undervalued by
Active Member Straws
#Investor Presentation
Added 2 months ago

Novonix released their investor presentation today. Highlights:

1. Novonix anode beats all competitors for battery life (including Tesla)

2. Novonix anode offers the best capacity retention (less range loss over time for EV) including vs Tesla

3. DPMG cathode is under development

4. IP being filed for long-life electrolytes

5. Touched on breakthrough dry particle microgranulation method that can be used for anodes and cathodes with a 100% yield (no waste) opposed to current methods that have significant loss. DMPG also uses no wastewater or materials and a lower cost.

6. Immediate opportunities to use DPMG in house for anodes. Have also filed patents for this.

7. $5M of funding raise will be used to test DPMG at pilot scale and proceed to full-scale processing for cathodes, with $3.5M being used for the current anode side of the business.

8. Cathode material market is $US 7B and growing 13% YOY



 

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#Quarterly Activities Report
Added 5 days ago

Brief highlights:

Aiming for first deliveries of anode in October but are expecting Covid-19 related delays in regards to this.

Battery Technology Solutions (BTS):

Achieved >100% revenue growth YoY, forecasting $5M full year revenue.

BTS arm of business funds NVX R&D.

See attached: https://asx.api.markitdigital.com/asx-research/1.0/file/2924-02261532-2A1239781?access_token=83ff96335c2d45a094df02a206a39ff4

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#Investor Webinar
Added 2 months ago

NVX Investor Webinar – Technology Roadmap

12/06/2020


Introduction:

•The materials market to service EV industry is going to grow to US$100B over the next decade

•Will be starting new arm of company around cathode production

•Investigating a North American listing on OTC market

•Have various battery analysis technology patented (e.g. differential thermal analysis – to assess electrolyte degradation over time)

•Goal higher energy per production cost (anode, cathode etc)

•Working on future battery tech that you hear about such as solid state batteries

•These are going to start gaining adoption around 2030 – long runway to target this growth

•DPMG can be used for a number of different raw material inputs – means they can make new materials that weren’t previously possible. Can enable a whole new class of materials – are exploring this while scaling battery side and DPMG can make everything in today’s tech cheaper with the dry method.

•Agreements in place with Samsung for 500 tons later this year then working towards a longer supply contract

•Sanyo – non-binding MOU to assess anode materials – will work towards signing a supply contract to support Sanyo’s expansion.

•No other company has accomplished agreements with global battery manufacturers - NVX is the only company to break into this market and have a supply contract

•Cathode and anode market is going from US$10B today to US$50B – $100B in next 5-10 years

•NVX has an R&D collaboration with Samsung on new materials


Anodes:

•NVX have a low cost production method

•Manufactured in the USA – Global battery manufacturers are determined to source supply chains from outside China – NVX only one who can currently do this. They plan on opening up a European factory (2022-2025) and to continue to co-locate with battery manufacturers in 2026 and beyond.

•Highest cycle life, highest first cycle efficiency and capacities – this is what everyone [global battery manufacturers] are looking for.

•NVX anode best in industry

•Offer best battery life compared to competitors

•Offer best capacity retention compared to competitors – better capacity means less range loss over time for an EV

 

Cathodes:

•Novonix’s DPMG involves dry synthesis of high nickel materials at a significantly lower cost

•Single crystal cathode materials (patent filed) – will be future of batteries and is essential for million-mile class of batteries. NVX has this with their dry synthesis method (DPMG). Materials are more robust in the single crystal form. Poly crystals crack after extended cycling which leads to capacity loss [battery can’t hold as much charge]. The single crystal method is very robust and resilient to cracking achieving much longer cycle lives. See graph below.

Single crystal (red) Polycrystalline (blue)

 

Electrolyte

•Serves as medium for lithium ions to be transported between anode and cathode.

•Dictates life of battery – electrolyte reacts with cathode and anode – rate of reaction is what eventually leads to cell failure.

•NVX electrolytes outperform benchmark electrolytes under long-term cycling at 40deg C at no extra cost.

•IP starting to be filed from results of work around high performing electrolyte packages

 

What this means

To enable a million-mile battery you need long-life anode, long-life cathode, and electrolytes to allow those materials to cycle continuously. Putting all of above NVX tech together – PUREgraphite anode + Adv electrolyte + SC Cathode = huge capacity bump in retention relative to traditional materials – this is what will allow the million mile+ battery of the future. This is all achievable at 40deg Celsius.

NVX plans to be a tier one global supplier in this rapidly growing advanced materials market

More to come as their research continues - numerous other IP and patents filed

*refer to their recent ASX announcement for revenue, capex and forecasts

Takeaways (opinion only):

There’s still room for them to sign an agreement this year in addition to the Samsung one. I have been very skeptical up until this point, but I now believe we will see a Tesla collaboration this year and possibly announced at Elon Musks’ upcoming battery day.

It’s been obvious NVX has the best battery technology for anyone familiar with the company. Not only do they have a huge moat but with the announcement they are able to pursue other battery tech such as dry cell batteries I can see NVX positioning themselves as the number 1 battery (materials) manufacturer/supplier over the next 10+ years. By positioning themselves as a global leader, continuing to file numerous patents, and continuing to aggressively pursue R&D NVX are limiting the ability of competitors to enter the market.

With NVX’s exposure to the anode, cathode and (pending) electrolyte side of batteries I believe they will be a battery manufacturer one day.

What’s exciting about the DPMG patent is that it opens numerous possibilities in other industries. NVX can lease this IP out as an additional revenue stream through royalties or licensing fees or NVX could spin this core competency into an entire new company.

Disclaimer: I hold a position in NVX.

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#ASX Announcements
Added 2 months ago

ADVANCED CATHODE MATERIAL MANUFACTURING
METHOD – PATENTED BY NOVONIX

NOVONIX Limited (ASX: NVX) (“NOVONIX” or “the Company”), in partnership with the Professor Mark Obrovac Research Group at Dalhousie University, is pleased to announce its ability to manufacture “single crystal” NMC cathode material (“Single Crystal Cathode”) using
its proprietary Dry Particle Microgranulation (DPMG) technique.

Single crystal cathode materials have recently become an aspiration for the lithium-ion battery industry, with demonstrated outperformance over traditional polycrystalline cathode particles (the current standard), enhanced energy density and ultra-long life for EV and ESS uses. Single crystal cathode cells far exceed the lifetime of other NMC/graphite cells (J. Dahn et al, Journal of The Electrochemical Society, 2019).

“I believe we have only tapped a fraction of these opportunities. It is my research plan to aggressively pursue the opportunities from these new methods while continuing to develop new dry processing methods that bring yet more opportunities to the table," Professor Obrovac said.

More details around the developed methods and materials will be published by Professor Obrovac and his team in the coming months. In the meantime, the team at NOVONIX BTS (a 100%-owned subsidiary of NOVONIX Limited) is working on installing pilot scale production capability for DPMG and Single Crystal Cathode manufacturing to support further development, scale-up and testing against state-of-the-art materials.

The ability to make NMC and other cathode materials through dry mechanical processes has great potential to decrease waste and cost of current cathode manufacturing methods.

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#Results of Entitlement Offer
Added a month ago

Retail entitlement offer heavily oversubscribed

The Retail Entitlement Offer closed at 5.00pm (Sydney time) on 18 June 2020. The offer was heavily oversubscribed with applications under the top?up facility significantly exceeding the New Shares available under the Retail Entitlement Offer. As a result, only a very small amount of shortfall was available for allocation ($1.3 million or 3.3%).

New shares to be issued June 25th and are expected to commence trading on June 26th.

https://asx.api.markitdigital.com/asx-research/1.0/file/2924-02247073-2A1232053?access_token=83ff96335c2d45a094df02a206a39ff4

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#Broker/Analyst Views
Last edited 2 months ago

14-June-2020:  Morgans:  Novonix:  Fully charged for now

Morgans now have a "HOLD" call on NVX (previously SPECULATIVE BUY) and a A$1.09 Target Price (TP).  NVX closed at 99.5 cps yesterday, but closed down -8.54% (8.5 cps lower) at $0.91 today, suggesting their is almost +20% upside from here if Morgans are correct and NVX do reach $1.09.

Main points:

  • NVX has raised of $5.7m and will also raise another $52m - $57m from existing shareholders and the StBaker Energy Innovation Fund (SBEIF).
  • The new capital will be used to repay debt and expand synthetic graphite production capacity to 2ktpa.  
  • NVX’s first graphite customer, Samsung SDI, has shown impressive sales growth of 58% yoy in 1Q20.  
  • NVX has filed another patent related to its Dry Particle Microgranulation (DPMG) technique which targets cathode production.  
  • We update our rating to HOLD and reduce our price target to $1.09.

Details:

Cashed up with new equity

NVX raised $5.7m from institutional investors and will add another $52m - $57m from SBEIF and other existing shareholders. The cash will be used to pay down debt, R&D and to expand synthetic graphite production capacity. NVX intends to grow its capacity to 2,000tpa by the end of CY21 at its Chattanooga facility using some of the funds raised recently. Shares on issue will increase to between 331.7m – 348.0m depending on the takeup of the entitlement offer to existing shareholders and SBEIF.

Strong sales growth at Samsung SDI highlights market growth

NVX’s first synthetic graphite customer, Samsung SDI, is experiencing continued strong growth in its large lithium ion battery business. In its 1Q20 earnings release, the company showed 58% sales growth compared 1Q19. The company has been growing sales to both the automotive and energy storage makers. We also note the impressive amount of capacity expected (38GWh operating / 50GWh announced) in the US market by a number of battery companies which NVX is readily placed to service.

Changes to our base case forecast

We have updated our forecasts for the PUREGraphite business (PG), the balance sheet of NVX and the number of shares outstanding. In our base case model, PG is the major driver of earnings growth. In its recent investor presentation, NVX lifted its long-term growth target from 75ktpa of synthetic graphite up to 100ktpa which we have incorporated in our base case. We also update a number of other assumptions (detailed later in this note). Our valuation has increased in dollar terms but is reduced in terms of dollars per share to $1.09.

Share price rerates on confidence in growth potential

The rally is NVX’s share price has been impressive and we believe the company is now being seen as a credible early stage player in the battery supply chain. We still see a lot more potential in the recently patented DPMG technology and in the ramp up of PG. However, we also acknowledge that there are still significant risks to NVX achieving its growth plans despite our increased confidence in the company. We think it’s prudent to see how the company performs on its contract with Samsung and in developing other customers. We therefore update our rating to HOLD and suggest that it’s worthwhile for early investors to take some profit. We have also considered bull ($1.59 per share) and bear case ($0.50 per share) scenarios detailed further in the note. 

--- click on link above for the rest of this client note from Morgans ---

Disclosure:  I do not hold NVX shares.

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#Bull Case
Added 2 months ago

Was at $1.54 last week with no bad news indicating that the the positives (previously outlined in detail in other Straws) are no longer present.  Now just under $1, perhaps due to some profit taking and concerns about COVID leading investors back to safer large caps?  Obviously risk associated with this company, but potential rewards seem worth a good look. Quant analysis has a speculative fair value at $1.22.

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#Trading Halt
Last edited 2 months ago

ASX-listed battery material supplier NOVONIX is expected to be in front of fund managers on Tuesday, seeking up to $58 million in fresh capital.

Street Talk understands the raising would be strucured as an $18 million placement and a $40 million accelerated non-renounceable entitlement offer and would be fully underwritten.

The offer would be priced at 29¢ a share. NOVONIX shares last traded at 66¢.

Morgans was sole lead manager on the deal.

https://www.afr.com/street-talk/charging-up-novonix-taps-morgans-for-raising-20200526-p54wdz

A lot of people panicking about this news but personally I think it's 100% positive for shareholders. Novonix raised $5M in unsecured loans to build/expand their production facility. To raise $58M more shows management is aware of significantly more demand.

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#Thesis
Last edited 4 months ago

Management

Exceptional management team led by Philip St Baker - proven track record, energetic, talented, honest with plenty of skin in the game (~40% between management and board).
Board and management possess extensive experience in battery development, resources, advanced materials.

Background

Novonix serves a diverse range of customers around the globe as their anode product is expected to be used in electric vehicles (EV).
Lithium-ion battery will dominate EV industry - they're lighter and have a higher energy capacity.
Not a highly capital-intensive industry but it is highly competitive (think arms race); competitors should narrow down over the next 10 years.
Massive demand for EV in next couple years as EU enforces stricter carbon emissions laws.
Battery costs are declining, it's possible that by 2022 EVs will be cheaper than gas powered cars.
Novonix has an R&D branch at Dalhousie University in Canada and established a company called Puregraphite in Tennessee to develop and manufacture their anode materials.

Their battery testing equipment (BTE), high precision calorimety (HPC) is the best in the world and patent protected - allowing batteries to be tested in a matter of weeks vs 6 weeks - months traditionally.  This accelerates their R&D tenfold.  Their equipment (HPC) allows them to process, build and test their batteries in 2 months, in house, compared to 9 months normally.
They sell this HPC tech (BTE) to major global players - Panasonic, CATL, Samsung, SK Innovations etc. giving them a foot in the door.

R&D
They're sponsoring external research meaning they have first right to IP out of the lab; which includes 12 PhD students working under a Mark O.
In process of filing a 2nd patent for cathode side of batteries (everything mentioned previously is regarding anode) - potential here is to develop a silicon infused graphite as it can hold more capacity (longer battery life).
The Canadian government matches their funding costs.
 

Market

Anode material market is $2B industry but is expected to increase tenfold to $20B in 10 years.
Projections as of mid 2018
2023 - 300kt - $250 - 500M
2030 - 1300kt - $750 - 2000M
*revenue = $10/kg - $20/kg
2 global battery makers have qualified their materials to use in their prodcuts - no other company has announced they've qualified an anode product with a global battery maker.
Additionally, they have several global battery makers testing their product with NDAs in place for their anode materials - first movers.

Battery producers (think Panasonic etc) are expanding rapidly and need more suppliers, more competition and lower prices.

They've developed and proven their product on a small commercial scale and are currently building their own commercial plant which is small but will demonstrate their capability.  They feel they are right at the cusp and are not pumping in lots of capital until they have long-term contracts.

Sales HPC grows at 30% p.a. expect it to continue.  More a strategic opportunity than commercial. 

 

Novonix have a great legacy asset in natural graphite deposit (mine) in Australia.  Looking to bring in experienced mining partner that want to take it forward but have not expanded on this much as to how it might impact the company down the track.


Novonix are not yet profitable but feel they are on the cusp.
Current ratio 1.3
D/E ratio 1.4

Capital Raising
Recently raised funds by taking an unsecured loan with St Baker Innovation Fund for $3.4M as well as management, Philip St Baker and Dr Andrew Liveris also lending $1.75M and $0.934M respectively at an interest rate of 8%.  This is to be used for US manufacturing and working capital. 

“Given the current market conditions, the Company has determined that the loans are the most suitable financing option at this time.”

Debt is a concern but if management is willing to put up their own money for a short-term unsecured loan they must see potential and really believe in the company.

Conclusion
Novonix possesses a competitive advantage with a moat and being first movers.  There is high risk as with any small cap but I feel there are more than enough positives to counter the risk, some of which are a talented, underpaid management team with a proven track record in this space and with skin in game, quick turnaround of the company from obtaining patent/IP to commercial production (3 years), early movers, unique and superior product, R&D department expected to be profitable as well as high quality R&D department, foot in door with global customers.

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#Update
Added 3 months ago

Novonix (ASX:NVX) develop breakthrough method for making battery materials

Novonix's shares have soared 38.5 per cent this morning and are trading for 45 cents each at 11:06 am AEST.

See link for ASX release:
https://www.asx.com.au/asxpdf/20200515/pdf/44hvlrs73pqlz1.pdf

Disclaimer: I have a position in NVX.

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#Broker/Analyst Views
Added 4 months ago

07-Apr-2020:  Morgans: Novonix: Breathing room to deliver on the first contract

Highlights:

Breathing room to deliver on the first contract

  • NVX announced that despite a two week closure of its Tennessee manufacturing plant work continues uninterrupted on R&D and its Battery Testing Services (BTS) segment.
  • BTS performed solidly in HY20 with segment revenue increasing by $2m on pcp.
  • NVX is adequately funded in the near term with $5m raised in debt funding.
  • The key focus over the next six months will continue to be manufacturing 500t of battery anode for Samsung under the initial sales contract.
  • We reduce our target price to 82cps but maintain our SPECULATIVE BUY rating.

COVID-19 to cause two week delay to Chattanooga commissioning:  The Governor of Tennessee has issued an order for non-essential services to close which will stop on-site commissioning activity at the Chattanooga battery anode manufacturing facility. NVX says that its staff will work from home to continue with desk-top work in a range of areas including quality assurance, engineering, procurement and marketing.

BTS performing better than we’d hoped:  At the half year result, NVX reported revenue of $2.7m. This is a much better result than we’d assumed (+$1m on our segment forecast). While the BTS segment is unlikely to grow to be a significant cash producing asset it enables engagement with potential customers in the supply chain and helps contribute cash while the battery anode business ramps up. Additionally, BTS also engages key research staff who are critical to NVX’s ongoing R&D program to develop the next generation of battery technology.

Adequately funded to meet first customer demand:  The $5m in debt funds raised in March should be enough for the company to complete commissioning at the Chattanooga plant and build inventory to fulfill its initial customer contract. The battery anode contract with Samsung is for 500t with deliveries commencing in 1H21. On completion of that contract we anticipate NVX will work towards securing longer term orders with potentially increased volume. Expansion will require additional debt and equity though to step up capacity from the currently committed 500tpa plant. It is crucial for NVX to continue to be able to access additional capital as required until it can grow to a sufficient size to be self-funding.

Strong growth theme but still speculative:  NVX has worked hard to get its foot in the door of the electric vehicle supply chain. The initial contract with Samsung and the collaboration with Sanyo show that NVX is becoming a credible industry player and is well positioned for significant growth. While we think the company can deliver on its promises we note that there are significant risks on the road to success. NVX still needs to prove it can reliably deliver its product at higher throughput and that it can scale up its production while keeping both operating and capital expenditure at a profitable level. Weakness in the oil market is likely to make feedstock chemicals cheaper for a while but petcoke prices have been historically volatile. We have also increased our assumption for capital intensity which reduces our target price to 82cps but we retain our SPECULATIVE BUY recommendation.

--- click on link above for more ---

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#Company goals
Added 2 months ago

NVX CEO Phil St Baker
https://www.youtube.com/watch?v=yZ9c6Tz06fU

Highlights:

Expects NVX to be delivering new product to Samsung located in Korea by end of year. Also, watch for a supply agreement with Sanyo (who have factories globally, including NA).

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#Capital Raise
Added 2 months ago

EQUITY RAISING TO COMMERCIALISE PUREGRAPHITE, DPMG AND RECAPITALISE BALANCE SHEET

$58.28 million (approximately) capital raising via a proposed institutional placement, accelerated non-renounceable rights issue and strategic placement to St Baker Energy Innovation Fund.
• Issue price of $0.29 per new share:
o a 56.1% discount to the last traded price of NOVONIX shares of $0.66 on 25 May 2020; and
o a 33.5% discount to the theoretical ex-rights price (TERP)1.
• Funds raised will provide capex and working capital to fulfil an initial SAMSUNG supply contract, redeem all outstanding convertible notes and repay loans, facilitate development and commercialization of the DPMG technology for cathode and other million-mile battery innovations, offer costs, and provide general working capital.
• Successful raising will allow NOVONIX to increase production to 2,000 tonnes per annum and be debt free.2
• The successful transaction will simplify the NOVONIX capital structure through the redemption of Convertible Notes and repayment of loans, along with the cancellation of 50% of the Options currently on issue.

In my short time investing this is probably one of the most fair CRs I've seen. Great to see the cancellation of 50% of the options as well.

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#Corporate Update - Covid-19
Added 3 months ago

PUREgraphite (USA)
The Shelter in Place orders in Tennessee that commenced on Saturday, 4 April 2020 expired on Friday, 1 May 2020 and businesses have been permitted to reopen on the condition of compliance to specific COVID-19 procedural requirements.

Our PUREgraphite operation in Chattanooga Tennessee reopened on Monday 4 May 2020 and our team has commenced the restart of the anode manufacturing plant. It is expected to take a week to resume production of finished product.

During the four-week COVID-19 shutdown our staff were actively engaged in desk-top work documenting and auditing our operating and quality systems and procedures, along with engineering, procurement, sales and marketing activities. These were all able to be performed remotely from home and through virtual teamworking.

NOVONIX Battery Technology Solutions (BTS) (Canada)

NOVONIX BTS in Canada continues to operate with split shifts, work from home and virtual teamworking arrangements in line with local orders from government agencies relating to COVID-19.

All elements of the BTS business are progressing as planned and we remain on track with all pre-COVID-19 revenue targets for the business.

 

https://www.asx.com.au/asxpdf/20200506/pdf/44hlp7d0pg14sh.pdf

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#Quarterly Activities Report
Added 3 months ago

Quarterly Activities ReportJanuary to March 2020

https://www.asx.com.au/asxpdf/20200430/pdf/44hd9gsncbzmk0.pdf

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#Broker/Analyst Views
Added 9 months ago

31-Oct-2019:  Morgans:  Novonix - Time to pause until funding is clearer 

Morgans have a "HOLD" call (previously "SPECULATIVE BUY") on NVX and a 65 cents PT.  NVX closed at 56 cents on Friday (Nov 1).

Main Points:

  • NVX has exhibited strong performance in anticipation of its first customer contract for its synthetic graphite product and is near our target price.
  • The company is forecast to spend $2.7m commissioning its first 500tpa of production capacity this half which will likely mean the company will need to seek funding.
  • Following successful product trials NVX’s synthetic graphite anode material has been approved for use by two major battery manufacturers and second stage trials are underway with other potential customers.
  • We change our rating to HOLD and maintain our 65cps price target.

[click on link above for more]

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