28/2/20 Half Yearly Report and Accounts
As always RFT released after market on the last day of reporting, but overall a pleasing result that completely validates the investment thesis.
Revenue up 12% and reported profit up 18% however RFT expensed some options issued to employees under their incentive scheme for $630k. These options exercise at 7c per share so require strong share price performance to be exercised. Adjusting for these options and profit before tax was $2.9m or 83% growth.
RFT continued to pay a high level of tax (41%) which I will try to chase up but if they paid a normal 30% they earned about $2m NPAT which puts them well on track to exceed my initial forecast of $3.5m.
The other big positive was the unwind of the inventory build-up from the last period with operating cash flow of $3.2m leaving a strong cash balance and allowing the company to take on some extra debt for the expansion of their manufacturing facilities. Also corporate costs remained flat at $1.9 which allowed margins to expand.
The one negative is EV revenue growth wasn't spectacular for the period up 9%, however EBITDA margin for the segment increased from 21% to 24%.
Operationally the release of two new products (bi-directional charger and 50kw DC home charger) provides further avenues for growth.
New Deal for Tritium (4th of June 2020)
Electric vehicle charging station company Tritium has struck a $45 million private placement debt funding deal with US insurance giant Cigna Corp to help fuel the next leg of its offshore expansion, with 1500 additional stations to be produced over the next seven months.
David Toomey, Tritium's head of corporate development, said on Thursday that $60 million of orders had been placed and the new units would be manufactured in Australia, adding to the 4500 charging stations the group has installed for customers in Europe, North America and Australia.
If RFT are still the main suppliers for Tritium (still in contract but may not be the exclusive supplier anymore as this was only for a 12 month period), this would be big news for RFT.
An Announcement of a large order might be around the corner for them which would see the share price rocket.
After Release of the Dec 2019 Half Years Figures, which were good, Looking forward to the new Bi-Directional Charger and 50 MWH Charger with the Increase in Production capacity created from the New Factory ( doubling the size so hopefully doubling the capacity), Opened if I recall ( from the 2019 AGM) just before the AGM could increase sales and Profitability significantly.
My Simply Wall St Analysis program puts a Fair Value at 15 Cents per Share this and their generally favourable rating is heartening.
I think it is very hard for anyone to accurately predict on a macro level how long the current downturn lasts for and the long term effects of it. What we can and should do though is look at individual businesses and assess the impacts to them from the coronavirus, positive or negative.
Unfortunately for RFT it seems as though they will receive the biggest impact from companies in my portfolio, with confirmation that their Malaysian factory was forced to close. The company is trying to seek an exemption to supply products to essential companies (most likely power supply) but are awaiting approval.
The Melbourne (R&D) and Singapore (Sales) offices remain open so hopefully the manufacturing delays can be sorted out in short time and sales quickly picked up.
The future at RFT looks quite promising considering the long-term industry tailwinds, its strong relationship with Tritium, superior product offering, lean balance sheet and a stellar power engineering team. However, close attention must be paid to RFT’s relationship with Tritium, Tritium’s financial progress, competitors’ product offerings and the Australian EV charging networks’ selection of EV charger suppliers.
The AFR yesterday announced a new deal between Tritium and Box Energi to install its rapid chargers at 2,500 charging stations across the UK.
The mind-boggling potential here can't be understated. According to the article, Tritium have installed 3,000 fast-charging stations to date world-wide, and this single contract will potentially double that number:
"Many of the sites will have two Tritium Veefil-RT 50kW DC Rapid Chargers, which the company says is capable of adding 100km of extra range in 20 minutes of charging."
Needless to say, this contract would mean RFT is undervalued at recent SP levels, but it's very hard to value the company based on press releases that may not trickle down to us. I won't change my valuation until we see this play out either in the full-year report, or as a separate piece of guidance, but it's tempting to double my current valuation on this one piece of news alone for the revenue it would potentially generate over the next 5 years!
Updated FY19 Result Guidance
RFT today came out and stated FY19 NPBT will come in between $2.5-$3.5m. At the top end of that range it will meet my forecast for $2.5m NPAT for FY19. I suspect this is likely as the company is generally conservative with their commentary.
On another note it will be interesting to see how the company could change it's guidance from $1.9m in the price query response to $2.5-3.5m today. The annual report may shed some light, otherwise it will definitely be a question for the AGM.
Profitable business from existing operations that has built out the necessary infrastructure to expand into new fields of electric vehicles and data centres. Recently moved manufacturing to a bigger facility that triples production and opened a new sales office in Singapore to support a global sales network. High levels of R&D spend all expensed has masked underlying profitability but has resulted in the creation of several innovative new products including OEM electric vehicle chargers that can be white labelled and modular charging units that can be combined to create high voltage fast charging.
Confirmed relationships with major players in the electric vehicle industries such as Efacec and Tritium who are focused on the fast charging area, the next growth sub-sector. Management are notoriously quiet but it gives patient investors the chance to buy cheaply in quiet periods for the long term as the company continues to kick goals.