Pretty normal day really, not much to report...

Firstly, great to meet you @BullsWool, luckily we were there with boots on the ground otherwise we would be flying completely blind.

Bear in mind all of this comes from a conversation with Nick Yeoh after the meeting, the actual formal meeting was a shitshow. The company secretary (I think a rep from the registry) had to chair the meeting, he fumbled his way through the resolutions that remained and closed the meeting once votes were cast. No business presentations or questions.

Afterwards, Nick said that earlier this week while checking the incoming votes they noticed a large voting bloc against the resolutions to re-elect Tino and appoint Nick and Jitto to the board. I suspect @Bushmanpat's rough calculations are correct with the shareholdings. It became quite clear what was happening, but no one knew why the Chair and his affiliated votes would drastically and suddenly revolt against fellow board members.

Nick hypothesised that the succession plan that was in place to have Jitto replace Ying Ming sometime next year was potentially the issue, but that is not confirmed. If so, why also vote against Tino and Nick?

The remaining board members met this morning and decided to resign. I don't think that was a good decision, from a corporate point of view I think it would have been better to accept the vote and deal with issues later on, but regardless that was what was decided.

That was really all Nick could share on the board situation. I don't believe anyone had communication with Ying Ming (who was at the meeting, I am not sure if that was a surprise or not) to find out what his intentions were.

Nick gave us an informal operational update. Other employees were there (as dumbfounded as everyone else) to chime in with any comments. Nick said they would "support" Tritium through their restructure, I took that to mean still supplying them but probably on a short rope. The new defence product will soon be released and would have been a focus of the business update plus an update on the megawatt charging with a new 200kw rectifier in early development.

A couple of other points to potentially clear things up:

The directors who resigned from the board have not resigned from the company. They are all still in their operational roles, but don't support the actions of the Chair (labelled hostile in the ASX announcement).

I don't believe Yanbin Wang the CEO is associated with Ying Ming Wang the Chair and these actions. They may have been in the past given Yanbin was appointed shortly after Ying Ming became Chair, but Yanbin remained after the meeting with the other board members and executive staff and has since resigned.

Given the board now doesn't comply with the Corp Act with everyone stepped down except for Ying Ming Wang, this is a probably a nuclear option but it forces a speedy resolution to what could be a long drawn out board spat. Hopefully Ying Ming Wang accepts his move has backfired and steps down from the board.

On top of that, the weather in Melbourne was shit. Got rained on walking to the meeting.

2 plus 2 is 4, minus 1 that's 3, quick maths.

The normally tight-lipped RFT management provided some granular detail I didn't expect to receive in the recent annual report by breaking out how much of the contracts received from Tritium and i-charging had been delivered and what was remaining. 75% of Tritium's $20m USD order has been completed, and 37% of i-charging's $22m order has as well. That leaves ~$19m USD to deliver with management stating they were on track to complete by the end of 1H24.

Which gives us a nice platform to work off what the 1H result may look like. At a 65c exchange rate that gives us ~$29m AUD from those two contracts. I expect the remaining business to contribute it's usual $3m plus in FY23 there was $4m in non-Tritium/i-charging EV revenue which I am not sure how to account for looking forward but let's assume that is $1m in the current half.

Tally that all up and it comes to ~$33m revenue in 1H24, compared to $19m last year. EBITDA margins fell half on half last year from 25% to 23% as RFT takes a slight margin haircut on the large volume orders, so let's apply the 23% margin to get $7.5m EBITDA. I see no reason why ITDA would change much from it's ~$500k a half leaving $7m profit before tax. Apply a 25% tax rate and you get $5.25m NPAT for 1H24.

At a current market cap of $65m, $5m+ earnings in the first half would leave the business trading exceptionally cheaply especially given the growth. Of course, the big question is what does the 2H look like as those big contracts roll off. When he presented to Strawman, Exec Director Nick Yeoh noted that once their rectifiers are integrated into a customers product the decision to shift away isn't taken lightly. Given i-charging's Blueberry chargers are so new to market I can't see them shifting away and would expect some commentary on a further commercial relationship with them. Tritium is harder to peg given it's never been disclosed exactly what products RFT's rectifiers are in and there is a chance newer products have been designed without them.

I plan on getting down to the AGM in November and seeing if I can get some light shed on the big question of what does 2H24 and onward look like. Commentary from the annual report was positive, but no doubt the market would like the certainty of renewed contracts or supply agreements.

27/2/23 Half Yearly Report and Accounts

A fantastic result from RFT, revenue of $19.3m was not only a record for a half year but eclipsed any full year in the company's history. Margins held up better than I expected as well with NPAT of $3.8m leaving the business well placed to smash my $4-5m target going into FY23.

While all segments improved, it was the supply of rectifiers for electric vehicle chargers than drove the result. Revenue in the EV segment grew from $4.5m to $15.7m and EBITDA margin improved from 9.6% to 29.5%.

The big question from this result is whether it is sustainable. As I have outlined before the near future is underpinned by some large EV contracts with Tritium and i-charging for $20m and $22m USD respectively. It is hard to gauge exactly how much of this result came from those contracts (and how much remains in the pipeline) but considering the i-charging contract was only signed in mid-November and in late September RFT updated the market with delays to the Tritium contract with only "part" of the order fulfilled I would think they have yet to contribute meaningfully. Even if the full $15.7m from the EV segment came from those contracts, it would still leave $47m in the pipeline to sustain strong profit results like this for the near future.

No doubt moving forward profit results will be lumpy, there is a lot of operating leverage in the business but I think the pipeline is strong enough to sustain growth moving forward.

25/11/22 AGM Presentation

Some fantastic details in the RFT AGM presentation from a management team normally light on them. The company now has a tremendous backlog of work to fulfill after winning another $20m+ USD contract from i-Charging, but after delays with servicing the existing Tritium contract the market is wary on the short term outlook.

Management conceded chip supply chain issues remain, but are doing what they can to substitute components and hired a dedicated supply chain manager. However the most important piece of news is how quickly they are ramping up production at their existing facilities. There is 140 current staff members in the manufacturing arm, with plans to grow to 180 by the end of this year and 205 by mid-2023. With no anticipated production capacity constraints it could lead to a very strong FY23.

There was also some great insight into future developments. Megawatt charging is a focus as member of the CharIN industry group. At scale the technology would be a gamechanger delivering 3000kW of power compared to current high powered chargers maxing out at 350kW. Management also committed to V2G technology but conceded it was still too early for commercialisation so the Highbury remains on ice for now. Finally the RT21 was announced with minimal details other than focusing on the defence industry and looking to commercialise next year.

RFT has been a much maligned stock after a few false starts (with the stock price more so than the business) but if they can get a clear runway on the supply chain issues which have hurt them since Covid FY23 could shape up to be a company making year.

31/8/21 Preliminary Final Report

A decent result from RFT given industry slowdown due to Covid. Revenue of $13.3m was down 21% on last year but came in well ahead of recently provided $11-12m guidance. It meant 2H21 was essentially flat on 1H21 ($6.7m) and perhaps hints towards the recovery in FY22.

NPAT of $540k came in line with guidance of $200-700k, though a tax rate of 48% was high and largely incurred in the 2H, which means I suspect they would have beaten guidance strongly if it was given at PBT or EBITDA level.

Cash generation was solid with operating cash in line with EBITDA and minimal capex after upgrading Malaysian manufacturing plant last year.

Looking forward, the RFT thesis is unchanged as largely a play on the success of Tritium with their exclusive supplier status in place for all of Tritium's chargers over 50kw. Tritium are forecasting 70+% CAGR over the next six years in their SPAC presentation and in a recent AFR article (https://www.afr.com/companies/energy/tritium-in-40m-debt-raising-to-meet-ev-charger-orders-20210907-p58pfs) specifically called out needing to build out their inventory which should benefit RFT:

"She said buoyant demand for charging systems this year – which includes a significant order from re-seller Siemens in the US – required large amounts of inventory of materials to be purchased up-front."

Beyond Tritium, potential for blue sky continues to come from the potential of RFT to commercialise their vehicle to grid Highbury charger.

28/4/21

Tritium Exclusive Supply Agreement

After announcing an extension to RFT's exclusive supply agreement with Tritium, it is interesting to see Tritium has announced they are going to be acquired by a Nasdaq listed SPAC and will be valued over $2bn:

https://www.afr.com/companies/energy/tritium-charges-to-2b-nasdaq-listing-20210526-p57vda

The funds will primarily used to ramp up manufacturing and at face value is appears RFT will be a beneficiary of Tritium's growth with their modules for high-powered charging.

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.

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.

30/8/19

Preliminary Financial Report

RFT released their preliminary financial report. Without the full audited annual report some details are lacking, but there is enough to get a feel for the performance of the business and where it is heading.

Based on the 1H19 result I was expecting RFT to report NPAT around $2.5m, so at first glance the FY19 result of $2.1m was a bit underwhelming. However digging deeper the miss was almost entirely due to a higher tax rate in the second half (28% vs 45%). Adjusting for a normalised 30% tax rate and RFT would have reported NPAT of $2.4m, much closer to expectations.

Interestingly though the breakdown of this result was again different to what I expected. I had forecast for revenues to remain flat to slightly up based on the announced contracts in the months prior, however revenue in the 2H19 was down on the 1H19 ($9.6m v $8.2m). This is a concern and something to be monitored, but shouldn't be a complete surprise as you would expect RFT's revenue to remain lumpy as it continues to be dominated by one segment (EV's), one customer (Tritium) and at the mercy of large contracts.

The highlight of the 2H19 result was the strong profit margins, with the EBITDA margin expanding from 18% in the 1H19 to 24% in the 2H19. The most impressive aspect of this is expanding margins even as revenue fell, suggesting there may have been some one-off costs in the 1H19 to service the large jump up in revenue, perhaps relating to manufacturing expansion or sales and marketing initiatives.

One concern out of the 1H19 report that rectified (pun intended) itself was the jump in receivables to $4.5m. This unwound in the 2H19 back to $1.4m, however working capital was still squeezed due to a sharp increase in inventories with it increasing by roughly the same $3.1m, from $2.5m to $5.6m. Unfortunately we need to wait for the audited annual report to get a breakdown on the inventory (raw materials v finished goods) to get a feel for how soon we may see that inventory turned into sales. Nonetheless the inventory jump meant operating cash flow was weak again, just $650k, well short of reported EBITDA.

Looking at metrics, ROE was a strong 29%, while incremental ROE was 95% though coming off a low base. Management commentary was typically understated, simply stating that they expect the improvement in sales to continue.

28/02/19 Half Yearly Report and Accounts

RFT reported their 1H19 results, with the headline numbers extremely strong. Revenue increased 141% to $9.6m, with NPAT growing 341% to $1.1m.

Margins were interesting, with the gross margin falling from 54% to 35% while EBITDA margins grew from 11% to 18%. I believe the key reason for this is because some employee expenses are attributed to COGS but this isn't clearly broken out. Regardless, the business is scaling nicely.

Growth was driven by the Electric Vehicles segment, which grew 634% to make up 70% of revenue (from 24%). Non-EV revenue was flat at $3m.

The only negative of the result was a sharp rise in receivables ($3.1m) which led to a $1m operating cash outflow. Monitoring this moving forward.

Management outlook was positive, both for continuing growth and bringing new products to market. Based on rough calculations on contracts announced, it appears some confirmed revenue will flow through in the 2H to support these claims.

7/8/19

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.

21/12/18 Preferred Supplier Agreement with Tritium

RFT announced a preferred supplier agreement with Tritium effective from 3 December 2018. The key part of this announcement is the exclusive supply of 35kW modular rectifiers for use in 120kW and above DC fast chargers. This exclusive arrangement is for one year, with an option to extend.

Given Tritium's desire to lock in RFT's products exclusively to prevent competitors from using them, it makes M&A activity between the two seem a viable option in the future.

1/10/18 3.4 Million USD in product orders received

As forecast in their last contract announcement, RFT has received a second order from Tritium for their modular 35kW high voltage products. This order is for $3.4m USD and will be delivered by March 2019.

Commentary that further orders are expected this calendar year was included again.

Tritium have announced that they have won a contract to supply over 600 high powered charging units to IONITY, a consortium of European carmakers.

RFT announced a $5m USD contract on 14 June with Tritium to supply their modular 35kW rectifiers which appears is tied to IONITY.

It is unknown whether the $5m contract is tied to this new IONITY deal or previous HPC's rolled out by Tritium.

My best guess is the $5m order is the first of many purchase orders in expectation of Tritium winning this and more deals. This gives me confidence in RFT management's claim that further purchase orders are expected this calendar year.

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.