Another interesting stock.
We like the business that this company is in BUT, after going through its board structure, we have decided NOT to invest in RFT.
Usually, a healthy board would be consist of a majority of independent directors with only the CEO being the executive director. In contrast, the company is controlled by a "small and closed circle" board made up of dependent directors and executive directors.
This company may very well have great potential, however, we cannot tolerate one with a lack of governance.
Potential consequence: Refer to stock IGE, announcement "BOARD STRUCTURE UPDATE" on the 28th April 2020.
VW to enables bi directional charging on all EV's on MEB platform starting next year
26-Feb-2021 (after market close): Rectifier Technologies Half Yearly Report and Accounts
One positive is that their gross margin improved from 48% to 54%, however that did not translate into a higher NPAT margin because their NPAT for the 6 months was $593K, being 8.8% of revenue vs $1.326M in the pcp (6 months ending 31-Dec-2019), being 12.3% of revenue, so their NPAT margin has declined by -28.5%, from 12.3% to 8.8% of revenue. That's still a reasonable profit margin, but they do look overpriced when their was no growth in the half, material declines in revenue, profits and NTA, no dividend, and their share price is 6.6 x their NTA.
- Positioning for DC Charging future
Strong Future - Bi Directional Charge - Close to market release
A key requirement of electric vehicle - Supporting Equipment
Trading volumes increasing, ASX release lowered guidance but confimed additional engineers being employed, factory capacity increased
Tritium managed to secure a pivotal debt funding deal of $45 million with US healthcare giant, Cigna Corporation. It was reported that this investment would be used to refinance an Australian government loan provided to Tritium under Export Finance Australia and be applied towards expanding production capacity and the company’s reach into the US and European markets.
Tritium continues to go from strength to strength as illustrated by the following key developments to date:
· Installation of 20 fast chargers in the City of Pasadena, California.
· Installation of 33 fast chargers at the Port of Long Beach, California.
· Installation of fast chargers at one of the largest Harley-Davidson dealerships in the US, Timpanogos Harley-Davidson of Lindon, Utah.
· In August 2020, Tritium unveiled its new DC fast charger, which can power EVs to an 80% charge in 15 minutes and is the first charger on the US market capable of Plug and Charge, a communications protocol enabling EVs and charging equipment to communicate, authenticate and bill customers via the charging cable.
· As at October 2020, Tritium had 8 job openings based in Amsterdam, Netherlands, evidencing the expansionary efforts across Europe.
Despite the adverse impact of COVID-19, RFT’s performance in 2020 is promising. RFT’s revenue decreased by 11.33%, which is reasonable given its manufacturing facilities were compromised between mid-March to May due to COVID restrictions. If you apply a time basis approach, the decrease is in line with lost production time being 11.53% (6/52 weeks). If COVID hadn’t arisen, revenue would have been around the same as FY19.
The slight decrease in revenue is disappointing but the runway for growth remains extremely long. I was really impressed with RFT’s ability to significantly reduce its COGS (raw materials and consumables used) as a percentage of revenue from 48% in FY19 to 29%, contributing to a decent increase in gross profit margins (45% in FY19 to 54%). RFT has managed to achieve operating efficiencies through capitalising on the additional factory purchased in October 2019.
There were also no retrenchments made and additional engineers were added to the Research & Development team, which is a major positive. This is supported by my sighting of a job posted by RFT in August, looking to recruit a Power Electronics engineer with 5-10 years of experience. It is a great sign that management are deploying capital into developing superior products to achieve long-term growth.
As a lot of businesses battle the economic headwinds brought on by COVID, we should monitor RFT’s collection of debtors, which increased by around $200k or 2% of sales.
Recently: 04-Aug-2020: COVID-19 Update
--- click on links above for more ---
I've cleaned that up quite a bit - it was clearly written by someone for whom English is not their first language - the original can be read here (first page).
[I don't hold RFT shares. They've been on my Strawman.com scorecard for a trade, but I reckon I might roll that virtual money into something else shortly.]
RFT unveiled its first two-way EV charger allowing households and businesses to charge an EV and sell excess power back to the grid. This charger will be available in late 2021 once the units gain certification.
RFT has also indicated that they plan on including more features for owners such as V2H (vehicle-to-home) operation, which will enable energy self-reliance and even home power backup.
Overall, positive news as it seems RFT is trying to gain first mover advantage in this space. Also, it is promising to hear that RFT are focused on developing enhancements to the product for the long-term.
I think this will accelerate the adoption of EVs over the next few years, its a win-win situation for both the consumer and electricity suppliers.
3 July ausbiz "the call" deal with Tritium fell over and they are going it alone- tritium had hige presence in europe
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.
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.
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.
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.
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.