Related Party Debt & Pudu Investment Holdings

Pudu Investment Holdings entered into strategic partnership in October 2005 with ICE Corporation (changed to Rectifier Technologies at 2007 AGM). The placement was for 53m shares @ $0.022 = $1.2m, bringing total shares on issue to 397m and allowed previous short term director loans to be repaid ($0.4m).  Following this Mr. Ying Ming Wang became a non-executive director in June 2006. 

As soon as April 2006 (and again in April 2007) further director loans (from Shaw, Vescovi, Duncan and Pudu) were required.  These turned out to be longer term and from April 2010 became non-interest bearing, and ended up being close to a total of $0.9m.

Pudu significantly increased their shareholding in April 2010 with a placement of $0.5m @ $0.001 per share, or 500m shares (to 553m out of 1052m shares). According to Notice of EGM Rectifier Technologies was otherwise likely to go into administration essentially with no realisable assets. Mr Valentino Vescovi, who was a cofounder of Rectifier, resigned and another director, Mr Malcom Duncan, also resigned in August 2010.  In the same announcement Mr Wang Yanbin was also appointed as a non-executive director giving Pudu effective control of the company.

Early in FY11, Pudu Investments advanced $0.65m of additional loan fund, most of which was repaid in FY12 but not fully repaid until FY15. Another loan of US$0.15m from a Chinese finance company was taken in April 2012 and repaid in FY14.

The divestment of RTUK, improving business conditions and cost reductions enabled the repayment of much of this debt through the period of November 2014 until March 2016.  Half the director loans were also converted to shares at $0.005 in June 2015 and December 2015, which was lower than the price ($0.007) when the 50% loan conversion to shares was announced, although a premium to the share price through most of the loan period.

In February 2016, long term (including former) directors forgave 85% of their outstanding directors fees ($0.3m) as outlined in the Directors Fee Forgiveness and Management Share Offer.  This appears to be designed to offset the impact of the Management Share Offer given the offer of 120m shares was made at $0.004 (vs then price of $0.006/$0.007), 90m issued without prior shareholder approval.  The 30m offer shares for MD Yanbin Wang were approved at the November 2016 AGM when the share price was $0.028, giving a substantial share based expense in the 2017 accounts.

An update is long overdue here

Tritium had their IONITY contract extended back in May from 100 sites to a total of 220 sites, with the possibility of further. Tritium is now the largest supplier to the IONITY network.

The original design concept for IONITY was for Halo chargers.  Announced Sept-11, these are now a reality following 18 months of development by Tritium in co-operation with others.

An update on the original post below - wrong on all counts!

Chargepoint released Flex which looks like a decent product (though notably no V2G) and the unboxing was done very early on the 18-Sep

Rectifier released a 50kW EV Charger Module which is a more powerful version of the 35kW module that Tritium are (exclusively) using for their 350kW chargers. Note that there was no ASX announcement for this.

Original post on Monday 16-Sept:

Rectifier announced 'Something Big is Coming', to be released on 18-Sep. Looking back in the Preliminary Report one would think it would have to be the V2G home charger:

"We will release the EV 11kW bi-directional product to the market in the near future and pursue further opportunities for power modules in this market." (last page, section 14.2)

So no news until tomorrow.

Co-incidently (or not) Chargepoint are also making an announcement on the 18-Sep (& Exhibit B & Exhibit C), which apparently is more flexible (maybe V2G?) and relates to home charging (& exhibit B).

Well, is it a possibility that Rectifier could supply Chargepoint the V2G home charger? Would the RFT charger fit into the current Chargepoint offering?

The Rectifier charger is 11kW (on 16A input) compared to the current Chargepoint charger (7.7kW @32A or 3.8kW @16A) , so it would be a step up. It sounds pretty small next to 350kW or 50kW chargers we are accustomed to but remember these have a different purpose and cost significantly more.  The RFT unit also offers the distinct advantage of being bi-directional and unlocks much potential at home, so yes it could fit into the Chargepoint range.

So if this speculation is correct, is it big? 

Yes I think so.  Chargepoint is the worlds leading EV network and you can read more about Chargepoint here and also their fact sheet

I guess we'll see on Wednesday.

@nicm - a brief reply to your question in #Bull Case: What are people's thoughts on Shorten's announcement of 50% of new car sales to be electric cars by 2030 and how that could influence Tritium and by default- RFT (or maybe even RFT by itself)?

Australian market is very small in the scheme of things and so what happens elsewhere is more important, although further visibility in Australia would likely spark public interest in Tritium & RFT.  ABB, main competitor of Tritum in the 350kW space, have the only ultra fast deployment in Australia (2 installed, 20 announced recently ~9-Apr-2019 through Chargefox).  These are being installed alongside the Tritium 50kW chargers. My opinion is that this has a long way to play out, both in Australia and overseas

FY19 Update (pre HY report)

Well, not a lot appears to have changed here and the market awaits the HY report.

We didn't get the orders last calendar year that we were promised, however we did sign a exclusive supplier agreement, which I guess takes the place of that and also relieves RFT having to disclose to the market the value of each contract. It will be interesting in the HY to see what margins we are getting on the EV components.

The announcement of the development of a high efficiency bi-directional power conversion technology is also worth noting, as announced here and explained in the AGM pack

Also exciting to see some Veefil-PK units sporting some different colours, those of Fortum and Evie

Location of Veefil chargers: Australia

Tritium - Gilbarco Veeder-Root

Gilbarco Veeder-Root have made an investment in Tritium.  See announcement.  Key points

• Further validation of Tritium capabilities
• Confirms retail fuelling as imminent market
• Veefil RT and PK units for petrol stations fuelling stations
• Acceleration of Tritium operational expansion

Who is Gilbarco Veeder-Root?

Gilbarco Veeder-Root is the worldwide technology leader for retail and commercial fueling operations offering the broadest range of integrated solutions from the forecourt to the convenience store and head office. For over 150 years, Gilbarco Veeder-Root has earned the trust of its customers by providing long-term partnership, uncompromising support, and proven reliability. Major product lines include fuel dispensers, point-of-sale systems, payment solutions, tank gauges, retail software development and integration and fleet management systems. For more information, please visit: www.gilbarco.com. They are part of Fortive (description in above announcement).  More information at www.fortive.com

Post by David Toomey, Tritium Chief Investment Officer:

Global strategic investor announced!! After a 12 month process to find the most optimal partner it’s great to reveal that Gilbarco, the worlds leading fuel dispenser manufacturer and distributor has invested in Tritium. Fuel retail will be a massive channel for us. I am very proud of the role I played in this process, a truly pivotal deal for Tritium. Thanks to all those around the world we spoke with during the transaction!

What does it mean for Rectifier?

Rapid growth of Tritium is good for Rectifier and indications are the we are a key supplier. Petrol station type fuelling for EV needs to be fast - who wants to wait 30 min at a petrol station? So likely there will be a good portion of PK units (175kW - 475kW), which are much more revenue to Rectifier than the 50kW units.  It's not clear how much work has already gone on in the background and how imminent orders are but it's quite possible there won't be a whole lot in FY19 as they sort out systems, process, production capability expansion.

FY19 Forecast

Likely Revenue for FY19

EV: A$16m (Up from FY18 $1.5m and FY17 $0.16m)

Known orders: US$5m (June ann) and US$3.4m (1-Oct ann)

Assumed further order: US$3.4m, assuming similar amount and timing for Q4, likely given that another order is expected by the end of the CY18. It will be interesting to see next order (timing, amount) and order completion timing to further guide this estimate.

Other segments: Steady at $6m

Total: $22m

Costs

Margins have been >50% in recent years. Assume 50%.

Overheads, say $5m. (Some increase; but bearing in mind migration to expanded premises was completed by late October 2017)

PBT= $22m x 50% - $5m = $6m (It looks like there are plenty of accumulated losses but not sure on how this is applied)

NPAT (assuming taxed) = $4.2m. So according to these assumptions currently on a FY 19 forward PE of about 10

To be honest I'm uncertain about the cost side of this equation in particular, and the forecast is pretty sensitive to that. Also, if anyone can shed light to the tax treatment that would be great.

A closer look at likely revenue

This is all just guesswork.  Interested to hear any thoughts/questions…

(See previous #IONITY – Tritium – Rectifier straw for background to this)

Assumption: A$1 = US$0.74

Option 1.  Orders Oct17 and May18 correspond to Brohl Valley East and Brohl Valley West respectively. This is an average of A$1.02m per site, for 100 sites gives A$102m

I think this is quite unlikely for a couple of reasons

• The time difference between May18 order and Brohl Valley West is only 15 days which is pretty quick and I just can't see it happening that way at this stage, when the first one took 6 months and there is more interest in getting it right than super fast
• The May18 order is A$185k higher than the Oct17 order, both for 6 chargers, and I can’t see why this would be the case other than the number of chargers increased (or perhaps some other variation to the order?)

Option 2. Order Oct17 supplied the Rectifier sourced parts for Brohl Valley East and Brohl Valley West sites.  This makes sense to me.  Plenty of lead time from order to completion which is probably what you would expect for trial type sites and the installation was just done by the same team more or less sequentially once they had all the kit on the ground

Option 2a. The Oct17 order supplying two sites is a fair representation of the price for the supply for 100 sites.  This is an average of A$0.463m per site, for 100 sites gives A$46.3m

Option 2b. The Oct17 order supplying two sites was very much a trial, done at ‘one of’ prices.  The May18 order is for a further 18 chargers/3 sites and more indicative of ongoing pricing.  This is an average of A$0.370m per site, for 100 sites gives A$37.0m. (Potentially it could be for 3 sites but a slightly reduced number of chargers, however I consider unlikely as they will probably pick off the bigger/standard sites first)

Option 3. Order Oct17 actually supplies more than the initial two sites, so revenue is quite a bit lower than options above. I think this is quite unlikely.  I’m pretty sure the first two were trial sites but I can’t find the link to that at the moment.

My previous straw originally used Option 2a, however reflecting on it some more I think Option 2b is more likely and so have updated it to reflect that ($37m vs $46m and 23 sites rather than 20).

What do you think?

Initial connection

IONITY launched in November 2017 and is the joint venture of BMW, Daimler, Ford and Volkswagen to build a network of reliable and powerful 350kW charging stations along major routes across Europe

The 3Nov17 announcement outlined some details on technology, scope, partners and timeframes. Reuters also offered some detail on costs

In late Nov Shell joined the group as a key site partner and there was more detail about which partners are involved in which countries. The first IONITY installation came in Denmark in December

In early Feb18 a plan was released for the locations of the charging stations and compared to the Tesla network. In Mar18, the IONITY design concept was released which I note looks nothing like the current renditions

In mid April the rubber hit the road (or electrons hit the batteries?) with the opening of the first location in Germany, which uses chargers delivered by Tritium.  Two more locations have since opened as well, one across the road (also delivered by Tritium) and another by ABB (note “main technology partner and supplier”)

On 5Jul18 Tritium to install ~6 chargers at each of 100 sites as a part of the initial 400 site IONITY network

So, Rectifier?

The first announced connection between Rectifier and Tritium was the US$5m order. It is for “35kW power supply units for DC electric vehicle charging”, exactly the same as Oct17 and May18. The repeat orders connection (changing from “substantial increase in further orders” in the $822k order to “Further orders” in the $5m order) also suggests that each of these orders has been from Tritium along with that the Oct17 order would be easily able to supply for the above 2 sites

Given the recent ann of Tritium supplying IONITY for 100 sites (and no visible progress elsewhere) it’s also likely that the three orders are all for the IONITY network which would be enough for roughly 23 out of the contracted sites.  That said there’s no reason why Tritium couldn’t be using the product to supply for a different network and probably just a matter of time before they are

There appears to be strong conditions on supply agreements in the US$5m order and Tritium most likely have similar clauses with IONITY, but the evidence so far suggests they are both up to the task. All going well and assuming that the May18 order is for 3 sites and more indicative of ongoing pricing, I think revenue of the order of A$37m can be expected from the initial IONITY-Tritium rollout

December 2016: Rectifier announced a Manufacture Capacity Expansion Plan to move to a new premises in Setia Business Park, Nusajaya Johor, Malaysia.  The plan was to more than double the floor space and increase capacity by at least threefold, and was expected to be completed by end of June 2017.

February 2017: Rectifier Malaysia obtained a variable interest 20 year loan of MYR$5.46m (~A$1.8m) from Public Bank Berhad to acquire the facility (2017 Annual Report Chairman's Report).

By July 2017 the expected completion date had extended to early September 2017 and was further delayed to be fully operational by late October 2017

The FY18HY report showed only a modest uptick in revenue for the half and while there was a couple of smaller contracts gained in March and May 2018 it wasn't until the June 2018 #Tritium announcement that we could see the new capacity would be put to good use.  The contract is US$5m (~A$6.7m) and scheduled to be delivered by the end of 2018 (ie just over six months).  This additional revenue is similar in amount to the annual revenue over the last couple of years of A$7.5m and A$6.2m (attachment source: 2017 AGM Presentation)

About Tritium Pty Ltd

Brisbane based Tritium is a technology company that specialises inthe design and manufacture of fast chargers for electric vehicles (EV), power-electronic systems and battery energy storage applications.  Established in 2001, it has gained a reputation with the world's largest organisations and top universities for providing solutions when quality, reliability and performance are critical for success.  Its products are operational on every continent around the world and are to be found in submarines, UAVs flying at over 40,000ft and even working in the extremes of Antarctica.

Tritium's headquarters are in Brisbane in Australia, with offices in Europe and the United States.

www.tritium.com.au

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