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Great posts guys
To conclude those thoughts, many people will top slice when orders are confirmed, but I tend to see it differently. An order or two confirmed now could well be just the first of many, and so for the reasons which should be obvious (if one is to accept my point below), this is the sort of stock where I would consider averaging up as those orders do come in because the share price growth will accelerate fast.
I would not generally follow that investing strategy due to the risk it involves, and because if things turn downwards for any prolonged spell then profits will disappear much faster. But despite the sort of BB chatter one hears everywhere on AIM, the very big winners are actually hard to come by. But at first sight this appears to be one of those big winners (just maybe....).
Hi Catwith9lives
I agree with that but it is chicken and egg. The higher multiple will be justified once there are orders to fill the firat 20MW together with forward visibility of more to come. I see it as something as a binary bet that the tech works commercially because once the costs savings and benefits are demonstrated in one application, the same savings and benefits can be transferred in similar fashion to other market segments. Growth will the be global and it will be rapid. And if that is what does happen the PE will rise commensurately. In other words I think we will see 25-30p long before the full Italy 20MW is confirmed, once the first orders start to come in. And the orders do seem to have started now.
You can make a valid case for VDTK to have a much higher P/E multiple than the FTSE100's 14x. The FTSE250 trades on a 19x P/E multiple reflecting its higher growth outlook than FTSE100 companies. Perhaps a better valuation metric is PEG. AIM listed BooHoo trades on a seemingly lofty 74.6x P/E multiple but on a PEG of 1.1x, isn't that expensive (P/E of 74.6x / EPS growth of 67%). ARM Holdings which was acquired by Softbank in 2016 for £24b traded on a 100-280x P/E between 2012-1016 and an average PEG of 8x! Does anybody have any forecasts for 2021/2022 EPS and earnings growth in 2022? If the Paragraf JDP results in commercial production of SPVs with efficiency levels >25%, then clearly the current SP is grossly undervalued imo.
At this stage with so much being promised in a short time-frame the SP has surely got settle in the lower double digits awaiting further news of orders, given it was 9p at IPO and given there has been a bit of dilution since that time too. Surely....?
A few thoughts on valuation now that we’ve been told they are expanding the factory to meet expected orders.
Paul Harrison said that using just the base pricing and 20WM, produces GBP 6 million and a bit of EBIT.
Knocking off corporation tax gives about £5m profit after tax. Using the UK average PE multiple of 14 would gives a £70m market cap, or a 24p share price.
The Italian factory can be scaled from 20MW to 50MW. I believe this is by increasing the number of shifts, therefore no further capex or delays would be required.
Looking at the results, the company has about £2m of overhead cost. Therefore I think Paul’s GBP 6m figure may be broadly £8m gross profit on panel sales and £2m of overheads.
At 50MW the £8m gross profit becomes £20m. Knocking off the £2m of overheads and corporate tax gives about £14.5m of profit after tax. Apply a PE multiple of 14 gives a £200m market cap, or a 69p share price.
This is all based on selling the panels at the base price, rather than a premium price for military, mining, or marine sales. Any increase in the panel selling price should fall straight through to the bottom line and have a leveraged impact on profits.
Brochures on the Verditek website gives examples of £1.5/watt for a fully installed system. Sales of just the solar panels to EPC companies will be at a lower price and I suspect this is the price that Paul Harrison referred to as the ‘base’ price that gives the £6m EBIT.
Specialist applications can charge a lot more. Solbian were recently discussed on advfn and they charge Euro 5.60-9.90/watt for their flexible panels for marine application.
In today’s results Rob mentions expanding into verticals and securing orders at attractive prices.
If Verditek can increase the average selling price by just 0.5 Euro per watt then the 24p share price at 20WM becomes 58p and the 69p share price at 50MW becomes £1.58 (20 fold from where we are today). They may be able to charge even more, especially for the camouflaged military panels.