Petro Matad funded for its drilling programme which should see production start next year. Watch the full video here.
I think it's important not to lose sight of the fact that ABDX has yet to demonstrate to the market what their new automated capacity means for them as a business.
BBI couldn't deliver on the numbers for AVCT in what is a tightening market margins wise. ABDX could. That demonstrates some competitive advantage.
The latest broker note for AVCT has the test costs running at €2 (euros) per test dropping to €1.50 as orders increase. For ABDX to be in the mix they must be expecting to manufacture at size. Otherwise, it wouldn't work. So they must be in for a quantity that will as they said in their last update, bring "meaning manufacturing revenues."
This contract when it finally demonstrates itself should act as a showcase for what an automated ABDX can deliver. Earnings in YE June 2021 were reported as being between £11.4m to £17.0m but that sum was heavily affected by the timing of deliveries/approvals as opposed to actual orders.
Again important not to lose sight of the fact that the majority of ABDX new automated lines only came online in their Q3/Q4. (Jan - June 2021). So the full benefit of that capacity and the cost savings it can deliver won't be seen until this financial year, which started on 1st July 2021.
The outsider in all of that is the AbC-19 test and the stockpiling that if successfully sold will have a significant effect on the business in this financial year. I remain open-minded on this because like with all things with this covid pandemic testing market there has to be a market shift before the masses get it. Antigen LFTs being the best examples with so many not believing they had any place in the market last Summer only to be proved wrong. Covid is difficult to measure as an investor but the UK Gov have themselves signalled the need for surveillance testing so a market exists in the world. ABDX don't need to sell many to make strong margins that would outstrip their contract manufacturing arm.
That doesn't make them a given but the UK-RTC has stuck by their guns and continue to prove up the test and they aren't stupid and so they aren't doing it simply because they are stubborn. Something is telling them it is worth it and just because the market won't currently buy into it doesn't mean it can't turn out to be a significant market for the group.
ABDX isn't an easy hold right now and is being beaten up for everything that can go wrong and given no understanding for what could go right. That signals an opportunity for the brave. I have my lot and given what I have just said I am happy to watch it unfold with the knowledge that ABDX will likely as minimum manufacture solid numbers for AVCT whilst in the background the AbC-19 just might deliver an unplanned for but most welcome surprise.
If you haven't already I would encourage a thorough read of the 2020 Annual Report. It is full of real gems of information about the strategy and gives lots of signals as to where this is all heading.
Page 12 covers the digital partnered portal,
"The portal allows us to access a huge pool of disengaged businesses quickly and effectively, with minimal intervention"
" In less than 12 months this grew from zero revenue to c.1,600 contracts per month (with revenue booked of £3.5m per month) in H2."
First-year only. Clearly, the 2nd year is bearing even more fruit with record monthly bookings in H1. I would expect this to only keep on growing as these partnered commercial agents and brokers expand and gain trust in the model and YU.
"Partners have been lining up to work with us in significant numbers, attracted by our speed of delivery."
Minimal work means lower overheads for bigger growth.
On page 23 there is a wonderful "REVENUE GROWTH FROM BOOKINGS" example demonstrating what each £1.25m of monthly bookings brings over a 5-year journey as the renewal process repeats itself. YU are honing in on customer service as a differentiator hence their aim for 70% renewals in 2021 (60% in 2020).
Like I say lots of positives in there which add to my enthusiasm moving forward.
I think right now this all about producing the goods and continuing to place the company on a firm and reliable standing. With CEO Kalar holding 53% the dividend will naturally follow but what I am seeing is better all-round management from the new executive team.
As I said in my series of tweets earlier the company has specifically mentioned 8-12 small suppliers that represent opportunities for the company. For me, these should be the priority for any cash that is on hand.
That said the business model and infrastructure for significant further growth is now fully set up so the dividend could well make a return sooner than later.
What I really like is the energy and innovation that YU is bringing to the market once more. The partnered portal combined with the rapid execution is attracting multiple partners. YU look as capable as ever of causing the sort of disruption they have often spoken about but unfortunately failed to achieve as the business got caught up in its own success and made critical accounting errors.
For me, that is all now firmly behind them and the energy is back along with the intent. They are now accomplishing what they said they would back in 2017. On the downside, the market is awful at the moment and even great news is being watered down by the market. However, YU#s disruptive utility sector angle should continue to attract investors even if a serious downturn does take effect be it these things are never smooth or continuous.
YU might carry the same sexy looks as some other AIM stocks and the illiquid nature of its trading certainly puts some off and needs to be looked at by the company. However, if the success really does come through as I expect over the next couple of years it should start to work in our favour. It's been a while since I had this sense of excitement over a company. Everywhere I look with it there is opportunity and reassurance. The management team clearly knows it too with their language which is as bullish as I#ve ever seen it.
I trust that helps.
Agreed. The move to solid profitability is not only about the actual profit milestone and what it means for the true passing of the historical problems, but also it's a marker that says more cash can be steered towards growth. Of that non-organic growth should be the biggest element and that means revenues that are immediately earnings enhancing as opposed to new contacts that tend to come with 3 months lag.
Lots to like about YU right now.
I will post this here for those that have access to Twitter and because sector/YU minded investors may find it of interest. I promise not to make it a habit.
I really do think that the market is being far too reserved in their assessment of YU. I thought the trading update yesterday indicated far better progress than can be taken at first glance. Something I have attempted to get to the bottom in this series of tweets.
I don't believe Good Energy is a true like for like comparison but it is in the same sector/trading market and its debt/profitability are being judged to be c. double the value of YU despite YU already demonstrating a far more rapid expansion phase. Perhaps the market would like to see more evidence but I whatever its thoughts I am very excited about how this company has re-focused itself, recovered from 2018 and improved its operations/quality of management.
My respect for CEO Bobby Kalar and his energy for this company has certainly returned and I expect the market to follow suit shortly.
In a nutshell, I think YU can do £140m in revenues in 2021 and deliver a nice profit at the EBITDA level. That will be a watershed moment for the business and if accompanied by acquisitions (which I fully expect in H2 2021) then will demonstrate to the market that YU is actively expanding non-organically and can afford to do so off its own back.
8-12 of the 20 or so small suppliers are earmarked as suitable bolt-ons delivering between 2,000 - 5,000 new meters each.
The Bristol Energy deal brought in 4,000 meters but more importantly got YU onto the public sector DPS platform. If I then add in the new digital partnering platform which added £21m in 2020 from a standing start and more importantly £3.5m a month in contracted revenues in H2 2020. That's more than the whole business achieved in H1 2019 with no doubt lower overheads to achieve (digitised).
So all in all lots to get excited about with YU even if the market requires more time to build trust in the longevity of the numbers. Just a shame that the chatter is so quiet but I would think that will change markedly over the next 6-12 months.
Here's the SP Angel update for ease of access.
Some tweets of mine on the latest SP Angel note released today on YU. The broker target price of £5 held for now but the message is clear it's going to go up.
The interims will be of great interest in terms of the monthly bookings going into H2 but the June figure is so big that it is clear that there is strong momentum in the business. A quick calculation of the H1 average against the first 4 months delivers a May figure of £11m. So again plenty of reason to believe that H2 momentum will be even stronger than H2 2020.
YU management talks about being confident of meeting market expectations. All the signs point to them beating it by a sizeable margin.
The $10 per kg is calculated from the table provided by the finance director which I included in my article.
You need to deduct the "direct cost of sales" ($73.4m) from the "total cost including sustaining capital" ($110.51m).
This gives you the 'overhead' cost for 2020. They are the operating and administration costs + sustaining costs. You would need to read the wording around the table to understand the exact costs that are included.
BMN provide the sustaining cost separate from the C1 production cost. Also, if you run the $73.4m figure then you will see that it comes out at $19.10 per kg. The reported production cost (pre-audited accounts) in Feb 2021 was c. $18.30 per kg. Some adjustment is then required for things like inventory sold in 2020 which is the point at which its cost to produce is included.
As a back check if you take the $5.38m in sustaining capital for 2020 and divided it by the 3,842mtV then that would be $1,40 per kg which is far higher than the difference between the pre-audit C1 costs and the actual 2020 outcome.
The capital expenditure for 2021 is a mix of BE items, capex and sustaining capital ($4.4m). Hence why I highlighted the difference to 2020.
Hope that helps.
Here's my latest set of tweets on the Medilink awards with some interesting and insightful thoughts from CEO Chris Yates.
The GLP would have everyone think that ABDX has been at it with government ministers. Yet they win an award for their innovation in a time of crisis and the covid minister singles them out for praise for their efforts last year.
Mr Yates also gives a brief insight into the demand that was present in April last year with over 100 countries chasing the same tests and components. ABDX committed to their government and made a pledge when they could have sold their services to the highest bidder. The GLP would have everyone forget that need and play the bias/ unfair tendering process card. I trust the judge was shown the same common sense that I see very clearly.
Lastly, it is absolutely clear that a UK diagnostics industry that is focused on consumer-led testing is being born. I expect ABDX will want to build on their relationship with AVCT so that they can help deliver more tests in the future. The UK government has made it clear already that they need to find ways to alleviate the costs of this pandemic on the NHS and alleviate their backlogs. A UK public with a now slid understanding of LFTs is primed for such a move.
The focus on AVCT's covid test and ABDX's part in it whilst current is too short-sighted for me. Much bigger things are happening and we are just seeing the tip of what can be achieved over the next few years.
Firstly thank you very much for the positive feedback on my series of blogs. I really hope there is worth there that enables investors to look at angles that perhaps weren't so clear before.
I just wanted to reiterate that in coming to my $36.50 per kg conclusion, I did employ the worst-case scenario as things stand. As I have said many times and I am sure many here are abundantly aware of, the exchange rate and actual production can have fairly dramatic effects on the outcome.
To give you an example, if BMN were to hit the top end revised guidance of 3,600mtV then at R14.25 that EBITDA cost could come in at around $35 per kg. Assuming of course that they sell 400mtV of inventory. That's a c. $6m swing.
If they have more inventory to sell and choose to do so then the situation improves even more.
We will know more as future quarterly updates come to pass.
Still very much on holiday but naturally after such a significant update I feel compelled to contribute something factual.
Important to appreciate that the revised production cost is heavily affected by the fact that BMN have adjusted the ZAR/$ exchange from R16 to R14.25. This is something they really should have made clearer because it is responsible for the vast majority of the adjustment.
What it does is place the revised average production cost at c.$26.50 per kg which i believe is only c. $1 higher than my own calcs published in my blog on the same subject. This is because I have always taken the live exchange rate into account. H1 exchange was c. R14.55 which means BMN are predicting a H2 fig of around R13.95. That looks far more sensible to me and if achieved would reflect a strong commodities environment and a weaker dollar. Both of which lend themselves to strong vanadium prices.
This doesn’t excuse the big miss on the production numbers. I am merely demonstrating that most of this rise should have already been known about but BMN could have communicated it much better.
Will produce my own detailed thoughts and analysis when I’m back next week. Be it I’m off on hold again the week after.
There's much talk about Serabi Gold being suspended at the end of this month if it doesn't complete its accounts on time.
What I don't understand is why it is being played as such a significant event.
My understanding is that failure to complete their accounts on time would lead to a temporary suspension until such time they could be completed. Continued contact with the exchange is a given and an extension is plausible but if it isn't then it should have no long term bearing on the company's prospects.
It doesn't prevent the gold from being mined and sold. It doesn't eliminate the fact that gold has averaged over $1,800 this year or that Serabi production is returning to pre-Covid levels. It also doesn't prevent Coringa from being licensed and built.
Yes, it could prevent me from trading my shares for a limited period but as a long term holder that's not central to my world.
So where is the actual real problem here?
I see no wording in the Admission Document that says that those two 'funds' were part of the lock-in agreement. Infact the lock-in agreement only states,
"Each of the Directors, the Company’s employees receiving shares under option schemes and certain other Shareholders, who on Admission will be the holders of 64,948,008 Ordinary Shares in aggregate, representing approximately 67.9 per cent. of the Enlarged Share Capital, (being the Locked-in Shareholders) have entered into Lock-in Agreements."
So no direct mention of which shareholders are involved.
What it does say is,
"In addition, Shareholders not subject to Lock-in Agreements, who on Admission will be the holders of
7,387,248 Ordinary Shares in aggregate, representing approximately 7.7 per cent. of the Enlarged Share
Capital, have entered into Orderly Market Agreements. Under the terms of the Orderly Market Agreements, these Shareholders have undertaken to the Company and N+1 Singer only to dispose of any interest in any Ordinary Shares owned by them or any connected person, in the period prior to the date which is twelve months from the date of Admission, through N+1 Singer during that period in such a way as to maintain an orderly market, except in certain limited circumstances considered customary for an agreement of this nature."
So those c. 7.39m shares have very much been in play since the IPO plus any others that were placed outside of the lock-in arrangement.
The fact that Touchstone hasn't sold down despite having the ability to do so is a big positive for me.
Also, one should not forget that the Chairman and CEO hold 18.5% of the company between them and are locked in until Dec 2021. That demonstrates true skin in the game and a willingness to drive the business in 2021, despite the fact that the DHSC judicial review claim was already in play prior to the IPO.
Whilst ABDX needs some good news to turn its fortunes I do feel it is about when rather than if. Yes, the share register was late in being updated but there are also valid and plausible reasons as to why a seller exists outside of the lock-in arrangement and the DHSC contract was deemed important.
My view is that the AVCT contract alone can bolster the business outlook in their new financial year (so from July) and they have other outlets for business too. 3 assays moving to large scale manufacturing remember + whatever AbC-19 can offer.
What I don't see is a conspiracy or unhand dealings. ABDX had a lot of debtors pre IPO and that does need to wash through somewhat but even then many of them have agreed to sit tight until at least the end of 2021. I'm happy to do so also.
The shareholder list now updated and states Touchstone still holding which (if indeed correct) is interesting because they were the ones that had the 3-month lock in ending in March. All directors and concert party holders (see page 99 of the Admission Doc) are as they were.
As I say, this assumes ABDX have established actual holdings. If Touchstone were selling then they could get away without saying anything until they were done.
In April 2017 BMN completed the purchase of Vametco from Evraz and were the proud owners of minor interest in the facility due to the need to avoid an RTO.
SP on completion was 8p and the price of vanadium was c. $27.50 per kg FeV.
In Nov 2017 the company agreed to buy the 55% of Vametco that they didn't own from their partner Yellow Dragon. This was an RTO and completed on 21st Dec 2017.
Share price post completion was 8.75p and the price of vanadium was $44 per kg.
In March 2018 BMN raised $22m in a fundraise that brought in a consortium of cornerstone investors including LionOre and led to the appointment of Michael Kirkwood as Senior Independent Non-Executive Director where he remains today.
Share price post completion was 13p and the price of vanadium was $72 per kg.
In amongst all of that was some dilution which does skew things a tad but even after securing a full 78.8% holding in Vametco, the highest it ever, the share price barely budged north of its March 2017 position even though the vanadium price had increased by 60%.
For whatever reason, it was the timing of the March 2018 fundraise that really kicked things off. However, even then the SP managed to hold at as low as 8.3p on the 5th March even though vanadium prices were already at $63 per kg.
Post 26th March everything went nuts and the rest as they say is history.
The point is that even back then as BMN was adding ownership and the vanadium price was surging the SP struggled to gain traction. But those that waited long enough gained the rewards delivered by that pent up energy in the share price.
Back then BMN was an array of complicated finance deals with parties that had no intention of staying the course. The deals, the facilities and the market were poorly understood. If anything 2021 gains from the journey that 2018 took us all upon. So the depth of education shouldn't be as necessary.
Nobody can predict the market or the way that it will move when developments come along. All we can do is hit the targets that we research and wait for everyone else to catch up. BMN is in a far stronger position than it was in 2017/18 and is succeeding in 2021 more than it is being recognised for. It doesn't have to be a big conspiracy or something we have missed. We are allowed to be ahead of the crowd. That's how we ultimately win. The hard bit is maintaining belief and staying the course. Some didn't achieve it in 2017/18 and they wasted much hard work and regretted it.
This time around the complexities lie in the energy storage side of the story and not the mining of the vanadium. But the same rules apply. Hold or walk, stay or go. Each must decide for themselves. I'm going nowhere.
It is easy to understand why Acacia is so keen to back Enerox.
Enerox with their $30m of support must in my view ultimately be the tech partner for any localised VRFB assembly and manufacture. It was after all a techno study conducted with the IDC, alongside the one completed for the electrolyte plant and look where that ended up.
FM always said that local assembly would come when the demand warranted it and if I remember correctly that started at c. 10MW. My view at the time was that this was connected to the Eskom contracts but since the mini-grid project was conceived and Enerox got involved and were acquired, the industrial sector angle looks to be the correct one.
This is compounded by the IDC webinar comments from the other week that stated that the industrial sector angle was the focus.
Let's see how it plays out but it should now be a very busy run through to the electrolyte plant commissioning.
It is a truly significant and great day in the world of Bushveld Minerals wherever the share price is and decides to go.
The ramifications for the electrolyte plant, local VRFB assembly and the entire vertically integrated value chain that BMN is building are simply immense.
I saw a lot of promise even in the 10MW threshold but it would have meant scale would have to be worked harder for.
At 100MW the opportunity just went orbital.
The benefits won't be seen today but now BMN has a truly inspiring goal at which to aspire to and all of their moves on the energy storage side in S.A. moving forward have renewed meaning and promise.
I am delighted that I understand this story enough to appreciate what this development means. Many won't which is why the SP won't react strongly but all that truly matter is that I get it and I know where it is ultimately heading. The rest can catch up when they are ready to.
This is the day that the BMN strategy kicks in and as is always the case in S.A. the results (eventually) keeping falling BMN's way. It will now be interesting to see just how closely the Vametco mini-grid license follows this news.
A really great day in BMN's VRFB world.