Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Sophie - to some degree VDTK's fate is out of their hands. If the orders don't come through due to Cov19 or other reasons then they could be up the river without the proverbial paddle. However, they do claim that they haven't lost any orders to competitors so that is a plus. Life goes on, the global transition to solar has been delayed by Cov19 not derailed. Even if VDTK don't make it under their own steam, I suspect that there is always the backstop option of finding a strategic partner to take a majority stake and believe that VDTK have been approached in the past but decided to reject these advances. If VDTK didn't have a viable product, that would worry me a good deal more.
Its difficult to put a positive spin on yesterday's abysmal TU so I won't try!
With Michael Walters throwing in the towel and the SP back at the level it was at on June 15, the question is whether to stick or twist. Is the SP going to 3p? Will they need another CR in 3-4 months? Will they be able to get more financing from shell shocked investors? Tbh I don't know the answers to these questions . I still doubt whether VDTK will be able to succeed with it's current operational structure and suspect they will get bought out by a strategic partner at some point. So in some sense any investment in VDTK at this point is a punt based on the premise that things can't get any worse! Well I guess they could get worse - the Paragraf JDP could get mothballed. Tge CEO could resign. A major customer like SAF z****stsn could go bust and VDTK might not get paid. So yes there are still huge risks in investing in VDTK before they have announced a major order and got the money in the bank.
All of this having been said VDTK are in a better place than they were 12 months ago;
1 Stronger balance sheet: £1.7m net cash v £200k net debt at 1H20. No longer paying 20% IR on loans.
2. Institutional investors inc Unicorn AM hold more than 6% of VDTK's equity.
3. Extensive distributor network established Inc tie up with industry specialists like AF Global
4. Improved operational structure with production glitches ironed out at their Lainate fab.
5. Technology validated via SAF ****stsn follow up order.
6. Follow up order potential from Intergroup Mining in Australia (1MW) and BTMNs in Chile (150kw)
7. Multiple deals being pursued, some of which may come to fruition once customers stop delaying orders. It appears that VDTK are being asked to bid on more contracts in target mkts than was the case 12 months ago.
None of the above is enough to guarantee that VDTK will succeed. However, they are moving in the right direction even if a huge amount remains to be done and significant challenges remain before their technology is widely adopted. At the end of the day, you pays your money and takes your chances. It could be a roller coaster ride!
Has just published an update on Verditek.He has thrown in the towel and advises investors to cut losses and sell.
Interesting post on Black Tulip Minerals linkedIn page confirming that Cov19 has delayed some projects but confirming they are in discussions to purchase 150KW of panels from Verditek for their Chala gold mine and that this could increase to 1MW.
Horse Posture - at this point in time what would you advise investors to do, as many are sitting on heavy losses and hoping things will improve?
The other point that needs to be made, is , if VDTK don't get orders over the line in the next 6-9 months and they burn through their cash, who is going to fund them? I can't see many existing shareholders stumping up the cash and there has to be doubts about whether Unicorn will stay on board or cut their losses. I hope VDTK manage to turn it around but I fear they face an uphill struggle in the face of Cov19 continuing to disrupt business activity.
Snip - imo VDTK probably need to be acquired by a strategic partner in order to fulfil their potential. They lack the capital to expand their in house sales team, set up a leasing SPV, fund R&D, build a brand, expand capacity to drive down costs. Chinese competitors are heavily subsidised by the Gvt and have access to more capital. I think it's only a matter of time before they realise they can't make it on their own. I don't discount RR pulling in a couple of decent orders in the next 6 months which could rerate the SP, but I don't see how they overcome the simple fact that the 3rd party sales team of 18 simply aren't selling their product. Why? Because it is probably a lot easier for them to sell traditional SPVs rather than go hungry waiting for customers to dip their toes in the water and order from VDTK. Since their AIM IPO in Aug 2017 VDTK have failed to generate a penny of revenue. It's difficult to put a positive spin on that. If chances of turning things around are no better than 50/50 then this is basically a punt on global Cov19 vaccinations being rolled out and enabling the world to return to normal. In a sense, VDTK's fate is now out of their hands.
In terms of could things get any worse well hypothetically they could! The CEO could decide to throw in the towel! It might transpire that the Paragraf JDP requires significant further funding for it to progress to commercialisation, funds which VDTK don't have! And VDTK might need to come back to the market for more funding if the 3rd party sales team don't start generating orders. if the contracts start to roll, all well and good but three is no guarantee of this any time soon as long as Cov19 contineus to disrupt business activity. The world might not return to normality until 2022. Hope I'm wrong, but that's the way I see it. Why has any announcement about the Paragraf JDP been delayed?
Not a great RNS but pretty much what I expected. The £1.7m net cash position reflects the repayment of director loans ($806k inc compound interest at 20%), brokers fees related to the placing and the increase in working capital related to delayed shipments to SAF ****stan and BTMNs. Monthly cash burn on normalised production is £100k so they have around 12 months before they need more cash. It does mean they can fill any orders from stock. Probably best that the company has come out and sandbagged 2020 results although doubtless TW will be all over these like a rash!
I sense VDTK need to up their game with regard to investors who form the bulk of their investor base ( Unicorn hold just 5.5%) whom they are ultimately reliant on for l-t funding should they choose to expand capacity at some point in the future. Imo they could do themselves some favours and help investors out by taking the following steps:
1. Get the CEO to give an investor presentation on something like Proactive/ Investor meets company where he can explain the company's vision and strategy.
2. Revamp the website so that it showcases the company's products, contains customer testimonials, has a full list of distributors and has relevant investor information such as investor presentations.
3. Delegate IR and comms ( inc tweets/PR) to an individual within the company ( the FD?) So that the CEzo can focus on winning contracts and generating revenue.
4. Provide more information about VDTK's subsidiaries and explain why VDTK continue to have holdings in these companies.
5. Restructure the BOD so that they have an experienced industry veteran on the BOD who can assist with strategy.
At the moment VDTK's comms strategy is a total shambles and needs addressing ASAP. It may not halt the current SP erosion, but imo it is a 'sine qua non' if they hope to develop into a credible global solar panel producer in the future , build a brand and showcase their products to the world.
Snip - that's a great point. I suspect the answer is not a huge amount because they have historically been cash constrained. However, with that caveat, I do believe they have focussed some development efforts on achieving ATEX certification for their panels. This is important because it is a key differentiating factor vs competitors ( such as Solbian/DAS) and will enable them to deploy their panels onto offshore oil rigs (zone 2 compliant). There is a lot of potential demand in the ME, particularly the Gulf. I think VDTK are also working on product development in other areas incl the means to attach panels on HGVs without solely using glue, also ensuring that the panels are grid compliant so can be used in off grid micro arrays and linked to the main grid without suffering overload/catching fire etc etc.
As far as the Paragraf JDP is concerned, VDTK contributed 50% of the cost of JDP2 (initiated in Oct 2018) and have their ex CEO, Geoff Nesbitt seconded as CTO. I believe plans are afoot to hire additional PHD students to bolster R&D efforts for GIPVs.
At the moment VDTK is primarily a panel producer. One of the key issues facing them is whether they want to/need to evolve into "a solutions provider". To some degree they already fulfil this role with their containerised PowerMat solution. But what about EV Car Ports where competitors in the US (like Beam Global) already provide a fully integrated solution? Its the sort of thing the CEO could address in an investor webinar. At the moment, its not 100% clear what the company's l-t strategy is with regard to R&D and product development other than continuing to cut costs and at some point commercialising GIPVs.
penetration of this sector. The same goes for the oil and gas sector, where VDTK could leverage some of the contacts of CEO Rob Richards from his time at Siemens Power. If VDTK can achieve ATEX certification (anti flammability) they they could start to see adoption on oil rigs. Interestingly they hve recently signed a tie up with AF Global that are specialists in supplying the oil & gas sectors and feature VDTK prominently on their website. As fr s small scale mining cos re concerned there is evidence that access to leasing finance would certainly speed adoption of flex SPVs. Who knows, maybe VDTK will consider setting up leasing SPV to target this market which they claim comprises 4,000 global companies each with potential demand of 1-2MW should they switch from diesel to solar.
6) The current structure of the company isn't optimal. Again fair point. It would make sense for the CEO to move back to Europe and for VDTK to recruit more full time sales people as well as recruit some heavy hitting industry veterans to the BOD.
So is the SP heading to 3p? Sadly I don't have a crystal ball. Without any news flow on orders in the next weeks then looking at the charts the SP could certainly head lower imo (4-5p?) Catching the bottom could prove difficult as I suspect any sizeable (1-2MW ) order will lead to a pretty swift SP rerate to the 8p CR price and beyond. There is no reason that VDTK is likely to emulate other green plays and see its SP rise stratospherically over the coming months. However, by the same token, I think its premature to write off VDTK's chances of seeing a significant SP rerate over the next 12 months even if they only begin to realise a fraction of their potential. Now its up to VDTK to stand and deliver!
(cont) Another existing customer (Black Tulip Minerals) re expanding elsewhere in Chile. Although it appears that shipment of the initial E200K order has been delayed itt's possible that VDTK could receive follow on orders from the Piura project (s capacity expands from 50bpd to 300bpd) and other projects elsewhere in Chile where BTMNs are committed to rolling out solar panels to replace diesel. The SAF ****stan project (1.5MW) could also be revived. The IM Efficiency paid trials are ongoing and results are expected in the Spring. Its not impossible that VDTK will succeed in winning significant orders for IME's Solar on Top range. Add to these, the possibility that targetted sales efforts to the oil & gas sector in the Middle East, mining in Australia and transportation in Europe and N America produce deal, and its not far fetched to see a scenario where VDTK achieves sales of 5-8MW and reaches cash break even in 2021.
2) The BOD needs a shake up. Fair point imo! VDTK's fate lies in their own hands. They have the ability to make changes in the BOD and importantly they have made important changes in the last 12 months - the old CEO has been replaced as has the FD.
3) VDTK don't have their own IP so what is their MOAT? Fair point - VDTK are cell agnostic. They buy in the cells from 3rd parties (primarily based in the PRC) apply multiple laminate polymer coats to the cells in their Lainate factory and sell to the end customers. Being cell agnostic, enables VDTK to target different markets at different price points rather than being tied to single cell structure ( as is the case with Sunworld which buy cells directly from their affiliate Maxeon). So wht could change. I a word - the Paragraf JDP. IP developed by the JDP will be shared 50/50 by VDTK and Paragraf giving them the potential of generating a revenue steam should GIPVs be licensed to 3rd parties as well as being used in flex SPVs. When will GIPVs be commercialised? We still don't know. Maybe 2022? Hopefully a JDP update will shed more light on the commercialisation strategy and revenue potential.
4) VDTK has been run on a shoe string for the last 4 years since the IPO. Fair point, but post the Nov CR they have around £2.0-2.5m on the balance sheet and even allowing for annual cash burn of £1.2-1.5m thy hve enough to keep them going for the next 12 months or so. This gives them the resources to increase R&D spend, sales recruitment, working capital build and (hopefully!) enough dosh to improve their rather poor website and IR!
5) They aren't price competitive vs trad SPV makers. This is true but they aren't competing against these guys. The markets VDTK re targetting re offgrid oil & gas, mining and transport verticals where trad SPVs can't go because they re either too bulky, too fragile or too heavy. There is clear evidence or transport companies (Ocado etc) adopting solar panels and if VDTK is successful in winning orders from IEM, this could provide a spring board for wider
Over the last 6 months I've been involved in countless debates with friends, colleagues and potential investors about the merits and demerits of investing in VDTK. There has been quite a lot of push back from bears whose arguments go something like this:
1) Since its IPO in Aug 2017, VDTK has a consistent track record of promising the earth (8MW of orders in 2018..., confident of follow up orders, on the cusp of commercialisation etc etc ) and delivering almost nothing in terms of revenues (which is what ultimately matters!)
2) The same BOD is in charge who have presided over this sorry state of affairs, so what is going to change things in the future?
3) VDTK currently don't have any IP, so rent't they eventually going to be killed on price as and when larger (primarily PRC based) SPV makers decide to target the light weight flex SPV market.
4) VDTK has been run on a shoe strong for the last 4 years relying on hand to mouth financing incl directors' loans (Gavin Mayhew charged an eye watering 20% compound IR on his $600k loan to the company!) and they don't seem to have had the financial resources or nous to invest in upgrading their website or comms strategy ( incl irrelevant and misleading tweets)so what gives you the confidence that they can change things around before they run out of cash again in the next 12 months?
5) They aren't price competitive vs traditional PV makers and there is so far limited evidence to back up their forecasts that massive potential demand in the O&G, mining and transport sectors re about to be unleashed. Whats more, lot of small mining cos look to lease equipment (inc solar panels) rather than purchase them outright due to cash flow constraints.
6) The current structure of the company doesn't look optimal. The CEO is marooned in Thailand, the BOD are based in the UK, the main production facility is located in Italy and the sales team are dotted around the world and working on commission. The CEO has a tough/nigh impossible task on his hands to make this company work. Isn't the SP heading to 3p and oblivion?
The points above are fair enough. There is no doubt that VDTK faces significant challenges and it could be a bumpy ride over the next 6 months. Anybody who thinks the SP is going to the moon over that period i probably deluded. So addressing the bear points one by one, here is a counter view which entails the possibility that VDTK's SP could be significantly higher in 12 months time than where it is currently languishing.
1.) When are VDTK going to deliver meaningful revenues? The Seal advisors report (issued in Nov 2020 - a "paid for" report) suggested 20MW was possible in 2021. Based on the current state of play, that looks pretty unlikely imo. Maybe 5-8MW is a more realistic scenario. One existing customer (InterGroup Mining) have suggested that follow up orders in 2021 of 1.5-2MW are possible.
As conspiracy theories go, the claim that VDTK's CEO, Chairman and Nomad would sign off on RNSs stating they have an 18 strong global sales force if this is a total fiction, seems a bit far fetched, even by the standards of AIM! There aren't many companies who list all their individual sales people and locations! I suspect that sales generated by the sales team has been pretty non existent, so I don't think your suggestion would achieve much. Also the sales people are working on commission for VDTK and are not solely employed by them. Results so far have been pretty unimpressive. If they don't start generating sales in the next 6 months, maybe VDTK will change tack and start hiring more full time sales people. They already have a few if these inc Harris Hurst ( Houston, Texas) and Andrew Cutler ( Sydney, Australia). Distributors ( AFGlobal (US/ME), Reliant Intl (Asia/ME) Imannt ( Latam), Solaren ( Philippines), Solar World ( Australia) as well as the UK and Thailand ) have all been appointed in recent months. It might be a good idea to list their global distributors on their website when they eventually revamp it.
Super dude- you make some fair points. Yes it has been jam tomorrow with VDTK for some time. To date revenues have been minimal, particularly following the postponement of the SAF ****stan deal. Talk of VDTK doing 100MW of sales in 2022 is clearly barmy. Maybe 20MW in 2021 is over optimistic (5MW would be a result imo) . There is no guarantee VDTK will succeed, however I do think they have made progress over the last 8 months since Rob Richards became CEO even if this hasn't translated into revenues yet. Yes they have over promised and under delivered. I give them 12 months to deliver the goods. If they don't there is a risk that competitors will out muscle them, expand capacity and kill them on pricing.
" The market place for our products is indeed tough at the moment. However, we have not lost any projects, merely that almost all of the projects both big and small are being delayed by clients" As good as a TU imo and now priced in.
The email is on the ADVFN BB. It was leaked on Friday.
I have added this morning. Yes the SP could dip further to 5p, but on a £20m mkt cap the risk reward stacks up. I've taken a look at VRS following their interims and in comparison the investment case for VDTK looks compelling. VDTK's comms strategy ( IR, tweets, TUs, linkedIn) is a shambles imo, however it should be a relatively easy/low cost fix and free up more management time to focus on growing the core business. No immediate catalysts on the horizon, but Rob Richard's email on Friday was as good as an RNS to this effect. Buy when there is blood on the streets!
I've been one of the biggest cheer leaders for VDTK over the last 6 months. I have to hold my hand up and admit that progress has been far less than I expected in terms of sales over the last few months and I am becoming a lot more pessimistic about the company's prospects than I was when I initially invested.
In 2020 VDTK raised £5m from new and existing shareholders and if you strip out the E2.2m SAF ****stan contract which has been "delayed", then I suspect that FY20 revenues probably didn't exceed E0.3m. The cash flow BE target of YE20 clearly hasn't been reached and the sales generation by the global sales team of 18 has been pretty non existent which suggests that there is either a problem with the product or the 3rd party sales team ( I suspect the latter) or both. if the 3rd party sales team can't sell the panels, that begs the question , what options does VDTK have? The CEO Rob Richards may be able to leverage some of his contacts in the O&G sector and pull in some orders in 2021 but I doubt that will be sufficient to reach a 20MW sales level. The fundamental problem VDTK has is that they don't currently have the resources to hire a full time sales force to sell their panels. They don't seem to have enough resources to revamp their website, tweets or linkedIn page, which is a worry and as many have pointed out, having the CEO marooned in Thailand, a factory in Italy, a global 3rd party sales team working purely on commission and a BOD in the UK is not the ideal structure for a company hoping to develop into the dominant player in the flex solar panel market.
Yes we could see some positive news on the Paragraf JDP front in the next month or so, but even if we do, VDTK would still face the challenge of selling the GIPVs in the future. I'm increasingly coming to the conclusion that VDTK may need a strategic partner (with deep pockets) to take a major equity stake in the company, dilute existing shareholders , pump cash into developing the product and ultimately enable VDTK to realise their potential. if they continue along their current trajectory, the risk is that they will limp along with the occasional 1-2MW order but that other competitors (like Sunman in China) will ultimately take market share, expand capacity, cut costs , win the "land grab" and VDTK will be toast. Some tough decisions for the BOD to ponder. VDTK could of course turn things around and produce a rabbit from the hat in the next month or so in the shape of a chunky contract, but if the last 6 months are anything to go by, the odds of this happening aren't that great. 2021 could be another disappointing year. The $64m question is, how much of all the bad news is already reflected in the SP?