Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
MW basically says the investment case for VDTK remains extremely solid so don't panic!
It's maybe worth emphasising that the recent orders from SAF Pakistan, BTMNs and the marine sector in Thailand are encouraging but they aren't in themselves going to transform the company's fortunes. What I did find potentially significant in the last RNS was the mention of a possible deal with the Sindh provincial government. If you have travelled in that area near the Indian border you will know that there are extensive military encampments in the area. It's pure speculation on my part, but I wouldn't be surprised if VDTK's lightweight camouflaged SPVs are attracting interest. The PH interview alluded to discussions with the Australian military. Just a thought.
AIM investing is inherently risky. We know that. However, the rewards ( few and far between) are much greater than on the LSE. My reasons for investing in VDTK are pretty straightforward:
1) I believe in the company's Gen 1 SPV technology.
2) I believe there is potentially massive upside from the graphene JDP with Paragraf
3) I am encouraged by the investment in Paragraf by Amadeus Capital and Hermann Hauser.
4) I believe in VDTK's new management (Rob Richards) to commercialise the company's potential
5) Feedback from customers suggests that VDTK is in the right place with the right product at the right time
6) The global shift to renewables supports the investment case for VDTK.
7) If they deliver on their potential, valuations don't look stretched.
8) Potential newsflow on new orders from a variety of customers in a variety of verticals could lead to further SP rerating in the coming months.
9) The global shift to ESG investing will favour companies in the renewables sector such as VDTK.
10) Unlike other companies in the renewables sector, VDTK has product which is "good to go" and there is a realistic prospect that they will be cash flow positive in 2H2020.
I should add that I don't rate the likes of TW who a) engage in sloppy research b) don't verify allegations with company management c) don't bother to contact customers to get an independent opinion about validity of new orders d) don't bother to educate themselves by attending events like Big Solar 5 ( Dubai 15-18 Sept) to cross check allegations about competitiveness. Fine to question VDTK's RNS in 2019 but sloppy journalism not to cross check facts with VDTK management before going public.
I don't want to get in a bunfight with TW. I think he does have a valid point about the RNS issued in 2019 about the Nigerian "contracts". However, I think his extrapolation that recent RNS on new orders are similarly dodgy are wrong. Why? I have contacted one customer and confirmed that the order is genuine, they love the product which is a no brainer for them, they plan to place further SPV orders and they rate RR highly. I can't comment on VDTK's current cash position or if they will decide to raise capital but the feedback I have received from VDTK customers is extremely positive. For the record I hold a 1% stake in VDTK and believe in their technology, management and strategy.
I've spoken with RR and he has admitted that VDTK don't have any patented IP on Gen 1 SPVs but doesn't believe that is important. Fair enough. Patented IP isn't everything. Loads of other factors determine commercial success and defending patents can be a costly , time consuming and ultimately pointless exercise.
I am planning to attend the Big 5 Solar in Dubai from 12-15 Sept and should be able to get a good insight into how competitive VDTK is vs the competition. Talking to senior management only gets you so far. Talking to competitors and customers is also critical to form an objective view of the company's prospects.
One point worth noting is that VDTK's 15 strong sales team are freelancers who are not tied exclusively to VDTK. Good for margins. Another point I have gleaned from talking with Latam mining contacts with connections to VDTK is that the shift from wet to dry fuels is taking place at an exponential pace. To quote one contact with connections to VDTK via Black Tulip Minerals who are planning to roll out solar solutions in various mining operations in Latam " we are working on one project which has mind blowing implications for solar". Not clear if VDTK is involved but the shift from diesel to renewables in the mining sector is taking place at an incredible pace.
I've been chatting to a number of potential VDTK investors this week. The biggest push back I get is that VDTK doesn't have a MOAT. My argument: 1) The flexible lightweight SPV mkt is growing fast and there is room for more than one player. 2) VDTK's panels have been developed to withstand extreme weather conditions and have been tested to buggery and received the required EU certification from TUV without which many customers won't purchase 3) The specific features of VDTK's products (polymer film which repel dust) and adaptability (camo/shafing options) together with the long warranties (20 yrs) make it difficult for competitor products to make inroads. 4) VDTK has a very lean cost structure and a low cost base in its Lainate fab 5) The CEO's links to the mining and offshore oil and gas sectors are major positives. 6) Even if competition does increase over the next 3 years, at some point VDTK will be able to migrate to producing graphene integrated SPVs where they will have patents jointly filed with Paragraf. 7) In terms of projected market share, VDTK's targets are pretty modest even if they scale production to 60-80MW. So at the moment VDTK doesn't have a MOAT, but does it matter? Anybody got any thoughts?
I filter him!
Yazo: In the PH interview he did mention that announcements about commercialisation of graphene via the Paragraf JDP might be made in the next few months, so maybe you are right. Talking with various people connected to VDTK I get the impression that their focus for the next few years will be on Gen 1 SPVs and that GISPVs are a much longer term project. Who knows. Things change quickly. The 50/50 J/V with Paragraf is certainly a huge asset for VDTK and the market is currently not placing any value on it. As far as BBR Filtration and Westec are concerned, I haven't looked at them in any depth so can't really comment on what their shareholder value could be.
I think the focus will be on Gen 1 SPVs for the next couple of years. Even if there is an announcement in the next six months about commercialising GISPVs with Paragraf I personally don't think production will start until 2023 or later. Target markets imo likely to be laptop PCs, phones and EVs (10% of auto sales in 2025). Its a l-t opportunity for VDTK but in the medium term I think the investment case hinges on Gen 1 SPVs.
I think the focus will be on Gen 1 SPVs for the next couple of years. Even if there is an announcement in the next six months about commercialising GISPVs with Paragraf I personally don't think production will start until 2023 or later. Target markets imo likely to be laptop PCs, phones and EVs (10% of auto sales in 2025). Its a l-t opportunity for VDTK but in the medium term I think the investment case hinges on Gen 1 SPVs.
Another issue I am trying to get to grips with is VDTK's SPV production facilities. When they were listed on AIM in Aug 2017 they controlled a 51% stake in Greenflex which had 2 production lines in San Marino with total capacity of 50MW. When they acquired the minority interest in Greenflex (49%) in May 2019 they announced that they planned to scale up production of a 20MW production facility in Lainate, Milan. So what happened to the production facilities in San Marino that were owned by Greenflex and how/why did VDTK shift operations to Lainate? The answer is probably very simple, but I haven't been able to find any explanation.
When VDTK listed in Aug 2017 the main focus of Greenflex's SPVs seemed to have been solar roof tiles. The technology was developed by Claudio Marati. I heard from another source that VDTK's flexible lightweight SPVs were specifically designed for the British Antarctic Survey to withstand extreme weather conditions of -40C --> +85C. Neither Greenflex nor VDTK appear to own any patents so I am trying to work out how VDTK developed this incredibly competitive product. There isn't much background information on their website or anywhere else than I can find.
Couple of questions. As I understand it, VDTK's SPvs aren't covered by any patented technology. How easy would it be for competitors to replicate their products and squeeze them on price? I think VDTK mentioned that they have a very competitive cost base vs competitors. As I understand it, Si mono SPVs have higher power output/efficiency levels than Si poly SPVs but historically they have deteriorated in conditions of extreme heat. VDTK appears to have overcome this issue. Does anybody have any idea of how? Finally there was talk of some competitors using Cadmium which the EU may ban. Do we know when the ban is coming into force and which of VDTK's competitors it might impact?
VDTK's SPVs are opening up new markets so the opportunities are endless. I suspect that they will focus on the highest margin opportunities in key strategic sectors which provide the opportunity for l-t growth. Key challenge will be how to expand capacity and how to allocate resources. Not surprising that they need a new FD to handle these complex issues.
Disappointed but not overly concerned by the recent SP weakness. The fundamental investment case remains compelling. As others have commented, AIM stocks move on news of concrete orders. Fallow news periods are invariably accompanied by SP pull backs.
Does anybody have any thoughts about how VDTK will leverage its relationship with XNRGI ? Are there any new markets that will open up or is the tie up more likely to increase VDTK's competitive offering in current target markets.
The SP pull back is annoying but if you believe in the l-t investment case, trading in and out of illiquid shares is a dangerous game. In my view the l-t investment case remains compelling and in 2 years time we will look back and see the current SP retrace as an irrelevant blip.