AFC Energy Analyst Q&A: Positioned well for future collaborations (LON:AFC)

AFC Energy plc (LON:AFC) is the topic of conversation when Zeus Capital’s Head of Research Mike Allen caught up with DirectorsTalk for an exclusive interview.


Q1: AFC Energy, can you just talk us through your latest note and explain the approach that you used in your valuation?

A1: We’ve issued a note earlier this week and we’ve updated our valuation following the initiation note that we dd back in September.

Since September, there’s been a number of positive developments in terms of new strategic collaborations with world leading organisations, there’s been investment to ensure capacity can be built up to satisfy demand and obviously the UK government has banned the sale of new petrol and diesel powered cars after 2030 and hybrid after 2035, that was previously set at 2040.

So, there’s been a lot of different market dynamic changes but the company have set themselves well with some future collaborations as well.

In terms of the approach we took to valuation, they obviously set up a collaboration with ABB recently and we’ve looked at the agreement and the platform the company would have with ABB and we’ve started looking at the potential valuation impact. So, we’ve looked at the major markets where ABB and the company work together and we’ve ascribed 131.5p of DCF value and that’s just considering them working together in the US, Canada, Germany, France, Italy, and Spain, obviously, ABB are in over 80 countries so the upside could be bigger. We’ve also ascribed some value to the EV opportunity, mainly in the UK and also the upside with diesel-powered generators as well and that opportunity gives us value of around 60p.

So, taking that the total of that gets us to a valuation of 191p which we think is centred more on this existing capital structure.

To add to that, there’s a lot of things we’ve not considered in the valuation as well so we’ve not put everything into that valuation at all, we’ve ignored wider markets with ABB and we’ve ignored product development with ABB as well. We’ve also haven’t looked at the temporary power market on a global basis which could be an opportunity, we’ve not put anything in for the AlkaMem as well and they’ve recently signed an agreement with Ricardo and we’ve not put anything in there.

Interesting as well, we’ve only looked at the EV charging market on passenger cars, Scania recently flagged that they would be using stationary fuel cells as an important component in the electric charging system. We think that would play well with the company as well so we’ve not considered the commercial vehicle charging market at this stage.

We have looked at the current opportunities that we see but there’s a lot that we’ve ignored in this valuation as well.

Q2: You’ve excluded quite a few things from the valuation, is that something that you’ll re-evaluate later down the line?

A2: Well, obviously we are looking at this on a long term basis and clearly the market is moving very quickly at the moment so as ever, there’s always risk attached but if some of these opportunities emerge more quickly then that’s something we’d have to consider in our valuation.

So, we are comforted that there’s a lot going on at the moment and the fact that the company has signed with such a big player such as ABB suggests that the technology is right and there at the right time. There’s a lot of opportunities that could come in quicker than what we currently expect.

Q3: For anyone looking at this stock, what are the next catalysts?

A3: We expect results next month from AFC Energy, there won’t be an awful lot in those results we don’t think as it clearly takes time for the revenue to be generated. So, we wouldn’t be expecting any ABB revenue in these results and clearly, we’d expect the business to be loss making as well and equally, we’d be expecting the company to be investing in these opportunities.

So, the results we don’t think will say a lot, the bigger catalyst is probably any new strategic collaborations, further progress on Extreme E etc., these are probably going to be the bigger catalysts. It’s the unscheduled strategic alliances and collaborations which we think will be more important.

Click to view all articles for the EPIC: ,
Or click to view the full company profile:
    Share on facebook
    Facebook
    Share on twitter
    Twitter
    Share on linkedin
    LinkedIn
    AFC Energy

    More articles like this

    Fintel plc

    Fintel core revenue growth is higher than Zeus forecast

    Fintel plc (LON:FNTL), the leading provider of Fintech and support services to the UK retail financial services sector, has released a trading update for the six months to 30 June 2022, which reveals: Core revenue grew c.9% to

    Shoe Zone plc

    Shoe Zone analyst Zeus upgrades FY22 adjusted PBT forecast

    Shoe Zone plc (LON:SHOE) Better than expected demand and further strong margin performance leads to an upgrade in FY22E adjusted PBT from “no less than £8.5m” to “no less than £9.5m”. Zeus revenue forecasts increase by £1.5m (1.0%)

    OnTheMarket Plc

    OnTheMarket analyst Zeus confident in forecasts

    Foxtons, one of London’s leading estate agencies with more than 50 interconnected branches across London, has signed an agreement to advertise its UK residential sales and letting properties at OnTheMarket plc (LON:OTMP). Zeus view: Foxtons, the well-known London

    SpaceandPeople analyst Zeus restores estimates and valuation

    SpaceandPeople plc (LON:SAL) secures, sells, and manages flexible space for brand experiences, short term promotions and retailing in high footfall venues for its customers, including in shopping centres and travel hubs. The Group has issued a positive pre-close

    Lookers Plc

    Lookers shares are still undervalued says Zeus

    Lookers plc (LON:LOOK) has released an H1 trading update reporting a continuation of strong performance year to date. H1 2022 underlying PBT is expected to be c. £45m and Management anticipate full year PBT will also be ahead

    SysGroup plc

    SysGroup analyst Zeus forecast a 39.0% increase in revenue in FY23

    SysGroup plc (LON:SYS) is an award-winning provider of managed IT services, cyber security, cloud hosting and IT consultancy. The Group offers investors an attractive business model with high recurring revenue and a diversified customer base. SysGroup is competitively

    AFC Energy

    AFC Energy’s long term opportunity remains vast says Zeus

    AFC Energy plc (LON:AFC) has signed an agreement with another leading UK construction/infrastructure player, this time in Kier Group. We believe this further endorses our long term thesis that AFC will play an active role in encouraging the

    Inchcape

    Inchcape performance exceeding expectations says Zeus

    Inchcape plc (LON:INCH) has released another positive trading update, with performance exceeding expectations so far this year. This follows on from a positive Q1 update on 28 April. Through quarterly improvement in Distribution volumes and operating margin, the

    boohoo Plc

    Boohoo Group analyst Zeus sees a strong performance in Q1

    ¨ Q1 financial highlights: Boohoo Group plc (LON:BOO) revenue of £445.7m is -8.3% YOY vs. a strong comp (Q1 FY22 revenue +32.1%), in line with Zeus’s forecast and management’s previously stated guidance. Gross sales growth remained positive +9%

    No more posts to show