CFU - Ceramic Fuel Cells

[dagrizzbear]

I've bought in and am thinking this has got to be a pretty good climber in the long run. It's still below the initial offer price and hasn't begun the climb.

I mean Oil is in the 70's, market will spotlight alternative energy related shares like this one sooner or later. Has got impressive patented technology on the globally hot topic of fuel cells and some commercial steps already progressing with sales talk to NZ and Germany. So the market frenzy of when the transition from a CSIRO venture to a commercially operating business takes place is just around the corner. Long term supporters like Energex are at the shareholder list. Even BHP Billiton and Mitsui & Co. are holders.

Any comments?

[Porper]

Quote: Originally Posted by dagrizzbear I've bought in and am thinking this has got to be a pretty good climber in the long run. It's still below the initial offer price and hasn't begun the climb. I mean Oil is in the 70's, market will spotlight alternative energy related shares like this one sooner or later. Has got impressive patented technology on the globally hot topic of fuel cells and some commercial steps already progressing with sales talk to NZ and Germany. So the market frenzy of when the transition from a CSIRO venture to a commercially operating business takes place is just around the corner. Long term supporters like Energex are at the shareholder list. Even BHP Billiton and Mitsui & Co. are holders. Any comments?

[dagrizzbear]

Thanks Porper.

I am not a day trader and invest in the medium to long term so it's interesting to hear your opinion from a charts point of view. I guess I should have waited a little before I jumped in. Hopefully seeing gains two days in a row is a sign of a stop in the losing streak.

[YChromozome]

Should be a stock to watch on Monday.

A couple of days ago CFU announced that they would build a volume manufacturing plant in Germany to make solid oxide fuel cells for micro-combined heat and power (CHP). The first stage will see a production line capable of producing 50,000 1KW full cell stacks per year with the line running 24/7. The second stage will see the factory expanded to produce 150,000 1KW fuel cell stacks per year.

CFU who has a number of demonstration units in field trials has said they are not interested in building the CHP systems themselves. They would much rather build the stacks and work with existing appliance manufacturers to integrate the stacks into their products.

After the Australian market closed last night, CFU announced a product development agreement with Gaz de France, Europe's leading distributor of natural gas, and De Dietrich Thermique, to develop a fully integrated m-CHP unit for the French residential market.

CFU is dual listed on the ASX and AIM. This announcement pushed CFU's AIM price up 15% overnight.


I had an oportunity to have a tour through CFU's Nobel Park (Melbourne) facilities a week and bit ago. It's certainly impressive the gains they are making in size and efficiency every year. It was only in June 2005, they launched the first fuel cell powered CHP the size of a two door wardrobe. Then they brought out the NextGen, which was half the height of the first demonstrator. Many of the NextGen units are in the field, including 10 with a German utility, EWE.

In September CFU announced newer square ceramic stacks and improved other key components such as a 50% smaller steam generator, a 40% smaller heat exchanger, and a 75% reduction in the airflow through the system. They had a Nextgen chassis fitted up with the new square cells, and the stack was only half the size with all this wasted space in the top of the cabinet. I can only imagine what size the unit will be next year . .

We also saw the Zircon Powder plant ready to be shipped to a factory they are setting up in the UK. This was announced earlier this year and should be operational in April 2007. The Zircon Powder also has uses in other industries and hence there is a an oportunity for this plant to bring in revenue through the sale of the powder to third parties.

I think the announcement of the Zircon Power plant, Fuel Cell Factory in Germany and the overnight announcement of the product development agreement with Gaz de France shows the commercialisation is now full stream ahead and there should be good things happening over the next few years.

[EasternGrey1]

I'm not totally convinced CFU is good value, though the recent announcements will probably push the share price up at least in the short term.

At 150,000 1kw ceramic stacks p.a., what revenue stream are we looking at?

If a 1kw generator can retail at around $US550, ie. $A700 Yamaha EP1000 Generator, then the wholesale price of a 1kw micro-CHP ceramic stack (not the whole unit) is unlikely to exceed say $A150.
So we are looking at maybe 150,000 * $A150 = $A22.5m pa revenue. If profit margin is 50% (generous?) then annual profit is $A11.25m, and if the company is growing strongly p/e might be as high as 30, giving a market cap of $A338m. But this production level isn't reached till phase 2, and phase 1 goes to 2009. Discounting say 5 years at 15%, we get NPV15 = $A168m, or at 10% NPV10 is $A210m. I think those figures are reasonably generous.
Market cap is currently $A232m.

The project is to be funded by a combination of debt and equity, so there is also some dilution to come. In addition, competition and improving technology are likely to push prices down over the intervening years, and CFU is not the first cab off the rank.

The Gaz de France deal obviously adds value, but it is unclear how much, and any profits are still years away.

CFU clearly has potential, but I wonder if it is really worth buying at the current share price. I would have thought there was better value out there.

Disclosure: I bought CFU late 2005 & early 2006 for average 0.55 and have since sold them all at average 0.75. I would buy again around the 0.55 mark.

[YChromozome]

Quote: Originally Posted by EasternGrey1 If a 1kw generator can retail at around $US550, ie. $A700 Yamaha EP1000 Generator[/url], then the wholesale price of a 1kw micro-CHP ceramic stack (not the whole unit) is unlikely to exceed say $A150.

[EasternGrey1]

The way you put it, it sounds great - but -
- there is competition and CFU hasn't won yet, so there is still a chance to be factored in that EWE, Gaz de France etc might not use CFU's stacks at all (which I didn't factor into my calcs).
- a key issue is just how much CFU will get paid for each unit. Just because it's G de F not the householder doesn't necessarily mean they'll be paid heaps.

For me, the figures don't yet add up to compelling value at the current share price, though I'm not saying that CFU won't be a great investment over the next few years. My calcs suggest that at the current level of information, the shares are not far off being priced for perfection.

I'm currently treating it as a spec to be bought low and sold high, rather than a solid long term investment. If it keeps going up from here, I'll most likely not be on board, but future announcements might change the picture of course.

[YChromozome]

Interesting - Seems to just keep gradually floating up. Yesterday on the ASX it closed 95c up 2.7%.

Overnight on the AIM, CFU closed up 6.76%.

Since the announcement AIM:CFU is up 31.6% and ASX:CFU is up 26.6%

[hoody]

It seems this stock has been given renewed interest by an American commentator Dan Denning now living and working in Australia. He rates this thing as a top pick and has sent out recommendations on it yesterday. Yesterday it was $1.12 today its 1.29.

Spoke to one CFU's directors yesterday. Seems things are moving well with their trials and the plans to produce in Europe around 2009. They are not planning to sell the units in Australia at present. Our electricity is too cheap.

There is a shareholder information day at the Noble Park factory on Wed March 28. Bookings must be made on 0395542300. Some non shareholders may be allowed to attend if space allows.

Hoody

[Knobby22]

I think the rerating is more a going back to the old price coupled with todays announcement showing the product going commercial at full steam.

I bought a few a while ago. Some risk but not compared to most technology companies in the ASX. Could get taken over by the Europeans who can recognise a good tech. company. Probably get slapped in a correction though.

[hoody]

Thanks Knobby. You are of course correct in saying the announcement is the likely reason for the rise today. I did ask the receptionist at CFU that I spoke to this morning if there was an announcement today but she had no news. I took her word for it and neglected to look it up.



I'm going to the meeting and taking a tour of the factory at Noble Park on Wednesday 28th. Any others interested?
Cheers

Hoody

[Boyou]

hoody,
I have done a bit of research on these .Fundamentally I think the company has HUGE potential.And just reaching the production phase with the plant in Germany.
Plenty of interest from European power companies.The French power company looks to be on board.
Just wondering if you are still on them and how the factory tour went.I just picked up a small parcel of them today .I know there is still a fair amount of spec surrounding CFU ,but the potential excites me!

Cheers Ya'll

[Captain_Chaza]

Quote: Originally Posted by Boyou hoody, I have done a bit of research on these .Fundamentally I think the company has HUGE potential.And just reaching the production phase with the plant in Germany. Plenty of interest from European power companies.The French power company looks to be on board. Just wondering if you are still on them and how the factory tour went.I just picked up a small parcel of them today .I know there is still a fair amount of spec surrounding CFU ,but the potential excites me! Cheers Ya'll

[YChromozome]

Quote: Originally Posted by Boyou Just wondering if you are still on them and how the factory tour went.

[Boyou]

Hi responders!
Captain Chaza ,thanks for the warning.I do understand the risks.Could you expand on the Technical stuff? What don't you like about the system?
YChromosome ,thanks for your input .I live in Bris ,so it was not possible to attend the tours.I see you have been holding a while..still confident about them ,now they are reaching the next phase?

Cheers Ya'll

[hoody]

Boyou

No I'm not still in the stock. I bought at 1-20 and sold at 1-12. Glad I got out when I did but I still have the company in my watchlist as I'm very confident it will eventually produce an excellent return. But production and installation of units is over a year away so its not going to make money any time soon. I'm of the opinion there is lots of better value out there at present where your money can return a much faster profit.

Hoody

[Boyou]

Thanks Hoody, I will just see how they run for a while....I don't mind waiting.

The next couple of years will be interesting for this type of technology as people begin to grasp the reality of LOCALISED energy generation.One small step toward lowering Greenhouse Gas emissions.

Bring it on ,I say!


Cheers Ya'll

[YChromozome]

Quote: Originally Posted by Boyou YChromosome ,thanks for your input .I live in Bris ,so it was not possible to attend the tours.I see you have been holding a while..still confident about them ,now they are reaching the next phase?

[Boyou]

Thanks for your input YChromozome,

Looks like the SP has taken another little run up.looking at the chart on ASX, I see it has been doing a bit of a Rhumba for a while.

Anyone care to speculate on the moves? Is it smart money doing a bit of massaging? Hope not .

Cheers Ya'll

[YChromozome]

Quote: Originally Posted by Boyou Anyone care to speculate on the moves?