BUY HOLD SELL – Novonix (ASX: NVX)
Novonix (NVX) is an Australia-based battery materials and technology company. The tagline that greets you on their website says, “Better battery technology. Faster, cleaner and cheaper. Because the world needs it.” Hard to argue with that. It is a developer and supplier of materials, equipment and services for the global lithium-ion battery industry with operations in the US and Canada. NVX operates through three segments: Graphite exploration and mining, battery technology and battery materials. Might as well be one. 98% of its meagre revenue comes from battery technology. The flow chart below helps in understanding its operations. NVX is a $4.5bn company with revenue of a little more than $5m in 2021. If Marcus Today was valued on that revenue multiple, my scanty shareholding would make me a multimillionaire. Seems a bit farfetched but valuations are stretched as any central banker will tell you. An AFR article at the start of the month said it could be in a green bubble along with AEF. Recent news (A bit dry)Why not sign up for a free trial? Get access to expert insights and independent research and become a better investor.
- At the start of the month, it was announced that NVX would be added to the ASX 200 index on December 20. It also told the ASX it had no idea why the share price had fallen 32.4% on December 3.
- In October, bought a manufacturing facility to help its expansion to 10,000t p.a. of anode production by 2023.
- Early August, Phillips 66 announced a US$150m strategic investment to help support a capacity expansion. A big vote of confidence in NVX. Phillips 66 had its debut as an independent energy company when ConocoPhillips executed a spin-off of its downstream and midstream assets.
- In May, filed a draft registration statement with the US SEC about a potential initial public offering via Nasdaq.
- In April, completed the installation of a first Generation 2 furnace system built by Harper. Key to its graphite manufacturing process.
- In February, completed a $115m equity raising. A further $16.5m was raised via directors through a placement.
- In January, received a US$5.6m grant from the US Department of Energy.
- The stock box is a bit irrelevant given the lack of fundamentals.
- Obvious from first glance it is a growth company. ROE of -9.2% is expected to reach 11.3% in FY24.
- Revenue is expected to grow almost 50% this year after a 23% improvement in FY21 and a 121% improvement in FY20 although it is from a very low base.
- EPS is expected to fall 43% this year then pick back up 150% in FY23.
- It trades on a PE of -153.3x as it is yet to make a dollar of profit.
- No dividend.
- It is trading at a 25.7% premium to the average broker target price.
- Its peer, Ecograf (EGR) sits on a market cap of $300m with even fewer fundamentals.