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, provider of hydrogen power generation technologies, have announced that it’s signed a binding agreement with BK Gulf. Mike, can you just talk us through the nature of that agreement?
A1: The company has today announced a manufacturing contract with a BK Gulf, who are based in Dubai, and that’s for the function of containerised and fitted out systems that will be ready to accept the AFC fuel cell stacks.
So, these containers will be fabricated utilising the company’s design but BK Gulf will provide for the engineered solution, looking at ways to design and configure, that will ultimately reduce costs to the company and its customers.
Just a little bit of background on BK Gulf so they are wholly owned by Dubai- based Dutco Group so that’s a family owned conglomerate with interests in construction, property development, energy, and hospitality. Until recently they were the JV partner of Balfour Beatty in the Middle East, it’s large business, been well-established and they’ve got access to approximately 6,000 engineers working across the business and operating on one of the biggest ports in the world as well.
So, it kind of gives us confidence that the company can deliver a cost effective solution but also working with partners that can give them scalability.
Q2: Has this news meant that you’ve made changes to your forecast in any way?
A2: We’ve not reviewed our forecast yet, clearly given the positive update we had a few weeks ago as well, the commercial pipeline already was very strong so we believe our forecasts are well pinned at this juncture but haven’t made any changes, as yet.
Q3: Now, in terms of an investment case, how do you view AFC Energy?
A3: I think as we said in our initiation note really, we think the business has got very exciting technology, they’ve got the ability to solve very large problems and actually, the environment, particularly around electric cars where government talking about banning the sale of diesel cars 10 years earlier in 2030, probably plays right into its strengths as well. Of course, it’s not just about EV charging, there’s a lot of applications around different power and other areas that we’ve really explored to be honest.
So, we think the business has never been in a stronger position financially, commercially, and ready to go so we think 2021 and beyond will be very exciting for the company.
When we initiated coverage, we were comfortable with a valuation based on the opportunities we could see and measure of 68p and that’s just based on UK EV charging and distributed power alone. Clearly there’s more to that story as development unfolds.
So, overall, we think it’s exciting times ahead for the business.