Strengthening the offer

Haydale Graphene Industries 4 November 2015 QuickView

Haydale Graphene Industries

Strengthening the offer

Advanced materials

QuickView

3 November 2015

Price

177p

Market cap

£20m

Share price graph

Share details

Code

HAYD

Listing

AIM

Shares in issue

11.45m

Business description

Haydale is focused on the commercialisation of graphene and other nanoparticle products using its proprietary plasma process, which functionalises the materials. The functionalisation enables nanomaterials to more effectively interact with host materials by introducing customised covalent bonds.

Bull

Plasma-based functionalising process still appears unique, with patents awarded in China and Europe.

Placing and open offer oversubscribed.

Commercial development agreements in place with major resin suppliers.

Bear

Graphene remains a nascent material surrounded by a lot of hopeful rhetoric.

Haydale remains loss-making despite addition of profitable HCS; cash break-even expected FY17.

Very fragmented market means competition could emerge unexpectedly, from any region.

Analysts

Andy Chambers

+44 (0)20 3681 2525

Roger Johnston

+44 (0)20 3077 5722

Haydale has announced a successful placing and launched an open offer to raise £5.6m net through the issue of 3.75m shares at 160p. Combined with a number of positive developments since the IPO in April 2014, and following solid FY15 results, the company appears well-positioned to continue its progress. Focus on graphene-enhanced inks and composites end-markets appears to us to bring closer commercial success.

Fund-raising and FY15 results

Management states that the main placing of 2.9m shares was oversubscribed. Its success marks the rehabilitation of Haydale following the IPO in April 2014. £2.6m of the proceeds will support its working capital requirements. Monies will also be used to invest in increased reactor capacity, which has expanded 15x in the last 18 months, and support development of processing centres of excellence in Korea, Germany and the US. Haydale reported results to 30 June 2015, which include Haydale Composite Solutions (HCS, formerly EPL) bought in November 2014. Excluding HCS, sales more than doubled to £0.3m from £0.13. HCS outperformed expectations, although group adjusted EBITDA loss widened to £2.38m from £1.96m. Haydale had net cash of £2.05m at the year end.

Fast track to commercialised products

Haydale has secured a key European patent for its plasma-based functionalisation process, which enables the use in end products of nanomaterials such as graphene and graphene-like materials. While development of high-quality single sheet graphene may be some way off, areas targeted by Haydale may be commercialised more readily. It focuses on graphene-enhanced inks and composite resins, although sensors and energy markets may follow. For example, in the last year it has signed agreements with two resin suppliers (one polyester, one epoxy) to develop composite materials using functionalised graphene, which could more than double the strength of the composite and open up high-value markets. The process can be applied by any producer of nanomaterials requiring functionalised enhancement of products. In our view, Haydale’s process is currently unique.

Valuation: Still nascent, but progressing

The development of the graphene-related commercial products should be the main driver of sales over the remainder of the decade and may commence in FY16. Revenues should grow rapidly this year, with a full contribution from HCS augmented by the addition of graphene-enhanced product development projects as well as higher grant funding, the start of licensing and nascent commercial sales.

Consensus estimates

Year
end

Revenue
(£m)

PBT
(£m)

EPS
(p)

DPS
(p)

P/E
(x)

Yield
(%)

06/14

0.13

(2.22)

(0.28)

0.0

N/A

N/A

06/15

1.48

(3.03)

(0.25)

0.0

N/A

N/A

06/16e

2.70

(2.01)

(0.15)

0.0

N/A

N/A

06/17e

4.30

(1.00)

(0.07)

0.0

N/A

N/A

Source: Bloomberg (one estimate)

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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