Applied Graphene Materials — Cash runway extended well into calendar 2023

Applied Graphene Materials (AIM: AGM)

Last close As at 04/11/2024

5.25

0.00 (0.00%)

Market capitalisation

GBP4m

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Research: TMT

Applied Graphene Materials — Cash runway extended well into calendar 2023

Applied Graphene Materials (AGM) has raised c £6.0m (gross) through a placing, subscription and PrimaryBid offer at 41p/share. Management estimates that the funds raised extend the company’s cash runway from October 2021 well into calendar 2023, enabling it to convert the current opportunity pipeline into meaningful annual revenues during the period.

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Applied Graphene Materials

Cash runway extended well into calendar 2023

Technology

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28 January 2021

Price

47.5p

Market cap

£24m

Share price graph

Share details

Code

AGM

Listings

AIM and OTCQB

Shares in issue
(prior to January fund-raising)

49.7m

Business description

Applied Graphene Materials (AGM) develops graphene dispersions that are used by customers to enhance the properties of coatings, composites and functional materials. It also manufactures high purity graphene nanoplatelets using a proprietary process based on sustainable, readily available raw materials instead of graphite.

Bull

Understanding of dispersion technology enables AGM to support customers developing commercial applications.

Standardisation of some graphene dispersion products reduces length of sales cycle.

Expansion of distribution network accelerates the pace of introducing AGM’s dispersions.

Bear

Revenue development dependent on success of individual customer product launches.

Extensive testing required prior to customer acceptance.

COVID-19 pandemic prolonging sales cycles and dampening demand from end-users who cannot access sites to deploy coating products.

Analysts

Anne Margaret Crow

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5700

Applied Graphene Materials (AGM) has raised c £6.0m (gross) through a placing, subscription and PrimaryBid offer at 41p/share. Management estimates that the funds raised extend the company’s cash runway from October 2021 well into calendar 2023, enabling it to convert the current opportunity pipeline into meaningful annual revenues during the period.

Oversubscribed placing, subscription and offer

At the end of July 2020, net cash (there is no debt except for minimal IFRS 16 lease liabilities) totalled £3.7m. The recent placing, subscription and PrimaryBid offer respectively raised £5.3m, £0.2m and £0.5m (gross). The placing is being conducted in two tranches. The second, which is of c £4.3m, is subject to shareholder approval at a general meeting to be held on 12 February. The cash raised will be used primarily for working capital as the company builds up revenues. The company had 119 active engagements at the end of November 2020. Management estimates that this opportunity pipeline, if fully realised, represents annualised revenues of £7.6m, or around £3m if a success-probability factor is applied.

Growing opportunity

Revenue growth is driven by innovative businesses incorporating AGM’s graphene-based dispersions in new products, which they are developing with enhanced properties. For example, one of AGM’s existing customers, Halo Autocare, has recently launched a graphene-enhanced wax for alloy wheels that can protect wheels for four to six months. Encouragingly, this is Halo's second product to incorporate AGM's Genable graphene dispersion technology. AGM continues to expand its distribution network, most recently with the appointment of chemicals distributor Manho Polymers in South Korea, enabling the company to access the fourth largest coatings market in Asia. The enlargement of the distribution network means that the number of people selling AGM’s products has trebled over the last year to around 60. In a significant development for the graphene industry, EU regulator ECHA has approved the use of graphene powder at larger volumes of 1–10 tonnes a year. The approval allays concerns that potential customers considering large-scale deployments of products containing graphene may have regarding the availability of graphene in sufficient volume.

Valuation: Still too early to form a view

AGM has only recently started to commercialise its products and the sector generally is at an early stage of evolution, precluding a valuation.

Consensus estimates

Year
end

Revenue
(£m)

EBITDA
(£m)

PBT
(£m)

EPS
(p)

DPS
(p)

P/E
(x)

07/17

0.2

(4.0)

(4.2)

(7.3)

0.0

N/A

07/18

0.1

(4.6)

(4.8)

(7.9)

0.0

N/A

07/20

0.1

(3.1)

(3.5)

(6.1)

0.0

N/A

07/21e

0.2

(3.2)

N/A

(6.0)

0.0

N/A

Source: Company data, Refinitiv

Applied Graphene Materials is a research client of Edison Investment Research Limited

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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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Applied Graphene Materials and prepared and issued by Edison, in consideration of a fee payable by Applied Graphene Materials. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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