Acta S.p.A. - Hydrogen Propelled

http://www.actagroup.it/

Acta Logo
Acta (LSE:ACTA) is an Italian clean energy products company that listed on AIM during October 2005. Its operations revolve around the creation of hydrogen generation technologies which have since moved into their commercialisation phase. Acta offers a unique opportunity to enter a market that is destined to grow in the future through national/international pacts to become more energy efficient along with the expected increased use of greener technologies. With a current share price of 6.13p, 98m shares in issue and a market capitalisation of just £6m, Acta looks poised to continue its trend set in recent weeks.
Acta has recently visited the mid seven pence range having lingered in the doldrums around 4.25p since the start of the year. A lack of confidence in the company combined with a lack of interest in the stock has seen it easily be one of the worse performers in the LSE for multiple years running. However, the sentiment seems to have firmly changed, interest has picked up, and Acta is beginning to look like it has been revitalised. A trip back to the current price of 6.13p has taken place over the last few days, but this appears to be on profit taking with  low volumes and market makers seeing this as an opportunity to restock. As shown by the chart on the right, the price broke out of a rising wedge fairly early and catapulted higher before retracing a large portion of its gains. Today the share was down near 10%. This is completely out of proportion with the ~1m shares traded. However, the upward trend still appears intact and a buy-in below or around six pence looks a compelling opportunity in the medium term. After all, the share has given up all but 33% of its ~75% gains seen only a few days ago.

It is worth noting that CEO Paolo Bert holds 17.3 million shares valued at over £1m collectively. Other directors aggregately hold ~290000 shares. In addition institutions hold ~36 million shares with client Heliocentris Energy Solutions holding 5.2 million shares. Therefore 53.6 million shares are off the market thus circa 45 million are available on the market equivalent to £2.7m. This means, that as seen over the last two weeks, a shift in demand can quickly push up the price through a shortage of shares. Broker Seymour Pierce currently has a 16p target for the share.

Acta's cutting edge technology partially revolves around the 'revolutionary' AES technology they have created following six years of research and development. "Acta’s revolutionary AES electrolyser stack technology solves both problems: the use of an Alkaline Solid Polymeric Membrane eliminates the need to use expensive and rare noble metals on the electrodes and enables the safe production of directly compressed hydrogen without recourse to post compressors or sophisticated pressure balancing systems which add to the cost. The system is intrinsically simple, also saving the power required for the ancillary devices and for the compressor." In comparison to other technologies, Acta's AES technology removes the need to post-treat gas, has a lower per-unit cost and is described as combining the advantages of using the PEM and Pressurised Alkaline rival technologies whilst excluding the negatives. Thus it delivers the best cost to performance ratio (low cost, high performance).

courtesy of Zero emission resource organisation
To use the technology, Acta has developed a variety of applications. One of these is applicable for use in homes whereby clients can store excess energy via hydrogen generators and electrolytic stacks and then using this surplus to 'power electrical devices' or for cooking uses. Clearly this market will never be the driving force of Acta as the actual renewable energy sources tend to be expensive to implement. However, in coming years, more businesses could begin to take this path thus widening its appeal.

Another application is as follows:
Fuel Cell Back-Up Power systems incorporating Acta AES stacks deliver service-free operation with extended life cycle and higher reliability. It can be integrated to a renewable power source for off-grid operation. Fuel Cell Back-Up Power systems provide key advantages over batteries and diesel generators in terms of extended runtime, lifecycle and reliability. Acta’s AES stack is inexpensive, compact, and simple to integrate into a Fuel Cell Back-Up Power system and eliminates the need to replace H2 cylinders. It is a commercial enabler for the fast-expanding fuel cell back-up power systems market.

Clearly this will remove a lot of barriers involved with energy use in remote off-grid locations where infrastructure is poor. The presence of this would allow a company to store energy hence removing costly fuel and delivery. This is particularly useful as the technology allows for the use of rainwater rather than distilled water. Consequently, the use as backup power storage is an attractive proposition that would suit rural locations such as in the Australian outback. Despite hydrogen storage being less efficient it is far cheaper in comparison to battery or other storage types. It is this relatively cheap nature of the product that makes it appealing.The company is also targeting back-up telecoms sites for this technology.

Yet another use is in the soldering industry. The AES system allows for a far safer and cheaper alternative to current Oxy-Acetylene bottled gas or HHO flames thus making it a potential driver of future growth. This product is expected to be rolled out near the start of 2013. Minimum purchase agreements are also in place with partner CBIL here which will see them order at least 300, 600 and 1200 units from 2012 through 2014. This should provide further income for the group.

A further use for the technology is in the green transport market. The fuel cells can be used as ports to refuel light electric vehicles such as motorbikes and small private yachts. Eventually, it would be good to see this technology being applied to more heavy vehicles such as luxury cars or vans.
An on-site hydrogen station can use renewable energy (solar or wind) to drive electrolysis of water, generating hydrogen. Acta's electrolysers allow for a safe and convenient hydrogen re-fuelling system for light electric vehicles.  Acta's proprietary electrolyser technology significantly reduces the cost of small-scale hydrogen generation and can be powered directly from solar panels without energy loss from power conversion or hydrogen compression.

SustainableDevelopment
Through this, Acta has developed a product range including over four makes of hydrogen generators with prices on a sliding scale, multiple AES electrolytic stacks that are capable of storing wind or solar energy and come in a plethora of sizes, a generator for soldering purposes entitled 'Pure Flame' and bottled substances for fuel cells and electrolysers. Acta has already been in discussions with partner APFCT for fuel cell scooter refuelling kiosks in Thailand, growth in electrolyser markets via partner Heliocentris and the Australian telecoms market via SEFCA. In addition, multiple newly industrialising and established economies such as China are seeking increased investment in the sector. Furthermore, Asia and the Pacific are seeing a boost in the use of hydrogen powered vehicles. For example, in 2010 Hawaii launched the Hydrogen Initiative seeking to create a solely hydrogen island community. Its also worth noting that in December 2011 APFCT agreed to purchase at least 375 electrolyser stacks prior to June 2013. This is likely to translate to between ~£550k to ~£725k.

Since January, Acta has been busy creating future partnerships with key players as well as furthering the business following its poor share price performance. The year started positively with the company signing a letter of intent with Horizon Fuel Cell Technologies, the world's largest fuel cell producer (by volume). Through the agreement Horizon purchased preliminary products from Acta for evaluation. Following this, Horizon intends to use Acta's hydrogen generator stacks in its future products. This agreement provides Acta with a near instant route to addressing the wider global market indirectly.

Soon after Acta sold two photovoltaic projects to Fedi Impianti in exchange for a retained equity interest between 130k euros and 160k euros. The purpose of this was to divest of non-core assets and streamline its operating base. To further this the company disposed of other Italian photovoltaic assets in mid-February for a cash consideration of 150k euros.

Later in January the company released the following:
"As announced on 22 September 2011, the Company has been seeking to finance the growth of its production activities through its current banking relationships as well as through the disposal of its remaining portfolio of photovoltaic consents and the collection of grant receipts and working capital receipts due on the completion of EPC photovoltaic installation contracts. Having made a careful review of the financial resources available to it from these sources, the Board has determined that the level of capital currently available will not be sufficient to finance the Company through to full profitability and cash breakeven, and has therefore decided to seek additional funds through alternative sources to finance the working capital requirements of the Company's current commercial expansion. The level and form of this financing has not yet been fully decided but there is a likelihood that there will be a requirement to raise additional equity. "

courtesy of freedigitalphotos.net
Whilst this does raise eyebrows at the company's finances going forward there is almost no concern that the company may run out of money with a variety of financing possibilities open to Acta. A few days later the PUREFlame 600 soldering product was launched which boasted lower costs and higher hydrogen and oxygen delivery per hour.

In late February the agreement with Heliocentris was signed. It drew upon a minimum purchase agreement of 500 units in 2015 and 1.5m euros in 2016. This deal represents the potential for appreciable upside as there will be demand for Acta's products in the educational sector of Heliocentris which is the focus of universities and research centres worldwide. In addition, if Acta raises over £1.8m in a share placement, Heliocentris agreed to put in for 250k euros worth of shares. CEO of Heliocentris commented: "We are excited to have entered into this strategic partnership with Acta. Cost efficient and scalable hydrogen generation is an important element of Heliocentris' roadmap towards autonomous power and zero emission solutions. The combination of Acta's innovative alkaline solid membrane technology and Heliocentris' leading system engineering know-how will enable Heliocentris to expand its successful current rollout of GenSet efficiency and energy management solutions to the next level: commercially viable and industrial grade autonomous power as well as zero emission solutions."
In March the placement was completed. ~51 million shares were placed at an underwhelming 4p/share to raise £2.03m despite it being oversubscribed. Whilst the share placement price was poor, it gave institutional backing to the company plus endorsed their forward-looking strategy.

Also in March the company released its final results for FY2011. Revenue was down from €7.906m (including a large one off revenue bonus) to €3.911m. However the operating loss was also down from €3.928m to €2.220m. Whilst the results were mixed, it will be the coming years that will define and outline the strong commercial backing for Acta's products, that should boost revenues and return Acta to a cash-flow-in company.

In May the company signed an exclusive supply agreement. Initially the products would undergo a validation phase that was expected to last 3-6 months. Subejct to satisfactory results (which are highly likely) "Acta will be specified as the exclusive supplier of alkaline membrane electrode assembly ("MEA") components for the new electrolyser and for any other alkaline membrane-based electrolyser equipment produced by the customer for other applications. The Agreement includes pricing terms for mass volumes of up to 100,000 units per annum." Once again, this is another vote of confidence that there is a definite market for Acta's products and that they are appealing. These orders should transfer into substantially improved future revenue streams. It is also not beyond expectations that as Acta gains recognition, it could become a very cheap takeover target.

In June the company signed the deal with SEFCA in Australia to develop products for the telecoms industry. Director of SEFCA commented: "Sefca recognises the Acta solution as a major breakthrough for us and our customers. It is the quantum improvement "disruptive" technological solution that we have been searching for. Uniquely, it is a solution that offers Sefca the ability to produce high pressure hydrogen on site, is designed to work with the variable power outputs of PV cells, and all at a relatively low cost. Sefca has been monitoring the Fuel Cell and Electrolyser markets closely in search of a product that can solve these issues and we are incredibly excited to distribute Acta Electrolyser. We see it as meeting our needs and providing the hydrogen breakthrough that the market in Australia has been waiting for."

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More impressively the July trading statement touched upon the fact that Acta had been in commercial developments from potential partners around the globe including China, the USA, Canada, Europe, India and Indonesia and that these discussions were progressing well. Through this it is clear the upside potential for both the company and share price is massive. In August interim results were released of the six months to July. Excluding the disposed of photovoltaic operations revenue was up
€0.2m year-on-year, revenues from product and research services had more than tripled y.o.y and the proposals pipeline had grown by more than 15 times to €300k y.o.y. The operating loss was also down 10%. However, period end cash stood at €1.1m which may have shaken investors as a placement may be coming soon. It is important to recognise that Acta is expecting to receive another €900k in grant funding prior to year end. Furthermore the company mentioned, "These [product integration and testing] have moved more slowly than we and our partners had previously anticipated, resulting in a slippage of the Board's revenue growth expectations for 2012 and to a lesser degree for 2013. "

However, operations have picked back up in October with numerous positive events that have driven the share price accordingly. In early October a shipment of a Hydrogen Fuel Cell Back-up system featuring Acta's technology has been dispatched that would then be tested in Australia via Mfield Energy. Following this, Mfield Energy promptly ordered two more of the same product which indicates confidence in the technology. On October 22nd the company received its first two orders for 1m3 electrolyser stacks (€9500 each) from educational institutions including the Spanish ministry of research and a manufacturer in Germany who are seeking to integrate Acta's electrolyser stacks. These will be delivered in December. Acta is also in discussions for the sale of more 1m3 electrolyser stacks. The final RNS came on October 24 - Multiple orders for the HG100 hydrogen generator had been received via Heliocentris (worth circa €150k). The product was also be showed at the Worlddidac exhibition completed 24th October through 26th October. News regarding enquiries from this roadshow may be imminent.

Currently Acta has experienced a lot of orders for its products, however these are currently relatively small in comparison to what could and may be achieved. Positive reception for any of the products could easily see their minimum order figures seem far too weak and propel Acta forward into 2013/2014 with a strong industry backing and an innovative new cost-saving, more efficient technology. For a £6m company, the potential is significant and Acta could feasibly become as large as another industry player such as ITM Power. Acta offers a potential low-risk, high-reward option to add diversity to a smallcap portfolio.

11 comments:

  1. Finally a good review on acta!?!!

    must be christmas

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  2. thanks for another good review@!

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  3. seems good

    J.P

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  4. Very detailed -> very good!

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  5. in at 6.25p, cheers

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  6. Sorry for ignorance.... is there any comparison between AFC and ACTA?

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    1. There isn't a lot of detail given on the AFC site
      http://www.afcenergy.com/technology/

      Whilst AFCs product is more efficient, ACTAs is more 'green' and far more sustainable (e.g. it can use rainwater). In essence, AFC offers a lower cost, higher efficiency alkaline fuel cell compared to those available whereas ACTA offers something different.

      A short comparison is shown on this page:
      http://www.actagroup.it/technology_aes_alkaline_pem.asp

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    2. They are two different products.

      AFC produce alkaline Fuel Cells which convert Hydrogen into electricity, they don't build Electrolysers.

      ACTA produce Electrolysers and AES Stacks based on their Alkaline membrane which produces Hydrogen/Oxygen from water. They don't build fuel cells, although they are conducting R&D with various Universities looking at utlilising their membrane for producing low cost fuel cells. A quick look through their twitter page should throw up that info

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  7. RISING STRONGLY!

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