Eco Investor December 2018
Supplying the Fast Charging Electric Car Market
The rise of electric cars means there will be growing opportunities for parts suppliers and this is happening with ASX listed Rectifier Technologies now focused on building a business supplying rectifiers for the growing market in electric car charging stations.
The company makes a wide variety of power related converters, controllers and supply products, and says it has supplied a large number of industries (industrial, telecommunications, utility, standby and backup power, rail, renewable energy, water and waste water treatment, defence, oil and gas, mining, and emergency power) for over 20 years. Over the past two years it has targeted electric vehicles and charging stations for growth. Rectifiers convert alternating current (AC) to direct current (DC) and are a key part of DC charging stations.
The company has a manufacturing plant in Malaysia and supplies rectifiers and magnetic components to four market segments.
1. Electronic Components manufactures electronic components for a range of industries.
2. Industrial Power Supplies (Electricity generation/distribution and Defence) manufactures and distributes rectifiers, controllers, accessories and complete systems for the power generation, distribution industries and defence.
3. Industrial Power Supplies (Transport and Telecommunication) manufactures and distributes power supplies for the transport and telecommunications industries.
4. Industrial Power Supplies (Electric vehicles) manufactures and distributes electric vehicle charges, battery charges and power supplies for numerous industries.
Among its clients is Brisbane based Tritium Pty Ltd, which supplies charging stations for electric cars including what it says is the world's smallest DC fast charger for electric vehicles. Rectifier Technologies recently received a US$3.4 million order from Tritium to supply 35kW high-voltage high-efficiency modular power supply units for DC electric vehicle charging. These are scheduled for delivery by the end of March next year.
Over the past four years Tritium has supplied DC fast charging installations to 26 countries, and it currently has about half of the Norwegian market and 15 per cent of the European market for 50kW fast chargers. So it is a key client and prospect for growth.
Rectifier Technologies' 2017-18 revenue rose 13 per cent to $7.8 million, with much of the growth due to the electric vehicle market while other sales were steady. Sales to the electric vehicle (EV) market were $1.5 million, up from only $167,000 in 2016-17. The company said it expects the EV segment to continue to improve this financial year.
For environmental investors, the immediate reality is that the environmental part of Rectifier's business is a minority part of its total business, and is largely dependent on a small but unknown number of clients. The attraction is that the environmental business will grow as expected.
The company is a pre-dividend stock, but only just. Its profit was a modest $62,000, while its loss in 2016-17 was $35,000. The company had small profits in prior years but without EV-related sales.
The company has upgraded its manufacturing facility to increase its production capacity, and has an active research and development program focused on developing technology platforms for the evolving energy market, particularly the electric vehicle space, said chairman, Ying Ming Wang.
In October last year the company released power modules for the OEM (original equipment manufacturer) EV charger market. The EV DC Charger OEM Starter Kit uses power electronics from Rectifier Technologies and a control interface from IoTecha. It has 30kW output and extra modules can be added to build higher powered systems.
The company also has its own EV DC Home Charger and OEM RT15 EV Start Kit products.
Rectifier Technologies is developing high efficiency bi-directional power conversion technology for the emerging vehicle-to-grid (V2G) market. This can use the battery in an electric car to send power to the grid as well as receive power and so reduce peak demand on the grid. Electric vehicle owners can save money and perhaps make money by charging their battery at off-peak rates and reselling power at peak rates.
The company believes V2G bi-directional home chargers will be an important technology in the electric car market. Its first R&D prototype is expected by the end of the second quarter of 2019 and it could be in full production by the end of 2019.
"Our fast and flexible approach to R&D has allowed us to exploit opportunities available in this sector, leading to significant commercial success," said Mr Wang. "We currently work with various partners to deliver the best solutions to the market. We are currently developing technology platforms that will provide solutions to support the growth of EV products in Europe and in the USA which is expected to increase rapidly in the next five years. The group will continue to focus on R&D in order to overcome the technical challenges of developing new products. This investment is expected to improve quality and capacity across a number of our markets."
Rectifier Technologies is small. Total assets are $9.5 million and net assets are $5 million. Debt is modest.
There are 1,366,900,602 shares on issue and the four directors of the company have large share holdings.
Rectifier Technologies has been listed since 1994 and over most of this time its share had a disappointing run and fell to 0.01 cents, the lowest allowable. Its share price kicked back into life in June 2016 when it announced key progress with its rectifier for EV charging. The shares are currently trading around 3 cents. (ASX: RFT)
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