|Shares Out. (in M):||30||P/E||0.0x||0.0x|
|Market Cap (in $M):||467||P/FCF||0.0x||0.0x|
|Net Debt (in $M):||86||EBIT||0||0|
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Originally recommended by Surf on Dec 10 2012 @ 6.70 and recently closed with a lovely profit
My read on original posting agreed fully with the selection commenting on VIC-
06/06/13 02:21 PM
Own stock and agree with opportunity here.
Feel it is an easy double over next 12 months.
The problem was revenue recognition by two marketing people
trying to make their sales targets. Management would not have been buyers of
stock on open market, if they where complicit.
In the fullness of time, new financials for past two years by new accountants,
then the strong fundamentals should prevail and stock rerated.
And sometimes you get what you anticipate. Maxwell more than doubled within the year
and it is truly surprising that I am recommending the stock again, a true growth/value investor
that I believe myself to be. The story is simply playing out better than expected!
Bloomberg several weeks ago in a story titled “China Wakes Up” had several eye opening comments:
1.”A July 2013 study found that air pollution in China’s north reduces life expectancy by an
average of five and half years”.
2. “The capital’s tourism industry has also been hit hard by the life threatening smog, with
the number of visitors to Beijing dropping 10% in 2013”.
3.”Most important, the Chinese people are voting with their feet. Almost 2/3 of the country’s
wealthy –those with assets of $1.6 million or more- have left or plan to leave the country,
with the environment one of their most frequently cited reasons, according to the Hurun
4. Environment surpasses land expropriation “…..more than 180,000 popular protests each year”.
This type of pollution is very hard for us as Americans to grasp. China is facing a major crisis
and is finally reacting deliberately. Shutting down 50000 small coal fired furnaces and removing
6 million high polluting cars and trucks have fallen well short of their targets.
We recommended the Uranium Etf several weeks ago as we reasoned a resurgence of nuclear plants
-smog free energy-would continue unabated, with China the stalking horse.
In addition we expect, the continuation and expansion of the hybrid diesel bus program in more cities of
China seems assured.
But what is the story here? What makes Maxwell unique? In one word- Ultracapacitors or UC for
short. Battery like in function- they store energy and release it. UCs can be charged and recharged
repeatedly- hundreds of thousands of times and still keep on working. Conventional batteries are
usually exhausted in several hundred charges. UCs take and release a charge in seconds- batteries
can’t- try charging your cellphone, laptop computer quickly etc. Used in combination with actual
batteries, UCs can significantly improve the fuel efficiency in oil and hybrid vehicles and additionally
extend the lifetime of the costly fuel cell and batteries in pure electric cars. They perform in a broad
range of temperatures from -40 to +65 centigrade. The frozen North or the tropics does not inhibit its
actions, allowing again as many as one million charge and discharge cycles! But they are not a
replacement for batteries at this point, as the UCs can’t hold as much power as long as a battery.
Used with batteries they absorb the initial startup and abuse that quickly kills batteries. The UCs also
redeliver the stored energy instantaneously for fast and repeated startups. The key to MXWL’s
Ultracapacitor performance lies in the proprietary electrode that they manufacture using their patented
The ultracap is increasingly finding its way in various exciting and growing areas. Last month saw
the publication of “Supercapacitor Market by Materials, Products , Applications and Geography- Analysis
& Forecast (2013-2020)”- a 253 page report. Areas highlighted included electric vehicles, smart grids,
consumer electronics (laptops, cameras, pda’s) and industrial applications (Automated Meter Reading
Machines, Uninterrupted Power Supply etc). Energy applications would include photovoltaic, wind
turbines, actuators and others. Medical products count defibrillators as a part of the market.
The report comments that due to “its fast charging and discharging ability” some additional areas of
application include energy and wireless applications which are expected “to result in explosive growth
of the supercapacitor market from 2014”.
Let us now deal with several of these opportunities Maxwell is pursuing. Probably the best known of all
is the Chinese hybrid bus market. In a Stifel Nicolas presentation on Feb 27, Maxwell’s CEO said that it is
expected that China will buy 60,000 new hybrid buses between this year and next, with Maxwell’s
expected to get $8000+ per bus- over $480 million in new business. While MXWL’s contract
manufacturer can sell its own Ucaps, it must buy the core material from Mxwl. Maxwell is patent rich
and very protective of same, its patents and dry process core material. They spent over $22 million on
R&D last year and work with all the major ucap and energy research universities including MIT and the
various government funded research labs- (ie working with UoC Berkeley, using Graphine).
Another very strong area of potential is the truck business. Advantages allow for fast stop and
retarts, reducing battery deterioration. As mentioned, UCs can operate in frigid weather allowing
trucks to function in freezing climes- batteries do not. Additionally, by shutting the engine down at
traffic lights and quickly restarting, energy savings mount up. With many cities now eliminating idling to
reduce pollution (effecting US Postal Truck, Fedex, UPS etc), we have a ready and growing market. It
was reported that 25 truck fleets were testing the Ucaps for energy savings and pollution mandates.
Maxwell’s new truck starter product is ready made for the $3 billion North American market from
18 wheelers to delivery vans – now in five fleets. Currently class 7-8 sleeper trucks are covered.
Maxwell’s Engine Start Module (ESM) is rugged and maintenance free and delivers that power
quick- burst that big trucks need in frigid areas. The beauty again here is that it allows trucks to
repeatedly stop and start the engine when needed to avoid big city anti-idling pollution laws as well as
saving energy when the engine is shut off. Batteries that die easily in cold weather now are protected by
a Ucap, allowing for repeated and assured restarts in the frozen environment. Market size for Class 8
Trucks has been estimated alone at $200 million with additional millions for the under 7 Class markets
Another major opportunity is of course, the car market. Already in the Lamborghini, Mercedes,
Peugeot, Citreon, Mazda and in over 1 million cars on road today, it js just a matter of time before other
manufacturers add this as an OEM item for an estimated $40-65 per car. Stopping at lights and shutting
down the engine saves on pollution and gasoline with the Ucaps allowing an instant restart with the
green light. If Maxwell could capture just 5% of the 40 million global car market, we would add over
$100 million annually. No less than Tesla’s Elon Musk claims that the days of the battery are numbered
and that they will be superceded by capacitors.
Other areas of interest would be regenerative braking by which trains, trucks, buses are able to save
the mechanical heat friction in braking and then reusing it as a go forward power for reacceleration.
Maxwell is used by Flextronics to supply ucaps for its energy recuperative systems and by Bomardier
for a similar system for trains. Maxwell’s ultracaps will be used by ABB (NYSE) under its recently
won contract to upgrade Philadelphia area rail lines. By incorporating Maxwell's technology in a
hybrid version of its battery-based ENVILINE braking energy recuperation system, ABB was able to
both increase the system's efficiency and extend battery life. This is potentially over a one billion
dollar market opportunity.
Further areas of interest include grid stabilization applications, windmill and battery storage, all in
So now let us attempt to put this all together in market size.
Let us start with the truck (ESM) market which is projected to be $300 million annually.
The Hybrid Bus market appears to at least an annual $200 million
Then the first wild card would be the railroad/train reported to be in excess of $1 billion.
An additional $ 1 billion is estimated from the auto area.
Thus an early guess for many of the obvious uses of ucaps add to $ 2 ½ billion- market size.
If Maxwell can garner 10% of market size by 2016, we have $250 million sales. Recently
running at $150 million of revs offers a reasonable volume growth rate. But lets try this thru the eyes of
management who, of course, has said very little in guidance. However, indeed they seem to have
sent us a message. The current San Diego facility has $160 million capacity. Two additional lines
in Peoria are planned with similar capacity. The first is almost ready at this point. Thus we have a
capacity of $300 million on line by year end. Finally, another Illinois line is tentatively due on line in
You can do the math.
If we can do $300 in next year or so, with more opportunities opening up, it would seem a 3 times
revenues would be ok- we have been there before. With 30 million shares we can get to a $30 po.
Trying this another way, a 5% net after tax would result in an eps of $ 0.50.
This again has zero to do with any rumored deal with Tesla.
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