Zeus Capital Research Director Dr Tom McColm caught up with DirectorsTalk for an exclusive interview to discuss Ceres Power Holdings plc (LON:CWR)
Q1: Tom, what are your thoughts on what looks like a positive trading update released by Ceres Power this morning?
A1: Yes, it was positive as you say. I think the update is to remind the market just how well Ceres’ commercialisation plan is going and how well they’re executing it by aggregating the last year’s news flow and comparing it to sort of what they said they’d do and showing that they’ve done that and I think it does that quite well. I think in particular they think the latest OEM partnership that they signed in a new vertical for a large CHP product, they announced that just before Christmas, they couldn’t announce the actual partners name because of commercial sensitivities. It was clearly a very big deal for Ceres and it was announced just before Christmas and I think they thought maybe it didn’t get fully recognised by the market due to its timing so this update just gave them a chance to flag that deal again.
Q2: What do you think is the biggest risk that would lead Ceres Power Holdings to failing to achieve its commercialisation objectives?
A2: I think all the risks are diminishing, I’ll say that upfront, a few years ago there was plenty of risk in this, I think they’re all diminishing with time. However, still for me with regard to the platform, the longevity of the platform, particularly in more aggressive operational applications, is what the OEM partners will be really focussing on most as they move through their development, trialling and potential launch programmes. I mean the efficiency footprint, fuel versatility, all these sorts of things are excellent, it’s what sort of gives the technology its really genuine USP and I think if these partners really can get comfortable with the fact that this platform will also last for the requisite time to make it commercially viable then that’s the biggest risk. What’s very positive in this regard, towards this risk, is that the core partners that they have been engaged with for some time now continue to move forward in these joint development programmes and in the case of a couple, particularly Honda, they’ve actually signed new joint development contract extensions. So, it sort of indicates that these big companies, who are baiting some pretty advanced programmes on this technology are finding the longevity performance sufficient to continue investing.
Q3: What news flow should investors be looking out for over the next 6-12 months in terms of driving the share price up?
A3: They should be looking for one or two further OEM partnerships, they have a target of five by the end of 2017, they’ve already got four in the bag so certainly one more maybe one or two more of those. New territories as well, they’re an international company, they’re all over the place but deals in new territories to look for but probably most importantly I’d say look for the progression of their existing OEM partnerships into further down the commercial road into full development contracts, commercialisation contracts and in the medium-term first product launches.