CAP-XX – a real burst of energy is now offered by this ‘penny-stock’
Sometimes even very small companies can be world leaders.
One such example is CAP-XX (CPX.L), it is only capitalised at £21m, yet it is a world leader in the design and manufacture of thin form supercapacitors and energy management systems.
After years of operating losses, I now believe that it is about to break into profitability that could turn this little ‘penny stock’ into a potential winner.
What is a supercapacitor?
A supercapacitor is an electrochemical energy storage device.
It is not a new invention – it is a technology that is over 65 years old.
The first supercapacitor was created by General Electric in 1957.
Standard Oil, nine years later, by accident developed its fuel cell possibilities.
It was not until the late 1970’s that NEC, the Japanese giant, started to offer commercially the first supercapacitor for computer memory backup.
Helping to transform hybrid-transportation
The latest variations are creating properties that are helping to transform hybrid-transportation.
The fast-expanding electric vehicle market is alert and excited about what is coming on offer.
Companies like Toyota, Peugeot-Citroen, Mazda, Lamborghini and, of course, Tesla, have all released new vehicles using a combination of supercapacitors and lithium-ion batteries.
Can you see yet the background of why I am now getting worked-up about the potential for this small-cap stock?
Firstly, let us get down to basics
Supercapacitors are a cross between a battery and an ordinary capacitor.
Previously known as condensers, a capacitor is a passive two-terminal electrical component. It contains two electrical conductors separated by a dielectric, such as an insulator. It stores electrostatic energy to give that energy to a circuit, when required.
Lithium-ion batteries rely entirely on chemical reactions, they consist of a positive (anode) and a negative (cathode) side. The two sides are submerged into a liquid electrolyte and separated by a micro-perforated separator, which allows only ions (atoms or molecules of net electrical charge) to pass through.
When batteries are charging and discharging, those ions flow back and forth between the cathode and the anode. That process gradually wears down the lifespan and the energy power.
Supercapacitors are different to lithium-ion batteries, in that they do not rely on a chemical play to work, because they store potential energy electrostatically within them.
They use an insulator between their plates to separate the collection of the negative and positive charges building up on each side’s plates.
That separation enables the device to store energy and quickly release it. Supercapacitors are best used for very small bursts of power.
Due to their ability to store and release energy they are superior to traditional capacitors.
During the ion transfer process batteries get heated, expand and then contract, which degrades a battery and reduces its lifespan.
A regular battery can handle between 2,000 to 3,000 charge and discharge cycles, while supercapacitors can handle more than 1m. Their ability to recharge within seconds does not rely on chemical reactions, as in batteries, so they do not degrade over time, also offering a much longer lifespan. Which in turn helps to save in both materials and other costs.
Based in New South Wales, Australia, the company was formed way back in 1990 under the name of Energy Storage Systems Pty.
It later changed its name to CAP-XX, before getting its equity quoted on AIM in late April 2006.
At that time the company was valued at some £45.2m, with its shares having been Placed at 93p each to raise £17.1m in the process.
It develops, manufactures and markets thin, prismatic supercapacitors and energy management systems which offer exceptionally high-power density and energy storage capacity.
Helping to power next generation products, they can be used alone or in conjunction with batteries to create power solutions for a large range of commercial devices.
Ideally suited for use in space-constrained and mission critical applications, they offer high cell voltage and can be operated in wide temperature ranges, with very low current leakage.
Its products can be used for in a variety of applications, such as for digital cameras, mobile phones, tablet computers, handheld computers, scanners, smart meters, point of sale terminals, wireless sensors, telemetry units, asset and location-tracking equipment and finally for clean energy applications, such as energy harvesting and micro-hybrid vehicles.
Although it is based in Australia, the company operates and has global distributors in the Asia Pacific region, in Europe, the Middle East and Africa, as well as in North, Central and South America.
Recent developments advance group prospects.
A recent research report states that a breakthrough could be achieved from graphene-based supercapacitors.
Graphene, which is claimed to be the world’s thinnest material, is a single layer of carbon atoms, yet it is stronger than steel.
A solution has been created, consisting of two graphene layers with an electrolyte layer between them.
That results in a film that is not only strong and thin, but which can release large amounts of energy in a short time.
Researchers consider that the new, thinner supercapacitors could replace bulkier batteries in future versions of electric vehicles.
They could store more energy than a lithium-ion battery while retaining the ability to release its energy up to ten times faster. The supercapacitors could be built into car body panels enough to entirely power the car, after a full charge, sufficient to run over 300 miles.
This means that in tandem with the use of lithium-ion batteries the new supercapacitors would be playing an important and necessary role in hybrid-electric technology.
Reduced graphene oxide doubles
Early in May the CAP-XX group announced that it had entered into a Joint Venture Agreement with Ionic Industries for the commercialisation of reduced graphene oxide materials (rGO) for supercapacitors and other energy storage devices.
Ionic, which is another Australian company but based in Melbourne, has under a licence for rGO, developed new forms of graphene for transformational energy storage technologies.
The JV, 51% to CAP-XX and 49% Ionic, will buy rGO products from Ionic, while CAP-XX will manufacture and sell supercapacitors and energy storage devices using rGO on behalf of the JV.
The rGO material is highly conductive, which increases electrode energy density by over 100% compared to CAP-XX’s current electrode. That approaches the energy density of lead acid batteries, providing superior power density and cycle life.
Boss of CAP-XX, Anthony Kongats, stated that
"We are delighted to have formed this joint venture with Ionic, which gives CAP-XX the opportunity to commercialise a new class of supercapacitors with significantly higher energy densities using Ionic's proprietary reduced graphene oxide. Our immediate goal is to translate the rGO technology into a system that can meet all the stringent performance and specification requirements of commercial supercapacitors."
Collaboration with University of New South Wales
The late May announcement that the group is preparing to launch a new 3V supercapacitor at the end of this year has given the company a bit of a spark.
Collaboration with university partners, such as the latest with the University of New South Wales (UNSW), can lead to direct commercial applications which can enhance the performance of the group’s supercapacitors.
The recent result of the Monash University collaboration is a supercapacitor with exceptionally low leakage current. Low leakage current is arguably the single most important parameter when considering a 3V supercapacitor being directly connected to a battery, especially a non-rechargeable battery.
Originally it was planned to extend the project work at the group’s Malaysian manufacturing site, but certain delays and the results from UNSW prompted the Company to pivot back to using the group’s Sydney site.
The 3V supercapacitor, when launched, will provide a high-performance complement to traditional 3-volt coin cell batteries.
There is more good news to be generated
In due course the latest news, such as the development with Ionic and the collaborations with leading Universities, is looking very positive for CAP-XX shareholders.
The group has some 510m shares in issue, while its larger professional investors include Canaccord Genuity Wealth, Quilter Cheviot and Ruffer.
Cenkos Securities, the company’s broker, rates the group’s shares as a ‘buy’ and has a discounted cash flow valuation on the shares at 13p each.
That is more than three times the current share price.
For the current year to end June the broker is estimating that revenues will be up from A$4.1m to A$5.8m, with almost trebled losses of A$1.9m against just A$0.7m loss previously.
For the coming year starting in July it sees sales almost doubled to A$11.3m and the company turning around into operating profitably, with A$3.2m being its estimate, worth 0.6c in earnings per share.
In the year to end June 2024 Cenkos goes for A$16.3m sales, A$4.0m profits and A$0.8c per share in earnings.
That really will be a result for the group’s shareholders after consistent operating losses ever since it has been AIM quoted.
That is also why I consider that CAP-XX shares at the current 4.1p each have very significant upside, especially assuming the Cenkos valuation of 13p each.