Novonix Limited

NVX Details

Institutional Placement Offer Completed: Novonix Limited (ASX: NVX) engages in the development and supply of high-performance equipment, materials, and services for lithium-ion battery. It runs operations in Canada and the USA. As on 26^th February 2021, the market capitalisation of the company stood at ~$1.15 billion. Recently, the company has announced the completion of an institutional placement offer of $115 million capital to investors. It will issue ~39.7 million fully paid new ordinary shares at $2.90 per share. NVX will deploy proceeds from the placement to enable the growth of the NOVONIX Anode Materials business and its present R&D programs in Halifax Nova Scotia. The institutional placement settlement is expected to take place on 2 March 2021 and new shares allotment is expected to take place on 3 March 2021.

1H21 Results Released: The company announced a decrease in revenue from its ordinary activities by 6% YoY to $2.73 million on pcp basis. The net loss to the members also went up by 53% YoY to $10.76 million on pcp basis. During 1H21, NVX declared a key alliance with Harper International for developing specialised furnace technology for anode material in battery. The cash and cash equivalents balance amounted to $25.28 million as on 31 December 2020. The 1H21 results are in sync with management expectations.

Financial Highlights, 1HFY21 (Source: Company Reports)

Outlook: For 2H21, the Group has updated a phased growth plan for the NOVONIX Anode Materials business, including an accelerated yearly tonnage milestone of 2,000 ton per year. NVX’s technology roadmap consists of a transition to Generation 2, develop Generation 3 furnace technology and provide enhanced scalability. As reported on 25^th February 2021 in the 1H21 results, the Generation 2 installation is on track commencing in February 2021.

Stock Recommendation: The stock of NVX gave a negative return of 170.64% in the past three months and a positive return of 578.16% in the past nine months. The stock is currently trading above the 52-weeks’ average price band of $0.1296-$4.23. The stock of NVX has a support level of ~$2.786 and a resistance level of ~$3.113. On a TTM basis, the stock is trading at a price to book value multiple of ~17.2x as compared to industry (Industrials) median of ~2.5x and thus seems overvalued. Given the backdrop of the latest development regarding the completion of $115 million institutional placement, the stock exhibits limited upside potential. Considering the current trading levels, significant returns in the past 3 months and 6 months, valuation on TTM basis, we give an ‘Expensive’ rating on the stock at the current market price of $2.950, down by ~10.335% on 26^th February 2021. The fall in price can be attributed to the decrease in the top-line, higher net losses incurred in 1H21 and the news of institutional placement completion today. 

NVX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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