Magnis Energy Technologies (ASX:MNS) a Solid Long-Term Bet On The EV Boom

Magnis Energy Technologies (ASX:MNS)

Henry Fung

Henry is a co-founder of MF & Co. Asset Management with over 15 years of experience as a trader, investor and asset manager. Henry runs the Options Income Strategy and has a free 5-day options income strategy course you can take to learn how to use options to generate income.

August 26, 2021

Today we will look at why Magnis Energy Technologies shares (ASX:MNS) is a great way to get exposure to the EV boom in our MNS share price forecast.

Magnis Energy Technologies (ASX:MNS) is an Australian company involved in the development of cheap and nearly 100% recyclable batteries that address the global decarbonization megatrend.

Magnis Energy Technologies is developing its product through strategic partnerships to garner expertise in various segments of the battery value chain.

Its proprietary battery is claimed to outperform current technologies while being cheaper and environmentally friendlier.

The company also has great verticals, with an investment in a high-quality long-life mine.

At the current MNS share price, Magnis Energy Technologies shares have been a stellar performer this year and returned nearly 80% YTD, outperforming the ASX200 index by 32%.

Magnis Energy Technologies (ASX:MNS) - MNS share price

About Magnis Energy Technologies (ASX:MNS)

Magnis Energy Technologies (ASX:MNS) is an NSW-headquartered company proposing to manufacture high-performance lithium-ion batteries for increasingly popular EVs and to store energy at the grid level.

Magnis Energy Technologies operates under a strategic partnership structure where the company collaborates with companies that can play a direct role in its operations.

The company has three operating subsidiaries: iM3NY – which owns the New York Plant; iM3TSV – the owner of the Townsville Plant; and Magnis Resources – which owns the Tanzania Graphite Asset.

Magnis Energy Technologies has shares of 63.5% (directly and indirectly) in iM3NY, 33% in iM3TSV, and 100% of the Tanzania Graphite Asset.

At the current MSN share price, Magnis Energy Technologies shares have a market capitalization of about A$316 million.

Great Product with Investments in Verticals

Magnis’ biggest strengths are the high performance and lower costs of its battery.

The battery, to be produced under a strategic partnership with C4V, a US-based designer and developer of batteries, offers an energy density that rivals state-of-the-art batteries but at a much lower cost.

That is due to the absence of exotic materials such as nickel or cobalt.

Furthermore, it has an extremely fast charge time of only 6 minutes for 85%.

The battery’s manufacturing process claims it can add 15%-20% energy density to any base chemistry.

The battery has patent protection in 35 countries and Magnis owns exclusive production rights.

Magnis Energy Technologies (ASX:MNS) - battery technology opportunity
Source: Magnis August 2021 Investor Presentation

Because of range anxiety and charge time concerns, EVs are currently attractive to only a small segment of the market such as climate-conscious buyers or customers wanting niche products.

These roadblocks to the widespread adoption of EVs remain despite EVs being significantly cheaper to run for two reasons:

  • Electric motors are much more efficient than combustion engines
  • Electricity costs significantly less than gasoline/diesel

However, the Magnis fast-charging battery solves both issues of charge time and range.

You may also like...
Sequoia (ASX:SEQ) is a High Growth, Cheaply Priced, Small Cap Financial Services Provider

Magnis Energy Technologies, therefore, has immense scope for growth if it can bring this battery to market as promised. Further, by 2025, the company plans to shift production to a solid-state battery currently under development.

While the company’s claims may sound ambitious, it is to be noted that the inventor of the lithium-ion battery, Prof. Stan Whittingham, sits on its board.

This means the company has the skillset to pull it off.

The company plans to commence production at a rate of 1.8 GWh/year.

Meanwhile, Magnis’ ownership of its graphite mine in Tanzania gives it a cheap and consistent source of high-quality graphite, which is used to make battery anodes.

The combination of C4V’s patented high-performance anode technology and a cheap source of high-quality graphite will give the company a substantial competitive advantage.

The company’s graphite mine is located in an SEZ, thus giving it tax-free status for the next 10 years.

Success Contingent on Execution

Magnis Energy Technologies (ASX:MNS) prospects depend considerably on projects that are still under development.

This year, the company aims to start low-scale production at its New York plant and reach full capacity only by mid-2022 to early 2023.

It is still in process of raising adequate funding to build the plant.

The company recently spent about US$71 million to bring its 1.8GWh capacity online.

Given that the company wants to reach 32 GWh by 2030, it will have to find a way to fund these ambitions through a combination of earnings, debt, and equity.

Timely execution would then become of paramount concern. Therefore, equity dilution or excessive gearing are both potential concerns.

Any hiccups in project implementation could exacerbate these risks and could put pressure on the MNS share price.

Huge Market Opportunity But Disruption Risk Is High

Magnis Energy Technologies (ASX:MNS) has huge potential opportunities from increasing EV adoption and the global shift to renewable energy.

However, batteries are crucial to both trends.

As mentioned above, the cost of EV batteries is dropping apace with rising adoption, but range anxiety and charging time are still bottlenecks.

In the case of grid energy storage, battery performance and cost are both barriers to adoption.

Magnis’ battery offers a solution to both. Its performance solves to a large extent the problem of range with low charge times, while its nickel and cobalt-free design make it 10%-15% cheaper.

Further, to drive costs down further, the company has designed a semi-automated production line.

Over time the company plans to use AI and ML to almost completely automate its production. This would reduce expenses considerably, increasing margins and give the MNS share price much more potential upside.

EVs are projected to make up more than 50% of new vehicle sales by the end of this decade and 80% by 2050.

Battery demand in terms of capacity is therefore expected to grow ten-fold by the end of this decade to US$90 billion annually by 2025.

You may also like...
2 Best Lithium Stocks ASX 2021 [Australian Lithium Stocks]

On the other hand, the stationary/grid energy market is expected to make up 18% of the battery market or US$23 billion.

Magnis Energy Technologies (ASX:MNS) - Lithium Ion Battery Market Opportunity
Source: Magnis August 2021 Investor Presentation

Given the size of the opportunity in batteries, multiple companies and groups are attempting to build a scalable solution.

Any technological innovation that outperforms Magnis’ offering, or one that leads to cheaper batteries could derail the company’s ambitions.

However, such attempts have been on for a while and have borne no fruit – as of now, lithium-ion batteries are still the front-runners for both EV and grid storage solutions.

Magnis Energy Technologies (ASX:MNS) Project Financials

Since the company is on the verge of commencing commercial production, there are no operating financials available as of now.

However, the company successfully commenced trial production at its New York plant in June.

The company has not shared specific details about the company’s per kW cost of production at either site or specifics about the total Capex in New York.

The company has expressed interest in a listing of the New York subsidiary by Q4 this year.

In Townsville, the company expects a total outlay of about US$3 billion across three stages over the next few years.

The planned capacity for Townsville is about 18 GWh.

The company expects revenues of US$3.5 billion at full capacity in Townsville, but the timeline to full capacity is not known.

In Tanzania, the company is the sole owner of an extremely high-quality graphite asset.

The quality of output from this mine is very rare outside of China which is the most graphite-rich nation in the world and the largest producer of the mineral.

Magnis Energy Technologies (ASX:MNS) customers, therefore, have a valuable option to diversify their graphite supply chain. The mine has reserves of 240ktpa and a life of 15 years.

The mine’s high-quality graphite is sold for about US$1,750 – US$2,000/ton at present, compared to US$750-US$1,000, for traditional graphite.

The mine will require an outlay of US$270 million and is tax-free for the next 10 years. The company plans to finalize funding by Q1 2022.

Magnis Energy Technologies has raised US$49 million so far this year through equity placement.

The money will be utilized towards the US$71 million Capex plan on its New York plant, assist with the unit’s US listing, developing the Tanzanian resource, and maintain liquidity.

Part of the money raised this year came from New York fund manager and venture capitalist Lind Partners, a firm advised by John Hancock, son of Gina Rinehart, Australia’s richest person.

Hancock is known for his spectacular $4 million bet on lithium player Vulcan Energy (ASX:VUL) that turned into $65 million.

Rinehart piled into Vulcan after knowing of her son’s investment – will she follow suit with Magnis? If so, we could see a very strong lift in the MNS share price and interest in Magnis Energy Technologies shares.

The company has off-take agreements from the US Department of Energy and others totalling US$729 million.

You may also like...
South32 (ASX:S32) Coal Divestment and Exposure to Renewable Energy Presents Strong Upside Potential

The company has cash on hand of A$73 million (US$53 million).

Magnis’ Valuation Versus Peers

Magnis Energy Technologies (ASX:MNS) is a unique company and no other companies in the space have the same operating structure or asset base.

However, Magnis Energy Technologies shares can be approximately valued based on comparables of its asset base.

CATL, one of the largest battery manufacturers in the world, whose main product is also lithium-ion batteries, is valued at US$200 billion, or about US$5B per annual GWh.

Based on that, Magnis’ manufacturing business should be valued at about US$4.5B for 1.8 GWh after applying a discount factor of 50% for all contingencies involved.

Since Magnis Energy Technology has exclusive rights to the commercialization of C4V’s battery and owns a 9.65% stake in the company, it also owns a part of the very attractive intellectual property.

QuantumScape is a Bill Gates-backed battery company that is in the process of bringing its solid-state battery to commercialization.

The performance of both offerings is very similar, and while the companies have not shared details about per kWh pricing, both state that their batteries are comparable or slightly cheaper than current lithium-ion batteries.

Based on QuantumScape’s current market cap of US$8.53 billion, Magnis’ stake should be worth about US$810 million.

Last but not the least, Magnis Resources can be compared to companies that are involved in high-performance battery component manufacturing and development.

Sila Resources is a California-based startup that is in the process of bringing its silicon anode technology to market.

The company was recently valued at US$3.3 billion in a funding round by BMW, Daimler, and CATL.

Discounting 75% for contingencies and Magnis’ partial ownership of intellectual property with exclusive rights, we get a value of about US$825 million for the graphite mine.

This brings the total potential, sum-of-parts, future value of the company to about US$6 billion, a far cry from the company’s current valuation of roughly A$300 million (US$217 million).

However, investors should take into account that there is a high probability of substantial dilution involved due to implementation and that there are a lot of contingencies involved.

Magnis Energy Technologies (ASX:MNS) Batteries Could Be A Boon For The EV Boom

Magnis Energy Technologies offers an opportunity to get in on the ground floor of the massive technological opportunity from decarbonization and the switch to electric mobility supported by high technology batteries.

The company’s patent-protected battery has excellent potential to ride the foreseeable boom in demand for high energy-density, quick charging and low-cost batteries for use in both mobility and grid applications.

However, investors should consider Magnis Energy Technologies as a long-term investment that could face technological innovations, project implementation, and equity dilution risks.

However, the company has shopped out some of these risks by entering into strategic partnerships.

At the current MNS share price, Mangis Technology shares is a small-cap, higher-risk play with great potential upside leveraged to the EV boom.

Are you still looking for the best stocks to buy in 2021? We’ve put together a free report on 5 stocks that we think are the best buys on the ASX right now. Download it instantly here.

This is general advice only. MF & Co Asset Management has not considered your personal financial needs, objectives or current situation. This information is not an offer, solicitation, or a recommendation for any financial product unless expressly stated. You should seek professional investment advice before making any investment decision.

You May Also Like…

Subscribe

Want more Free Research?

Subscribe today for free and get an email with stocks to watch every Monday and new research every Thursday.

Invalid email address
We promise not to spam you. You can unsubscribe at any time.

Testimonials

What People are Saying...

See what people are saying about our research, products and services.

Nice reporting, thank you
Anthony David Critchley
Anthony David Critchley
09:25 23 Aug 21
useful
Christophe Dussert
Christophe Dussert
07:16 23 Aug 21
Exceptional information that is concise and insightful. Keep up the great work !!!
BRIAN MINOTTO
BRIAN MINOTTO
09:19 19 Aug 21
I feel MF and Co are very informative with their advice and recommendations.
Norman Wilkins
Norman Wilkins
08:00 19 Aug 21
Good service with frequent emailed share suggestions.
Peter Farrell
Peter Farrell
03:39 19 Aug 21
Even I never trade with MF&Co, I watch all of Henry's review and analysis, very impressed with the accuracy and... objective of those thoughts.Of course no one can say what the future will be, but at least when reading those reviews, we know where we are, then sometimes that is the best thing that you can wish for.read more
Vu Nguyen
Vu Nguyen
23:44 15 Aug 21
Excellent service, not pushy, clear reporting highly recommended
Luke Stewart
Luke Stewart
23:25 15 Aug 21
Some very useful research
Richard Goodwin
Richard Goodwin
04:33 13 Aug 21
I very much appreciate the profound stock market research and the peceived honesty.
Quentin Steinbeck
Quentin Steinbeck
16:10 11 Aug 21
Easy to understand research for “dummies guide to shares trading”
Graham Ko
Graham Ko
15:30 09 Aug 21
Easily some of the most worthwhile research presented without any bias.
Tony Miller
Tony Miller
01:06 07 Aug 21
Nice free report with a good stock pick tip. Thank you.
QuincysLife
QuincysLife
00:17 06 Aug 21
i subscribed to the free research report and i found it very informative and useful for making investing decisions. I’m... looking forward to meet advisers in person when lockdown eases to learn futures options trading and to join trading education courses. Thanks for providing company reports for gratis 🙏read more
Rahul Newar
Rahul Newar
13:37 05 Aug 21
Excellent…..highly recommend
meltem247
meltem247
12:05 05 Aug 21
Henry's website is an absolute Treasure of Insightful Financial AdviceFree, Honest & Profitable!
Jonathan Meader
Jonathan Meader
11:37 05 Aug 21
I follow every recommendation and they are always a winner.
Peter Logiotatos
Peter Logiotatos
08:37 05 Aug 21
Great info, has helped in choosing some quality stocks to invest in and have had great results from those investments.
Stuart Farnworth
Stuart Farnworth
07:54 05 Aug 21
You can rarely find relevant, dedicated, and most importantly, free research as good as the ones published here.
梁坤佑
梁坤佑
07:26 05 Aug 21
Excellent and balanced with great knowledge
Peter Cryan
Peter Cryan
06:53 02 Aug 21
Great research and useful information for current market situation and potential buys.
May Deng
May Deng
06:04 02 Aug 21
great knowledge base and excellent research.
colin blanch
colin blanch
00:56 02 Aug 21
I am registered only on the free advice, I have found their advice to be so much more complete compared to other sites... which you have to pay for, it is timely and does not seem to be a shotgun approach as many sites seem to do so that some time in the future they can cherry pick their good results. For me 1 or 2 shares a week is so much more meaning to me for my style of investment, do I recommend MF& co, I sure do.read more
Phil O'Leary
Phil O'Leary
00:39 02 Aug 21
Ideas and complimentary assessments are informative, interesting and easy to read. They are sometimes 'out of box' in... thinking. To me, they install trust.read more
Grahame Cox
Grahame Cox
00:30 02 Aug 21
Informative information and well researched
David Bailey
David Bailey
00:12 02 Aug 21
Great research into current trends and foresight into what to watch for the future
Yumna
Yumna
00:03 02 Aug 21

MF & Co. Asset Management

MF & Co. Asset Management is a boutique investment firm offering Equity Capital Markets and derivative general advice & trade execution services.

We are specialists in advising and trading in Australian and US Equities, Index & Equity Options and Options on Futures.

Contact

Get In Touch

Australia
1300 889 603
International
+61 2 8378 7199
M-F: 8am-5pm

Suite 602, 37 Pitt St
Sydney, NSW 200
Australia

 

Share This