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99.5¢ windlab limited

Ann: Half Yearly Report and Accounts, page-11

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inversesquare

171 Posts.

13

07/11/18

15:55

Post #: 36420736
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Originally posted by gerling: ↑

I have followed the company for around 12 months. And have a modest holding (which is firmly in the RED).
I would agree that the lack of peer group makes Windlab difficult for investors to gauge or understand the business model.
The recent delays to Lakeland and Infrared are a pain, but still only a 3 month delay... hardly worth a 15% share price fall!

My take on WND is that the sexy part of the business is the development phase. Yields a 10x return on investment (basically $2M of development costs turns into $20M of revenue on financial close (once the offtake agreements, approvals, permits financing etc are in place). Whether windlab choose to retain and equity stake or not is a secondary consideration, as in some instances they do not (e.g. Coopers Gap for AGL, the USA projects, and I suspect in South Africa they won't hold on to a stake either). But this gives them optionality.

Having said that, I am comfortable with their equity stake approach. Kennedy Energy Park, Kiata and eventually lakeland, due to the recurring revenue streams as others have mentioned, including asset management fees of ~$1m per project. I think a good comparison for Windlab is actually a REIT / Property Developer if there are any out there. I suppose something like Folkstone or Mirvac (though I don't follow either). Given it the stability, and consistent earnings of Hard Assets. (Which can be resold if required to infrastructure funds or utility co's). + The more exciting side of the 10 x development returns. (The property market is somewhat similar, all of the margins and outsized profits belong to the developpers, more so that construction or the REIT-collecting landlords.

So I don't wish to overhype this stock.... but I think the 18 month timeline will be transformational. Add Lakeland (20 - 25% equity to Windlab when their reinvest their fee) to thew current book value (which included Kennedy and Kiata) and would get $75M = equal to current market cap. By end of 2019, recurring revenue will cover all of their costs, ~$10M per annum. Substantially de-risking the company (which will post a $2M loss for 2H18 also,most likely)..

Then the blue sky picture is the approval for the Kennedy Energy Park Stage 2 (Big Kennedy), this will deliver huge fees to Windlab, $50M for their 50% stake is my expectation. But this make be 18 - 24 months way, and is uncertain. Anyway, good luck to all holders. I am trying not to panic and looking at the Intrinsic value of the company, not the share price. After all, the Market once had Blue Sky (BLA) at $12, and Big Un was the best perfoming stock in 2017.... so how smart is the 'market' really?

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Excellent take, and I fully agree with you.

Optionality was one of the qualities of the company I was attracted to - it gives Windlab an edge over traditional wind developers like IFN that are straddled with debt and are levered up with interest rate and credit risk.

I would be backing up the truck if I didn't before - I got in at $1.40 and am already overweight. I will without a doubt continue to hold as I'm confident the intrinsic value of the company will be an integer multiple of what I bought at within 5 years. Management are capable and prudent, the company holds competitive IP and they carry the powerful characteristic of optionality. To top this off, the company is more or less completely under analysts radar and pretty illiquid (great for buyers). I was long before and I'm still long now.

WND Price at posting: $1.10 Sentiment: Buy Disclosure: Held
2 Upvote

0 Great analysis

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