When people don't understand something, they usually jump to conclusions. Most of which are unfounded and doing so is quite frankly an easy option, rather than facing the facts.
Especially when the facts, mean you should have probably seen it coming (me included). So rather than blame yourself, its much easier to blame someone or something else ... its human nature to want to shift the blame. That is what we are witnessing here.
The fact is Fluence is not yet a profitable company, and until it becomes one it won't get the share price appreciation we are all waiting for.
Until we are profitable, the elephant (cap raising) hasn't left the room ... it just went to the door to smoke a durry, and it will be back soon if management don't reduce our quarterly cash-burn.
With a cash burn of US$10m each quarter, and US$38m in the kitty at Dec18 ... Jun 19's Appendix 4C will be a strong signal as the company's need to tap the market again. I say this because FLC has shown that it will raise capital when there is approx. two quarters cash run-way remaining... the most recent one was done when they had US$23m in the bank.
If for example Jun19 cash burn was only $5m, the cash balance would be US$23m at Jun19, but at a US$5m cash-burn that is four and a half quarters cash run-way remaining... more significantly though, is if you extrapolate that out, the momentum would allow investors to have confidence that we are heading toward a break-even by Q4 2019. The share price would respond very positively to this.
The key is that Fluence need only convince investors that they have a genuine chance of becoming profitable from Q4 2019 onwards, and the market will respond.
That is why there was a luke warm response to the Ivory Coast contract ... even though it was almost double the size of what we were told (US$100m vs US$188m) ... it doesn't have a significant impact on the Q4 profitability objective. It does however bolster management's credibility and increase the value of the company no doubt, but just not by as much as we'd like.
What will impact the Q4 profitability are sales of and/or BOOT contracts for our smart packaged solutions products (Aspiral/Nirobox/Tornado/SUBRE). They are not only high margin, the cash comes in the door much quicker than these large projects.
If Fluence are going to be profitable by Q4 2019, it should be quite obvious very soon. We should see some decent sized contracts on the smart packaged solutions. Its the 1st of March, so we are pretty much past the quiet months of the year.
The next three months leading up the AGM will be a very busy period in my opinion... my prediction is that this won't go much lower, the US$188m contract will provide a solid support level, which is starting to form around 36 cents.
A sniff of traction in our smart packaged products.. and we will start to see some solid moves upwards.
Good luck and chin up
FLC Price at posting:
37.0¢ Sentiment: Buy Disclosure: Held
