90c price target, last 44c

Carbonxt (CG1)
[BCOLOR=rgba(255, 255, 255, 0)]Rating: Buy | Risk: Medium | Price Target: $0.90[/BCOLOR]
[BCOLOR=rgba(255, 255, 255, 0)]Commissioning of Plant[/BCOLOR]
[BCOLOR=rgba(255, 255, 255, 0)]Event: CG1 has announced that it has commissioned its Black Birch manufacturing plant and that it remains on track to be profitable by CY end. Shaw and Partners FY18 EPS forecast is lowered to -7.8 cps (from -4.5 cps) to reflect the delayed commissioning. Our FY19 EPS forecast remains unchanged, as does our 12 month TP and our BUY recommendation.[/BCOLOR]
[BCOLOR=rgba(255, 255, 255, 0)]Recommendation: A two month delay in the commissioning of a plant does not in our view constitute a major change in the value of CG1s business despite the fact that because it occurred as revenues are just starting to build it will have a meaningful impact on FY18 sales and earnings. CG1 remains well funded and as such we view the impact of the delay as frustrating rather than being a material factor in our valuation. We continue to see that CG1 is trading on an unchanged FY19 EV/EBITDA of 15.9 and continues to have a market capitalisation of $39m, neither of which are demanding next to other disruptive technology companies that are generating sales traction and moving towards profitability. We believe the discount at which CG1 trades to compcos reflects the short term risks we outlined in our initiation report. Over the next 12-24 months these issues will become increasingly less relevant, CG1’s sales pipeline, underpinned by 2 - 3 year contracts, and the operational leverage identified should transform the company’s earnings profile (as reflected in our forecasts) and we expect it to trade up to a significantly higher capitalisation. Our TP and BUY rating remain unchanged.[/BCOLOR]