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Ann: Appendix 4C - quarterly, page-15

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NewEconomy

335 Posts.

30/01/17

17:21

Post #: 22224923
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Originally posted by NewEconomy ↑

Brumbypat wrote: "They will need to be producing and selling at three/four times this amount before RFX reaches breakeven ... Going off my rough break-even numbers, Redflow needs to sell about 12 batteries a day to the installer network just to break even."

thanks for the estimate. for arguments sake lets say your numbers are correct... given that the current production line can already scale 2x or more as per ann, we are then only one extra production line away from the 4x increase required to break even and the ann clearly states "Multiple production scaling paths exist to extend production beyond the capacity of the existing line". If RFX goes in to full production next quarter (lets assume 2x production) and then establishes just one more production line by the start of the following quarter, we could be looking at break-even by June 2017, which is at the optimistic end of my own estimates yet realistic IMHO depending on the margin on the batteries. With one extra production line in the quarter after that we would be looking at relatively significant P/E given the short time frame we are looking at.

12 battery sales a day is not a stretch from what I can tell. Lets not forget this is not just ZCell installers but integrators across the world as per ann. With 2m battery sales expected in Australia by 2020 even if Redflow captures just 1% market share we are looking at sales of 18 batteries are day and thats just ZCell ignoring local and international ZBM2 sales as mentioned.

I also still think a CR is inevitable unless they ramp up production significantly before the end of this quarter (contrary to the announcement) or if they are paid in advance for orders. There is also the question of how much the costs will reduce this quarter given that all the investments in equipment etc. should now have been made although that of course could go up again if they start on a second production line or expand the current ones capacity in some way. In short, yes, CR likely but with manageable dilution in my view but I understand the concern.

Regarding the inverters... I'm not aware of any other battery that is compatible with as many inverters as Redflow's nor that any other manufacturer is attempting to make their batteries compatible with practically everything on the market going forward like Redflow. The strategic review aims to identify missing skillsets so whoever takes the reign of CEO or Chairman away from Simon (probably CEO) will likely be a valuable contribution to the company and allow Simon focus more on his job (and maybe give him more time to keep us up-to-date? one can wish...)

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sorry, that should read 'end of june 2017' not 'june 2017'

RFX Price at posting: 21.5¢ Sentiment: Buy Disclosure: Held
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