Welcome to a new Rare Triples analysis. This week, we’ll be...

Welcome to a new Rare Triples analysis. This week, we’ll be looking into one of the rare few battery technology companies on the ASX. The company was previously known as Altech Chemicals, which was focused on a kaolin project in WA and an integrated high purity alumina processing operation in Malaysia. Then, in late 2022, Altech further expanded downstream by entering into a joint venture to develop Sodium Alumina Solid State Batteries and subsequently renamed to Altech Batteries (ASX:ATC). These rapid developments has led to a big evolution in the nature of the company. Let's take a look at whether Altech is in fact a “Triple Threat”. Let’s get into it.

Threat #1 - Equal capital raise access

Shareholders are usually those who have backed the company through thick and thin, so making sure they are treated fairly at key dilutionary events is very important. Indeed, most growth companies will require additional funding, but ensuring that existing shareholders receive priority to maintain their ownership percentage (or even increase it) is a highly desirable threat in a company. Altech has demonstrated strong respect for shareholders at the point of capital raises, ensuring that they are prioritised for follow on investment. If we examine their various capital raising programs across the last 36 months, we can see that each time, the company has offered shareholders a way to participate. 17 July 2023: $3m placement + $12.8m 1:8 entitlement offer at $0.07 per share. Link 2 December 2021: $8.1m placement + $4m SPP at $0.107 per share. Link 9 November 2020: $14.5m 2:5 entitlement offer at $0.04 per share. Link The raise targets used above may differ from the actual outcome based on shortfalls. More on this effect below. Not only does the involvement of shareholders lower the cost of capital raised, it also drastically reduces the dilutionary impact on shareholders. Let's examine how the ownership percentages could differ if the company chose to exclude existing shareholders instead.

As we can see, the facilitation of SPP and entitlement offers by Altech means that shareholders are not meaningfully diluted should they take up most of their entitlement. Conversely, if each raise excluded existing shareholders, this example shareholder would only have a 0.061% ownership as of the most recent raise, a material dilution outcome.

Threat #2 - Investor transparency

Altech has done a great job at maintaining transparency throughout the past 12-24 months. This has coincided with a period of rapid evolution as the company pivoted from a HPA company (via their Johor plant) to a German focused battery technology company. This understandably may have caused a degree of confusion among investors so maintaining absolute transparency is important. The first type of transparency we can examine is the proactive type - information and materials that the company is releasing on its own accord with the intent of keeping investors as informed as possible. In Altech's case, the development of their Sodium Alumina Solid State Batteries, or CERENERGY, was the primary focus. Since announcing this JV in September 2023, the company has released a total of 10 announcements concerning the progress of the CERENERGY project.

These activity updates exclude any presentation, video, or educational content that was used to supplement this. Next, we can see a reactive form for transparency. This usually concerns how open a company is to receiving investor queries, both positive and negative, and responding in a timely manner. Typically this can be in the form of webinars, Q&A sessions, and open forum discussion. Altech has implemented a helpful Q&A platform to achieve this:

This is highly encouraging to see and the mix of proactive and reactive actions to drive transparency makes this a compelling threat for Altech.

Threat #3 - Setting goals

From the initial announcement of the 100MWh CERENERGY battery project, the company has outlined a set of goals to achieve this. As with any major project development, there are numerous parts to the wider system and it is important to examine how well a company can set goals and meet them. The first goal that was announced on 31st Oct 2021 (link) was the JV intention to plan for a Bankable Feasibility Study for train 1 (100MWh) plant.

Then in the December 2022 quarterly report and March 2023 presentation, the company reiterated the: DFS was underway Production of test units Meeting with financiers; and Early stage off-take discussions These goals outlined are all outstanding at the time of writing (26 Aug) as the company continues to push ahead with project development. The company reiterated that 2 (instead of 1) 60KWh battery packs remains under fabrication. Although no specific timelines have been set for any of these, the company has proven themselves to be fast moving.

Our Final Takeaway

Altech has undergone some major changes over the last few quarters and has emerged with business ventures across three countries. Pleasingly, the company has maintained excellent communication with shareholders and provided top-quality communication with every business development. This is extremely critical to ensuring shareholders don't become disengaged from any one of the many strategic evolutions.' Nevertheless, the company can improve further by setting broad timelines for their various activities so shareholders can understand their investment horizons and manage expectations. Furthermore, a clearer strategy concerning the non-CERENERGY assets could be beneficial for investors who due on a old strategy/focus. Yet, despite this, Altech has shown excellent qualities and we therefore see it as a rare Triple Threat.