Shares of Proton Motor Power Systems (WKN: A0LC22) have performed magnificently of late in the shadow of Ballard Power (WKN: A0RENB). The long-neglected penny stock is apparently now very much appreciated.
I noticed two things that stand out about this Anglo-German fuel cell specialist. But one thing makes me hesitate about the Proton Motor share.
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Advantage no. 1: Proton Motor addresses high-volume markets
Ballard Power has been working on the dream of zero-emission fuel cell vehicles for decades. On the way there were more lows than highs. That's why the company had to let down its guard:
- In 1997, Daimler (WKN: 710000) took over a 25% share.
- In 2005, Daimler together with Ford (WKN: 502391) acquired Ballard's systems business in Nabern (Germany), NuCellSys.
- In 2008, the Canadian automotive activities were spun off into a joint venture called AFCC, in which Ballard held just under 20% of the shares.
- In 2009 NuCellSys became the 100% subsidiary Mercedes-Benz Fuel Cell GmbH.
- In 2015, Audi bought a package of fuel cell patents from Ballard.
- 2018 AFCC was closed in Canada.
While Ballard has at least been able to reacquire equipment from AFCC, it is clear that the Canadians have become a minor player in the automotive sector due to the sell-off to Audi and Mercedes. Especially stationary and heavy duty applications have been in focus since 2008. This means that Ballard's strength is in large systems, usually with relatively small quantities.
Proton Motor, on the other hand, is as strong in compact systems as it is in power-hungry applications. Thanks to the modular system design, standard modules can be adapted to a wide range of requirements. The self-developed stacks have been mass-produced with robotic assistance since October. The specialist thus combines flexibility with cost efficiency. In the future, without major expansion investments, the production of annual up to 30.000 stacking units may be possible.
Advantage no. 2: Proton Motor is well connected
The wide variety of application areas of the systems is also related to the fact that Proton Motor actively seeks joint development with customers and partners. For example, the company participated in a research consortium that included a fuel cell system for the reconversion of hydrogen stored in liquid (LOHC). As an active member of the Hydrogen Alliance of Bavaria, the chances are good of regularly coming across exciting projects.
It is helpful that the Puchheim company not only supplies the fuel cell stack, but also offers services relating to system design, integration, approval and servicing. Building on this, Proton formed the Clean Logistics joint venture with two other partners in 2019. The idea is to electrify heavy diesel trucks, with the fuel cell serving as a range extender.
The suitable electric rear axle drive was designed by Ziehl-Abegg, one of the leading suppliers of electric drive systems. 3.3 million was awarded to the initiative in October. Euro and now the road permission is aimed at short term. When you consider that across Europe more than 2 million. trucks on the roads, this could hold great potential.
But: Does Proton Motor have sufficient backing?
Proton Motor is controlled by the Nahab family of entrepreneurs. Not only does she hold 88% of the shares, but she also provides the CEO, 75-year-old Faiz Nahab. His brother Falih Nahab is another lender. In spring 2019, shares in Proton were transferred within from liquidated Roundstone Properties to SFN Cleantech Investment, a holding company registered in Ras Al Khaimah (United Arab Emirates) and controlled from England.
The measure is to all appearances in connection with the search for further sources of capital. In May, Proton reported that the deadline of loans from the Nahab family in the amount of 65 million. Euro was extended by one year until the end of 2020. In addition, another loan was increased from 34.5 to 41.1 million. Euro topped up, with a handsome interest rate of 10%.
At the time, it was said that the funds would last until mid-2020. The sharply higher share price and the extension of feelers into the Arab region should help to tap new sources of funds. However, it is foreseeable that this will result in a dilution of shares. In addition to the possible issuance of new shares to new investors, Nahab family loans are also partially convertible.
Proton certainly has some strengths, in terms of technical expertise, standardization and networking. Overall, however, I'm not yet convinced that this will be enough to prevail in this difficult and competitive market in the long term. However, it can't hurt to put Proton Motor on your watchlist.
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Ralf Anders does not own any of the shares mentioned. The Motley Fool does not own any of the mentioned stocks.