Ilika: A Solid State Lithium Battery Stock
There’s a concept in finance called “home bias” or “domestic bias” which states that as investors, we’re most likely to buy stocks that trade in the countries we call home. Increasingly though, platforms such as Interactive Brokers allow investors to trade stocks on multiple foreign exchanges uncovering some interesting lesser-known stocks that provide exposure to disruptive technologies such as solid-state batteries. Our last article on Cymbet showed a very successful startup that is now dominating the solid-state battery market. One publicly traded company looking to enter this same market is UK based Ilika.
Founded in 2004, UK based Ilika (LON:IKA) was able to secure VC funding which culminated in an IPO on the London Exchange in 2010. In looking at their most recent annual report, we see +73% institutional ownership which is a very positive indicator. Institutional shareholders are likely to subject the company to a very high level of scrutiny which is needed to ensure management is held accountable for executing against their stated business plan. This is something sorely lacking with most micro caps and all OTC companies. Ilika states that their most important KPIs are cash position and their operating loss, words that should be refreshing to hear for investors. For fiscal 2015, the Company saw a slight improvement in revenues and operating losses as seen below (in GBP):
Since their IPO, shares have seen volatile trading but are up +28% at the moment giving IKA a minuscule market cap of just $76 million.
So what does Ilika do? The Company’s product offering is a “materials discovery process” which they claim can evaluate various material combinations in an automated fashion which allows them to discover materials much quicker. A process that has taken historically 7 to 10 years is reduced in time by 100 fold using a high-throughput physical vapor deposition process. While in the past they have worked with large corporates such as Shell (hydrogen storage technology), Toyota (battery materials), and Boeing (aerospace alloys), Ilika’s recent focus is on solid-state batteries.
The reason for focusing on solid-state batteries is the astronomical growth expected from this market. The global market for solid-state thin-film batteries was $66 million in 2013 and is expected to reach almost $6 billion by 2019. Ilika’s highlights for 2015 include the commencement of a pilot production plant for solid-state batteries which has achieved a 20 times larger deposition area for their battery materials and a 5 times increase in materials deposition rate. Over the year they were granted several patents relating to their battery technology, realized a 25 increase in battery size, and signed a contract with a commercial partner to develop a proof of concept battery for wireless sensor networks. Their technology replaces the traditional lithium battery electrolyte with a ceramic ion-conducter, and as of 2014, allowed them to produce stacked solid-state lithium-ion batteries, the worlds first they claim.
All seems to be on track for Ilika, and now they need to scale-up to production prototypes and begin signing some licensing deals. While they continue to make progress in other interesting areas, like self-healing alloys for 3D printing, the big payoff for investors is expected to come from solid-state batteries.
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