Black Swan Graphene initiated with a ‘buy’ recommendation by Paradigm Capital
Published: 08:26 09 Nov 2022 EST
Black Swan Graphene (TSX-V:SWAN) Inc (SWAN) has been initiated with a ‘buy’ recommendation and $0.60 target price, with broker Paradigm Capital saying it provides investors with an opportunity to “invest in an early stage but post-development high-volume graphene producer targeting the industrial markets”.
“Black Swan is a young company and its growth curve is just beginning, as reflected in its current relatively low valuation,” Paradigm said.
It noted that the company’s patented process is scaling up to 10,000 tonnes per annum (tpa) and it is currently building a customer base to take the production.
The company has a strong management team, both at the corporate level and on the scientific and chemical engineering sides, with the ability to successfully penetrate the graphene space, it added.
READ: Black Swan Graphene to commence trading on the OTCQB Venture Market
Only two companies worldwide have the capability to produce graphene in industrial volumes and SWAN is one of them.
The company, which made its debut on the TSX Venture Exchange on 9 August 2022, uses a fully patented graphene high shear liquid exfoliation process under license from Trinity College Dublin, which was originally expanded by Thomas Swan & Co. Ltd. U.K. which built a 40-tpa module using the technology.
SWAN has 20 patents and patent applications in nine countries, including the UK, US, Canada, Germany, Italy, Spain, France, Sweden and China.
Thomas Swan holds a 15.6% stake in Black Swan.
Low-cost process
The company’s production method allows graphene to be produced for less than US$4 per kilogram at volumes above 4,000 tpa. Given the selling prices are between US$10-12 per kg, this can be a very profitable business, the broker highlighted.
Despite its current low production capacity, SWAN already has its graphene qualified in both concrete applications and thermos polyurethane (TPU) sheets in the UK.
The Canadian company plans to have its first high-volume production facilities in Quebec to take advantage of graphite availability and benefit from favourable Quebec Hydro electricity rates. The company will grow capacity in response to market demand.
SWAN already has three customers ready to take graphene when it is available, including Gerdau Grapheno Ltda and Nationwide Engineering UK in the concrete vertical and an undisclosed customer in the transportation vertical for TPU sheet.
Paradigm noted that the company’s $10 million cash is expected to easily cover its next two to three years of spending.
With chairman Harry Swan, president and CEO Simon Marcotte, and COO Michael Edwards, who headed Thomas Swan’s graphene program, the broker views Black Swan as “poised for success”.
Valuation model
Using an 8x EV/EBITDA multiple on the 2027 estimated EBITDA of $85 million ($0.28/share) and discounted by 25% per year (to account for the pre-feasibility stage of development), Paradigm arrives at its one-year target price of $0.60 which equates to 1.4x 2027 estimated revenue per share.
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