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Ilika (LSE: IKA) makes solid-state batteries, and it may be purchased for penny share costs. Its expertise may very well be huge within the sort of distributed processing that may seemingly contribute to the way forward for AI — amongst a variety of different purposes.
As I write simply earlier than markets open on Tuesday (26 August), we’re a market cap of £72m and a 40p share worth. That represents an 86% achieve simply for the reason that begin of 2025. However earlier than we expect an excessive amount of about what the longer term may maintain, there’s one notice of warning.
Again in 2021, the shares reached 280p. So anybody who purchased on the peak is now down 85% general — even after this yr’s achieve. However new tech like this typically wants a second wind to essentially get began. And AI attracts extra consideration now than 4 years in the past.
What’s the thrill?
On 18 August, Ilika introduced a milestone with US strategic associate Cirtec Medical, an organization growing next-generation medical gadgets. The information launch stated: “The businesses have efficiently accomplished course of qualification for the Stereax M300 micro-battery manufacturing line at Cirtec Medical’s facility in Lowell, Massachusetts.”
This, apparently, is the ultimate technical validation wanted earlier than manufacturing can begin.
It comes after CEO Graeme Purdy instructed us at full-year outcomes time in July that “Ilika has achieved a big variety of vital technical and business milestones over the previous twelve months.“
The corporate’s subsequent main strikes embrace getting its electrical car battery expertise, Goliath, to viable product standing by the tip of 2025, which suggests finishing prototypes and getting them to clients for testing.
We also needs to hopefully see the popularity of Stereax revenues begin within the present calendar yr.
A no brainer purchase?
So, is it time to hurry out and purchase then?
Earlier than anybody considers it, there’s one key downside — there’s no revenue. The yr ended 30 April noticed simply £1.1m in income, with an EBITDA lack of £5.2m.
However there was money and equivalents of £8m on the stability sheet on the time. After the tip of the interval, the corporate raised £4.2m gross from a fundraising. And it acquired a £1.25m grant from the UK authorities’s DRIVE35 programme, which funds R&D in car electrification.
This all suggests there’s sufficient liquidity for some time but. However analysts nonetheless forecast losses for not less than the following two years. And so they see the money pile dwindling to round £1m by 2027.
It appears seemingly that Ilika may wish extra funding earlier than the revenue faucets open. And that might nicely result in dilution for traders who make the leap at this time.
The dilemma
This is similar dilemma that’s confronted numerous traders in potential high-tech progress shares whereas they’re nonetheless within the ‘jam tomorrow’ section. And for me, it normally means I steer clear and don’t think about shopping for till I see first revenue.
However on this case, primarily based on Stereax batteries hopefully producing gross sales within the close to time period, I’m truly pondering a small funding. I believe penny share progress traders ought to think about it too.
