Aurora Control Technologies (ACU.V) coverage has been initiated on January 26 with additional notes on April 19 and June 25 and November 5 . ACU.V improves solar cell manufacturing efficiency via innovative products (Decima, and Veritas). Since our last note, the following releases were issued.
Nov. 20 - Q2 Earning: Record revenues of $1.4M. Income for the second quarter was $0.178M - First profitable quarter in ACU.V's history. The unrecognized revenue and order backlog of $1M is expected in this fiscal year with a 36 to 75 systems order decisions within 3 to 6 months.
Dec. 19 - Dr. Johnson Wong is hired as Senior Physicist. He will be responsible for the technology road map for Aurora’s products. He will also be responsible for defining and delivering projects with scientific/technology partners worldwide.
Jan. 25 - Corporate update and Strategic Product Initiative. Monocrystaline PERC, Bifacial and Heterojunction (HJT) are the primary innovative solar cell design used in the market. Decima and Gemini support the first two designs: To date more than 50 unit delivered, ACU.V believes that the market will grow along with orders. ACU.V is also working on validating HJT which is forecasted to growth by 20% this year. ACU.V is also collaborating with SERIS in Singapore, and aligning its process with - Smart factories 4.0 - incorporating sensors at all stage of manufacturing.
Feb. 16 - Adds Heterojunction (HJT) Cell Characterization to Decima Gemini Family. HJT is an ultra high-efficiency solar cell design pioneered by Japan's Panasonic Corp. for solar products. According to Solar Media Ltd., HJT production capacity is expected to increase by 20% this year.
Feb. 20 - Q3 Earnings: Revenue of $0.33M with an income loss of ($398,959). Year-to-date for nine months, the Company has recognized $1.9M in revenue, an increase of 238% over the same period last year. The operating income (loss) year to date was ($0.67M), a reduction of 67.7% from the same period last fiscal year. Unrecognized revenue and order backlog of $0.6M.
Feb. 22 -Aurora Solar Technologies Named to TSX Venture 50
As displayed by the chart, ACU.V has taken a hit since the beginning of 2018 going from roughly $0.29 to $0.195 cents. The impact of Q2 Earnings were unrecognized by the market. Thereafter, a S1 Test was conducted by Scotia Capital (85) attempting to significantly drive the price down twice in a day.
Being able to bring the price down by 30% ($0.28 to $19.5 cents) on the first attempt (0.58M shares) demonstrates that ACU.V lacks liquidity. However, if you're familiar with Volume Price Analysis (2013) by Anna Coulling, you'll know that these kind of "test" are conducted to mark the market up or down.
In this case, it looks like we were in the distribution phase, and that the test was conducted to mark the market down*. In addition, the corporate update (Jan. 25) was a turning point for ACU.V. The lack of a sale update served as quasi-guidance and a catalyst for a sell cycle which culminated to disappointing Q3 earning results. Getting Named to TSX Venture 50 on the heels of weak earnings had no impact on sentiments. In fact, what was witnessed is a case of the "reinforcement effect" and a perfect recipe for a pull back resulting to the same lows as the December 13th tests ( $0.195 cents).
"When returns and sentiment point in the same direction (either up or down), prices are in the midst of overreacting. Such evidence of overreaction should disappear when returns and sentiment disagree." -- Froot, Lou, Ozik, Sadka, Shen. (2107) Media Reinforcement in International Financial Markets.
As such, we believe that ACU.V is currently mispriced and due for an upward correction. There may be suggestion that sentiment is starting to disagree with returns based on last week's trading activity. Two out of five days had volume in the top 25% percentile. ACU.V might be looking up!
*PS. Don't worry if you missed the S1 test, we missed it too and we're learning to watch these more carefully in the future.
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