Quest for commercial revenue
Commercial agreements with blue-chip industrials partners offer the prospect of entry into key markets for Deinove (PARIS:ALDEI). To capitalise on this opportunity Deinove must demonstrate that its technology can operate successfully on an industrial scale and using industrial substrates in its chosen markets. Confirmation of its ability to scale up its technology could act as a significant boost to its share price.
Scale-up of technology is required
Deinove has continued to make progress scientifically and commercially against a background of less favourable core markets. Despite a lower oil price we anticipate that the second-generation biofuel market will continue to grow – albeit less rapidly than previously envisaged – and competing technology has yet to establish itself, so the market opportunity remains. Agreements with commercial partners in both the Deinol and Deinochem projects provide Deinove with entry points to its chosen markets, but it will need to establish the commerciality of its technology on an industrial scale to assist the development of its share price.
Price competitiveness principal risk
The principal risk facing Deinove is that its technological developments are insufficiently price competitive for industrial deployment. Our assessment of the valuation of the business would also be jeopardised by slippage in the timetable for deployment. Deinove believes that, courtesy of its funding agreement with Kepler Cheuvreux, it has sufficient financial resources to fund the business beyond Q316. However, clearly any delays to the commercialisation of its technology could require further equity injections. Weakening of incentive programmes for biofuels and a further drop in the oil price could also pose a threat to the business.
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