Flux Power Holdings Inc (FLUX)

[savin4college]

$FLUX to forklift power = $TSLA to cars

FLUX Power reported Q2 results today demonstrating that the game is on in the wholesale replacement of lead acid batteries used in forklifts and other industrial equipment. This market opportunity is estimated at over $8B, yet lead-acid from providers like $ENS has owned the space for decades simply because no-one had attempted to launch a better solution - and frankly why would the lead-acid industry bother when they were doing just fine owning 100% of the market.

Flux's Q2 Release

Flux's sales ramp is being fueled by a few household name clients that after a few years of review and testing of the product and tiny Flux - have determined the solution has a compelling ROI and have begun to deploy it across their material handling operations. Getting back the Tesla analogy - Flux actually faces an easier path of growth - for they merely need to get customers to switch the type of battery they already use - to lithium. The customer doesn't need to buy an entirely new car, nor do they need to invest in recharging infrastructure. Switching to lithium is "plug-n-play!"

Lithium performs better, lasts longer, is more efficient in charging (uses less energy) and delivers a total cost of ownership well below the comparable cost of the multiple lead-acid batteries required to power a forklift over its useful life. The downside is that lithium is new, Flux is relatively new to the industry and lithium-ion packs do cost roughly twice as much as an initial lead-acid battery - but over time they save money, improve productivity and make forklift drivers and managers very happy!

[url=http://www.fluxpwr.com]Flux Power[/url] is positioned as the clear leader in the U.S. market for lithium-ion forklift batteries. Its leadership is measured by the sophistication and refinement of its solutions, its time in the market, scope of Fortune 500 companies that have piloted and/or bought packs and its technical approvals from the likes of UL, ISO9001 and and its strong relationships with the top three forklift OEMS - Toyota, Raymond and Crown.

Flux is not yet out of the woods as they must now cope with the demand they have created - and continue to deliver a great product at a compelling price in increasing volumes. For this reason, Flux's biggest challenge remains the sourcing of large scale capital required to fund the huge ramp we think is possible.

Flux has been supported by a very shareholder friendly major stockholder who has provided a $10M line of credit to FLUX at an attractive interest rate and the credit line is convertible into Flux equity at $0.60 per share, we'll above where the stock has been trading there past few years. This shareholder has done right by the company and all shareholders in keeping Flux afloat and in the game with impressive ongoing financial support.

The market opportunity in forklifts and airport ground service equipment alone - is over $8b - just replacing what's out there with lithium.

Of course, there is also the Fuel cell market with players like $PLUG and $FCEL that offer a great solution - but the infrastructure required and the solutions higher cost currently price Fuel cells out of most potential opportunities. You really need a large base of vehicles in one location to justify the infrastructure investment for fuel cells and their hydrogen charging requirements - and the economics of that energy source seem still far away from making sense for the smaller Class 3 equipment where Flux has first focused.

To be clear - this is not a question of lithium vs. fuel cells as they both offer far better power solutions but with different capex requirements. With Flux you can drop in one or two packs as you need replacements - whereas fuel cells require a big picture deployment plan and investment.

The real battle is lithium + fuel cells vs. lead-acid, with dominant players like East Penn, Enersys $ENS and Excide owning the entire market. And let's not pretend that a superior solution has an easy time unseating incumbent technology sitting comfortably at the top of the hill in a deeply fortified castle. Breaking down lead-acid relationships, distribution channels and their customers' risk aversion and concern about "new" power solutions - are huge challenges that Flux has already begun to address. But the customers where Flux has gotten a seat at the table - have steadily moved toward the light.

Finally - the forklift OEMs also play a huge role in the market - and fortunately for Flux they have long dealt with the performance challenges of lead acid - which reflect on the quality of their machines. Slowly they have come to see that lithium offers an exciting new opportunity for them to deliver even greater value and satisfaction to their customers - and so they are embracing lithium in a measured, prudent fashion. Flux continues to express optimism in solidifying its relationship with a high profile OEM and we think that is ever closer to public view.

Flux's courting of key OEMs is starting to bear fruit as the bulk of Flux's revenue this fiscal year has been developed for one household beverage brand - and sold to them via the sales arms of two of the largest forklift OEMs.

At $0.50 per share Flux's market cap is $12.5M, yet today's release provides visibility on near certain revenue of $2.25M so far in FY 2018 ending June 30 + a pipeline of orders through its fiscal year end totaling $3M. This of course compares to revenue of just $0.9M last year while Flux was still engaged in solidifying is product line, manufacturing and initiating commercial sales ramp.

Given Flux's first mover position, its major customer and OEM relationships, the clear ROI of switching to lithium, the scope of the $8B market and the pace of its accelerating revenue streams - we believe it's very likely that Flux could prove to be a once in a lifetime opportunity to invest in a technology revolution at the early stages.

Take a look and see if you agree with my assessment.