Our latest Canadian pick made at the end of May, Anfield Energy Inc. (AEC), has been on absolute fire on the back of a uranium bull market and an aggressive investment spree made by the U.S. Government into certain U.S.-based commodity projects. The warrants, AEC.WT, remain our top choice in this sector as not only is Anfield a highly prospective play, but the warrants remain underpriced with an implied volatility of less then 40% at $0.05. For comparison, Uranium Energy Corp. (UEC) options expiring in 2027 have implied volatilities of around 85%. AEC.WT would be worth $0.09 per warrant (it takes 75 warrants to exercise for one share) at an equivalent IV of 85%. We plan a follow up report on Anfield and its warrants, but for this piece we want to shift focus on a stock we talked about months ago, and finally looks ready to take off. That is Energy Plug Technologies Corp. (PLUG.CN) (PLGGF). If you like our picks you can follow this blog by clicking the follow button on the top of the left hand panel. We have 1038 followers on here as well as 124 followers on our Canadian blog. You can also follow us on X @StockTradePicks which has over 5,000 followers.
Alongside the commodity bull market, quantum and battery technology/recycling plays have been hot. D-Wave Quantum Inc. (QBTS) has soared to a $15 billion market cap while Aqua Metals, Inc. (AQMS) tripled in price on Tuesday. With Tuesday's news release announcing a three way partnership between itself, Quantum eMotion Corp. (QNC.V) (QNCCF) and Malahat Battery Technology Corp., PLUG is now uniquely positioned as a bridge between these two industries, while also being modestly valued at $23 million market cap. The stock understandably shot up 64% to $0.205 on the news on Tuesday, and finally sits above our opening call price of $0.18. We expect the hype to continue as long as companies like AQMS move like they do and QNC pushes half a billion dollars in market cap. A run to $0.50 would still have PLUG trading at only around a $75 million market cap, even with nearly 40 million warrants and options outstanding that would shore up its balance sheet by bringing in over $5 million in cash upon exercise.
The companies will be integrating QNC's QRNG2 chip into PLUG and MBT's Battery Energy Storage Systems (BESS) to create a power system that will be resilient to cyber attacks. This quantum-secured BESS architecture will be able to support Arctic defense installations and remote military bases along with utility-scale smart grids. At a time when Canada is supposedly looking to shore up its defense systems and rely less on the United States for critical defense infrastructure, these three home grown Canadian companies will be able to assist in these goals. All three of them are ideally positioned to call out any bluff made by Mark Carney and the Liberals, especially since MBT is of First Nations origin.
Energy grids being vulnerable to cyber attacks remain one of the prime weaknesses within the developed world, but the issue is often overlooked by the market and the media unless a major attack happens at that time. Given the next wave of hype on the quantum industry, we think that news of this partnership is going to gain sustained traction. PLUG has unfortunately been a dead play ever since we first mentioned it, but that's because partnerships of this nature need to be constructed carefully and the integration of technology takes time. QNC is one of the most hyped technology plays in Canada right now. But with that hype comes intense scrutiny. The only way it teams with far junior partners like PLUG and MBT is if it thinks that these companies can execute on their end of the bargain with respect to their BESS.
Our short term target remains $0.50 on PLUG as this early stage business model doesn't yet produce numbers needed for financial analysis. However, one cannot deny the potential it has to run well beyond that on hype. Critical Infrastructure Technologies Ltd. (CTTT.CN) hit a peak of more than $200 million in market cap after running from $0.05 at the end of August to as high as $2.49. CITT is a developer of autonomous, self-deployable communications systems for remote locations. Like PLUG, it's focused on security and surveillance of hard to reach places like the Canadian north. A significant amount of the design of CITT's system is dedicated to power generation and storage. A quantum-secure BESS should be of interest to a company like this. While PLUG should be of interest to CITT investors as they would understand and respect its business model which sets out to secure and enhance operations requiring power and communications in remote locations.
Disclosure: We are long PLUG.CN. We have been compensated in the past to write about PLUG, but have also engaged in open market buying and purchased shares in excess of the value of the compensation.
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