FRONTIER IP LOOKS POISED FOR AN UPLIFT - 12/05/26

It was back in 2023 when I first took a look here at Frontier IP (FIPP), with the shares then trading significantly higher than where they sit today.

For those unfamiliar with the company, AIM quoted FIPP is a UK based intellectual property commercialisation specialist focused on identifying and supporting promising university spin outs at a very early stage.

In simple terms, FIPP takes equity stakes in emerging businesses, providing both seed capital and hands on strategic support in the hope of generating substantial returns through future commercial success or profitable exits.

Its model has already proven capable of delivering exceptional results, most notably through the successful exit of its investment in Exscientia, where it generated returns of more than fourteen million pounds from an original investment of less than two thousand pounds.

That remarkable outcome provided clear validation of the company’s strategy. However, for long term shareholders, the period since has been far less rewarding.

While Frontier IP continues to hold a number of potentially valuable investments, its net asset value had declined to 52.7p per share as of December last year, while cash reserves and overall balance sheet strength have also weakened.

Even so, with the shares currently trading around 17p, the market capitalisation of the business at less than £13 million looks anomalous.

On the face of it, the share price appears to represent a striking disconnect between the company’s market value and the potential worth of its underlying portfolio.

Of course, many of Frontier IP’s investments have yet to deliver any returns, let alone on the scale of Exscientia.

As is often the case with early-stage businesses, meaningful updates can be limited by commercial sensitivity and confidentiality agreements.

That naturally makes valuation difficult and helps explain some investor caution. Yet, it is equally difficult to ignore the apparent quality of several holdings, with at least a handful appearing capable of delivering significant upside if commercial progress continues.

Among them is Alusid, in which FIPP holds a 36.16 per cent stake.

The company produces premium tiles and architectural surfaces using recycled industrial waste and is already building momentum across the UK and Europe.

There is also The Vaccine Group, where FIPP owns 16.95 per cent.

This business is developing novel animal vaccines with a particular focus on improving disease prevention in livestock.

Another notable holding is Cambridge Raman Imaging, in which FIPP owns 26.81 per cent. The company uses ultra-fast lasers and artificial intelligence to create real time digital images of human tissue, technology that could prove transformative for surgeons and pathologists seeking to identify cancerous tumours with greater speed and accuracy.

While each of these businesses offers meaningful long-term potential, it is two other holdings that appear especially compelling.

These are 2D Photonics and Pulsiv, where FIPP holds stakes of 9.1 per cent and 17.3 per cent respectively.

Both appear to have highly promising futures and, if commercial progress develops as hoped, could deliver returns capable of materially reshaping the valuation case for Frontier IP.

That is arguably central to the attraction at today’s share price.

At current levels, investors appear to be paying very little for a portfolio that still contains several potentially game changing opportunities.

Whilst that does not remove the risks, it may suggest the market is overlooking the scale of the upside that remains.

In order to learn more about one of these key investments, last week I caught up with Pulsiv CEO Darrel Kingham, whom I last met in 2024. Frontier IP CEO Neil Crabbe was also present and provided valuable additional insight.

Pulsiv, which is based close to me near the Cambridge Science Park, and therefore of particular interest, has developed a patented power conversion technology.

In simple terms, it significantly increases energy efficiency and reduces heat waste in almost any device that plugs into a wall socket or generally connected to an AC supply.

By using a unique method of converting AC to DC, it allows manufacturers to build smaller, cheaper and more sustainable products while using smaller components than those found in traditional power supplies.

It has the potential to be genuinely transformative, as it could be integrated into billions of everyday products, from laptop chargers to electric vehicles, reducing global electricity consumption while also improving the efficiency of renewable energy systems.

Yet, as with many private businesses, news flow can often appear limited or closely guarded, often for strategic reasons rather than any lack of meaningful progress beneath the surface.

To that end, Neil addressed my reference to recent bulletin board speculation and chatter suggesting that news may be imminent for either Frontier IP or Pulsiv

“It certainly isn’t informed, as you would have seen with the 2D news, which was quiet for a long time and then announced the €211 million award. On the back of that, I think people have been going through our portfolio and wondering what might come next.”

While the recent 2D news was highly significant, and something I will return to separately, Neil described Pulsiv as being equally exciting and potentially less risky in its commercial dynamics.

To that end, he pointed out that Pulsiv continues to work with a Tier 1 silicon company that has remained a constant partner throughout its development.

However, that company cannot yet be named, something Neil admitted was frustrating.

“We can see things going on, but when you can actually comment is challenging.

That is especially true when you have something like Pulsiv, where it is designing a power supply that is going into a device by an end customer, but they do not want to give away market advantage by saying what they intend to do.”

Aside from that, Neil highlighted some of the broader structural drivers behind growing customer interest.

“The basic pitch here has been that we are more efficient than existing ways of doing things, but it turns out that maps into a whole range of other benefits which are now being enforced through regulation.”

This includes new EU rules relating to the common charger directive and the USB C mandate, which is increasingly becoming the universal charging standard across portable electronics, with laptops now included.

Not only does Pulsiv appear well positioned to meet these requirements on energy efficiency, thermal performance and cost, it is the sheer size of the addressable market that captures attention from an investment perspective.

Neil added that the company believes there are more than eight billion devices per year that its technology could potentially serve.

“We believe it is an enormous opportunity. 2D created an immense amount of excitement recently and while that is super exciting, it is a much narrower, albeit high value niche, than what we could see in what Pulsiv is seeking to do.”

Darrel Kingham who previously served a long stint at ARM also highlighted how legacy power technology has actually changed very little over the past fifty years.

The industry needs a step-change in performance to address the growing awareness of issues around energy efficiency, increasing regulation and the demands of premium devices.

 Pulsiv believes it is addressing several needs at once.

Central to this is the issue of wasted energy through heat, which Darrel explained has wider implications for product lifespan.

There is, he said, a direct correlation between just how hot devices become and how quickly they fail in the field.

With multiple drivers behind adoption, Darrel explained that Pulsiv has evolved to offer a licensing model, component sales and complete modules designs, giving it several routes to market.

Importantly, Pulsiv does not produce chips itself.

Instead, its intellectual property is embedded into chips produced by its Tier 1 partner.

The potential end markets are extensive and go well beyond the immediately obvious.

In addition to chargers and consumer electronics, the technology could increasingly serve applications such as power tools, smart thermostats and even desk furniture.

Some customers, Darrel explained, do not have the resources to develop their own power supplies but are highly attracted to the value proposition and therefore seek a ready-made solution.

To serve this market, Pulsiv has developed a 65W USB charger for installed applications, which Darrel showed me during our meeting.

This can serve as a charger for phones or laptops and is designed to meet all relevant regulatory and safety standards while delivering significant power density.

Importantly, it remains exceptionally compact and generates very little heat, another major selling point.

“People are loving this,” Darrel said. “We are now in the process of finishing it and getting it into volume manufacturing.”

That potentially opens another attractive route to commercialisation, allowing Pulsiv to supply manufacturers directly or enable them to incorporate its designs into their own products.

“We are really excited about this one,” Darrel added, “because of the industry standards changing, and we meet the needs and requirements.”

Manufacturers increasingly want to deliver higher power, but are constrained by the heat and poor energy efficiency of legacy design techniques. Pulsiv technology solves those challenges.

According to Darrel, there are currently no commercial products on the market that meet the criteria in quite the same way.

Beyond chargers, the company is also now looking at LED lighting through the driver technology, which effectively delivers the power modern lighting systems.

By embedding Pulsiv’s Osmium technology, energy waste can be reduced while addressing one of the leading causes of failure in LED lighting applications.

That alone could represent a substantial opportunity, given the scale of the global lighting market.

Clearly, despite what may have appeared to be a hiatus on the news front, the Pulsiv team has remained highly focused on customer activities.

Neil addressed investor frustration on this point directly.

“The normal way with these things is that customers undergo a validation process first, then a cost analysis, then they look at design wins.”

Typically, he added, “individual products move on a twelve to twenty four month cycle before implementation.

That can be frustrating, but it is the way it works, as we are working with genuinely top tier accounts.”

Naturally, investors may remain cautious, and understandably so.

Much of the promise here does remain prospective, and until meaningful commercial agreements or revenue visibility are announced, some degree of market scepticism is likely to prevail.

Yet the effort that has gone into protecting the intellectual property appears significant, particularly given the importance of the licensing model and underlines the commitment and belief.

Neil explained that careful attention has been paid to encryption and delivery methods to ensure the technology cannot simply be copied once deployed.

All the value, Darrel added, is embedded in the chip itself.

With those foundations seemingly in place, Frontier IP shareholders will no doubt be eager for tangible commercial progress to emerge.

Both Neil and Darrel indicated that further news is expected in due course and will be shared when it can be.

However, given the nature of what Pulsiv is building and the calibre of the companies it is working with, specific disclosures may remain limited.

Whilst that may frustrate some investors, if even part of what appears to be developing behind the scenes ultimately translates into commercial success, Pulsiv could prove to be one of the most important assets within the Frontier IP portfolio.

One area Neil said could prove the first to see notable news in the sales space is that of gateway devices, such as broadband routers, set-top boxes and others.

These look like a significant opportunity for the business, as such devices represent a massive global market where power supplies typically operate under highly inefficient conditions.

Given that they largely remain in a constant active mode, the traditional power supply nature of such boxes is hugely wasteful and that is opening the market for Pulsiv.

The timeline for any future announcements on this will be one of moving from the design win to deployment in volume.

Neil pointed to the current backdrop as being particularly positive for the Pulsiv business, with energy being extremely topical regarding both the burden and cost.

Additionally, increasing pressure from data centres, and energy demand is also in the spotlight and such factors have led the team to look at how they can now grow and fund the business in a more aggressive way.

Neil didn’t want to comment further on what form that may take, but did refer to what has recently transpired at 2D in what he described as a big bang solution.

“Clearly we are addressing a global market” Neil added, “and funding it at the level we have been has been good for the technology development, but it isn’t right for the deployment phase”.

Darrell was happy to expand stressing that they are now at the point of needing to scale the business in line with the growth that they are expecting. Currently there is a core team of six that are concentrated on the IP but there is what he describes as a broad eco system whereby PCB design and module manufacturing and testing is outsourced.

They also have global sales and distributors in place, which provides for further connectivity.

Of course, whilst this all sounds extremely promising as a key component of FIPP’s investment portfolio, the current weak balance sheet is no doubt playing on investors’ minds.

Neil said that while they had already commented on this aspect publicly, he was, at this point, unable to comment further, but they were dealing with the issue.

That isn't down to any wish to avoid investor engagement, but rather, a course to follow as with any other news sensitive situation.

What does appear clear is that there are certainly various things in play and specific aspects of news will flow through as the year progresses.

As we stand now though, FIPP’s shares look glaringly good value, even allowing for execution risk and the resolution of its own financial situation.

Right now, a realistic valuation of CamGraPhIC (via 2D) is arguably in the £350m-£400m range, in light of the very recent Italian state aid grant of £183m to that business.

As the grant award covers a huge portion of the capital expenditure for their production facility, the company's valuation effectively "floors" at the value of that grant, plus their intellectual property and previous private funding.

FIPP’s stake equates to circa 22p per share, a massive increase on the valuation attributed as recently as December of last year.

And with the Pulsiv valuation currently at £60m, FIPP’s stake there equates to 13.6p per share, so collectively these two alone provide for in excess of 36p per share, against the current 17p per share.,

Then there are other investments making progress such as Alusid, so the likely NAV as we stand is realistically around the 60p mark.

Although 2D Photonics is still early stage, the monetary award and the issues it is addressing along with quality investors provide for a positive outcome for future success.

And whilst Pulsiv is currently valued at £62m any news on significant design wins and deployment, married to a boost of its own investment would likely see a marked increase in its own valuation.

For now, investors may have to wait a while longer for any significant news to break. But, given what I have heard and the tangible progress being made across both Pulsiv and 2D, then patience may be rewarded and thus a closing of the NAV from current levels may duly follow.