There are two words that nicely describes Silex Systems Ltd (ASX: SLX) half year result: who cares?
Today's 5% drop in the share price to 63 cents was certainly not caused by the laser technology company's 31.4% drop in revenue to $2.7 million or the 81.9% deterioration in net operating cash inflows to $1.4 million for the six months to end December last year.
The drop in the share price today is also inconsequential because the stock has surged over 30% in the past week and was issued with a speeding ticket by the ASX yesterday. Management was at a loss for words.
The fortunes of this one-trick pony are in the yet-to-be finalised construction of a United States based nuclear enrichment plant using its technology.
On this front, management had nothing new to say except the potential for a favorable decision in the coming months. The problem is shareholders have heard this all before.
Sadly management doesn't seem to know much and this is why Silex struggles to inspire confidence among investors.
Not that this is totally management's fault. Silex is not negotiating with the US government on the setup of the facility at Paducah, Kentucky. The talks are being handled by Silex's exclusive partner, Global Laser Enrichment (GLE), which is a joint venture between nuclear industry heavyweights GE, Hitachi and Cameco.
But the collapse in the nuclear power industry following the Fukushima disaster in March 2011 has clouded the outlook for the entire industry.
The small sliver of good news is that economics alone isn't necessarily the only determining factor on whether the Paducah facility gets built.
The plant, which will be the most effective enrichment facility in the world thanks to the Silex laser, is meant to help clean up uranium tailings left behind after the closure of the gaseous diffusion plant in 2013. There is community concern about the effects of leaving the tailings.
GLE's proposal is the only one being considered by the US government and there are enough tailings to keep the new facility operating for 40 years.
Sliex will not need to inject any capital into the project and it is entitled to a 7% to 12% royalty that runs into perpetuity. If the Silex technology becomes the new global standard for uranium enrichment, Silex's revenue could be measured in the hundreds of millions.
The problem is that negotiations for Paducah have taken a lot longer than anticipated and GLE is cutting back on investment to commercialise the technology in the face of weak global demand.
Silex itself had to undergo a painful restructure with the company effectively being mothballed to conserve cash.
Lasting the distance is critical as conspiracy theorists argue that GLE is waiting for Silex to keel over so it can get out of paying the royalty. Another potential option is for GLE to make an opportunistic bid now that Silex is a shadow of its former self with the stock trading at over $4 back in 2012.
Silex will appeal to highly risk-tolerant investors given the blue sky valuation upside, but buying the stock is akin to playing chicken with the market. Let's hope Silex won't be the first to blink.
