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Company
Update: China Energy Recovery (CGYV) Lands Huge Contract |
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With
everything that's happened to the economy and stocks over the last six
months, it could have been easy to forget one of the most simple measures
of what makes a company successful. Fortunately, we've got one of
our small cap followings to remind us of how the basics come first.
What's
the basic criteria? Sales growth - the more the better. The
company? China
Energy Recovery (OTCBB: CGYV). To my knowledge, the contract signed
recently is by far the biggest one they've ever landed. As for how
big, try about 1/3 of all of last year's revenue.
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Perspective
On the Deal |
In
short, China Energy is once again doing what it does best - building
a waste heat recovery boiler, this time for the Jiangsu Sopo Chemical
Group's sulfuric acid plant in China (the company also happens to
be China's largest acetic acid manufacturer).
 The
system is a 'retrofit', and will eliminate the need to annually burn 17,000
tons of coal that would have been required to generate the equivalent amount
of energy. Better still, the waste heat recovery boiler will prevent
the release of 45,000 tons of carbon dioxide emissions each year. This
will allow Sopo to comply with China's new pollution control measures/mandates
... a paradigm shift we mentioned was one of the key reasons we were attracted
to CGYV in the first place.
Plus,
the equipment will mean a significant expense reduction for Sopo.
The
project is effectively a financed purchase from China Energy, but
the financing is technically a lease-to-own type of deal. Either
way, the project's price tag is a total of $8.9 million - the biggest
project I'm aware of that the company ever has been involved with.
If
you're wondering how big an $8.9 million deal is for China Energy Recovery
(and if you're wondering whether or not you should get excited), try this
on for size ... the company's revenue for all of 2008 is estimated to be
somewhere around $24 million. So, this one installation is worth about
1/3 of all of last year's revenue. Our estimate for 2009's revenue
is around $40 million, so the contract represents about 1/4 of the current
year's likely sales.
Or
here's a different perspective - it was only about a year ago the average
project size was somewhere between $100K and $200K. The company was certainly
doing million-dollar projects then, but they've been getting progressively
bigger.
As
a sales-type of lease, I'm sure some of the revenue will be deferred for
a couple of years. The point is still the same though - a large dollar
project is going to boost the company's top line as well as its bottom
line. So, yeah, this is something to get excited about.
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Add
It To a Long List |
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If
you've been one of our readers for at least a short while, or if you're
familiar with China Energy, then you probably already know this
company's recent history of success. What I don't know if anybody
realizes or not is how much success China Energy has created
in just the last few months. Here's an amazing recap...
-
09/30/08
- $3.2 million boiler finished for Two Lions Chemical
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10/14/08
- Alkali recovery boiler completed for Zhuji Paper Mill
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11/06/08
- $11.6 million build-contract signed
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11/17/08
- CER posts 9-month (YTD) figures... record-breaking results
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12/04/08
- R&D subsidiary launched
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12/17/08
- China Energy Recovery featured on CNN
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01/06/09
- $3.3 million project completed for repeat customer
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01/13/09
- China National Salt's sulfuric acid plant is completed
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01/27/09
- Sopo Chemical group to acquire boiler system for $8.9 million (see release
below)
It's pretty
amazing just how far this small cap company has come since late last year.
 As
for the stock, CGYV was caught up in the overall market's
implosion during September and October. Once the senseless panic wore off
though, it looks like investors caught their error; China Energy shares
have been quite resilient since November, reflective of the underlying
company's success.
Oh,
CGYV has ebbed and flowed, as most stocks have in this turbulent environment.
But, this stock has also continued to make higher highs and higher lows
with each ebb and flow over the last three months.
More
importantly, the chart is inching closer and closer to breaking past
a major resistance zone between $2.08 and $2.25. As we've said before,
the pace of progress within those levels may be moderate. If-and-when
the stock gets past those levels though, the rally may not give
investors another entry spot anywhere near current prices.
Will
today be that day? I don't know, but if not today, then I think it's
only a matter of time (though not much time).
See,
that lengthening string of announcements above tells me this company is
not stopping for anything or anyone. More and more investors are
watching that same list of achievements get longer every month though;
today's
news is just another chapter in the success saga. I believe sooner than
later China Energy's story will reach critical mass, and push CGYV higher
once and for all. That's one train I don't think you want to miss.
Anyway,
here's the news release.
| China Energy
Recovery Secures an $8.9 Million Contract for a Heat Recovery System Retrofit
Project for Jiangsu Sopo Chemical
Tuesday January
27, 7:00 am ET
- China's
largest producer of acetic acid returns to China Energy Recovery for greater
energy efficiency
- Multi-million
dollar energy costs can be potentially saved annually
SHANGHAI, China,
Jan. 27 /PRNewswire-Asia/ -- China Energy Recovery, Inc. (OTC Bulletin
Board: CGYV - ISIN: US16943V2060; "CER"), a leader in the waste heat energy
recovery sector of the industrial energy efficiency industry, announced
today that it has recently entered into an EPC (Engineering, Procurement
and Construction) contract for a retrofit project (the "Project") to build
a new low temperature heat recovery system (the "System") for the sulfuric
acid plant of Jiangsu Sopo Chemical Group ("Sopo Group"). Sopo Group is
a leading Chinese integrated chemical company and China's largest producer
of Acetic Acid (Glacial), one of the major basic chemicals for industrial
uses.
The Project is
arranged as a sales-type lease which offers the company higher margin compared
to regular EPC projects. The currently determined total contract value
amounts to RMB60.8 million (roughly $8.9 million USD at the prevailing
exchange rate on the date of the release) with a 4-year installment payment
term. The main low temperature heat recovery system for the Project will
be specially procured from MECS, Inc., a leading US-based company specializing
in sulfuric acid manufacturing equipment and systems and formerly part
of Monsanto. CER partners with MECS to provide the low temperature heat
recovery systems for sulfuric acid plants in China.
The primary purpose
of the System is to utilize the waste heat released from the sulfuric acid
production process and to use it to supply the main facilities with the
hot steam, which would otherwise have to be supplied from coal-fired generators.
Through this process, not only are energy costs significantly reduced but
Sopo Group is able to meet strict environmental protection requirements.
It is estimated that upon completion in early 2010, the System will help
Sopo Group save roughly 17,000 tons of coal (coal equivalent), which would
otherwise be required to produce the same amount of hot steam, and thus
prevent the release of approximately 45,000 tons of carbon dioxide emission
each year. Moreover, approximately 200,000 tons of cooling water will also
be saved annually.
"Sopo Group has
been a long-time customer of CER," stated CER's CEO, Mr Qinghuan Wu. "We
are happy they continue to see the benefits that waste energy recovery
can provide and have returned to us to build the new project. This project
is important to CER as it demonstrates our customers' recognition of CER's
strong engineering capability in carrying out EPC projects for energy recovery
systems. We are also pleased to continue to partner with MECS to utilize
their superior technology in low temperature heat recovery for sulfuric
acid plants. The Project presents a robust start of the year for CER in
2009. We shall continue to strive to provide the best value to our customers,
especially in this current economic environment, because it is the corner
stone of our sustained long term growth."
The number presented
above is the total contract value, which includes a 17% Value Added Tax
("VAT") on the domestically purchased equipment, the retainage amount for
product warranty purposes which is 5% of the total contract value and will
be recognized as deferred revenue, and the interest income due to the sales-type
lease arrangement. The total contract value would be increased to RMB71.2
million (roughly $10.4 million USD) if the Customs Duty and import VAT
would not be exempted. The numbers presented represent values based on
current exchange rates. Changes in the currency exchange rates would result
in a commensurate change in contract value.
What is Waste
Heat Energy Recovery?
Industrial facilities
release significant amounts of excess heat into the atmosphere in the form
of hot exhaust gases or high-pressure steam. Energy recovery is the process
of recovering vast amounts of that wasted energy and converting it into
usable heat energy or electricity, dramatically lowering energy costs.
Energy recovery systems are also capable of capturing harmful pollutants
that would otherwise be released into the environment. It is estimated
that if energy currently wasted by all the U.S. industrial facilities could
be recovered, it could produce power equivalent to 20% of U.S. electricity
generation capacity without burning any additional fossil fuel, and could
help many industries to meet stringent environmental regulations.
About China
Energy Recovery, Inc.
CER is an international
leader in designing, manufacturing and installing waste heat energy recovery
systems which provide facilities with greater energy efficiency. The company's
primary focus is on the Chinese market. CER's technology captures industrial
waste energy to produce low-cost electrical power, enabling industrial
manufacturers to reduce their energy costs, shrink their emissions footprint,
and generate sellable emissions credits. CER has deployed its systems throughout
China and in such international markets as Egypt, Korea, Vietnam and Malaysia.
CER focuses on numerous industries in which a rapid payback on invested
capital is achieved by its customers, including: chemical, paper manufacturing,
refining (including methanol refining), etc. CER continues to invest in
R&D and plans to build China's first state-of-the-art energy recovery
system research and fabrication facility to allow it to meet the increased
demand for its products and services. For more information on CER, please
visit: http://www.chinaenergyrecovery.com/s/Home.asp.
Information on CER's website does not comprise a part of this press release.
Forward-Looking
Statement Disclaimer
This press release
includes "forward-looking statements" within the meaning of the Securities
Litigation Reform Act of 1995, as amended. All statements, other than statements
of historical fact, included in the press release that address activities,
events or developments that CER believes or anticipates will or may occur
in the future are forward-looking statements. These statements are based
on certain assumptions made based on experience, expected future developments
and other factors that CER believes are appropriate under the circumstances.
Such statements are subject to a number of assumptions, risks and uncertainties,
many of which are beyond the control of CER and may not materialize, including,
without limitation, the efficacy and market acceptance of CER's products
and services, and CER's ability to successfully complete orders and collect
revenues therefrom. Investors are cautioned that any such statements are
not guarantees of future performance. Actual results or developments may
differ materially from those projected in the forward-looking statements
as a result of many factors. Furthermore, CER does not intend (and is not
obligated) to update publicly any forward-looking statements, except as
required by law. The contents of this release should be considered in conjunction
with the warnings and cautionary statements contained in CER's filings
with the SEC, including CER's Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 21, 2008.
Contact:
Media
Sean Mahoney
Ph. 310.867.0670
seamah@gmail.com
Investor Relations
Jim Blackman
Ph. 713.256.0369
jim@prfmonline.com
Source: China
Energy Recovery, Inc. |
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Technical Trade Alert: iShares
S&P US Preferred Stock Index Fund
Sometimes the very best trading opportunities
are born from the market’s over-reaction to a mere possibility. Case in
point - the iShares S&P US Preferred Stock Index Fund (NYSE: PFF).
Investors felt the dividends being paid by many preferred stocks were in
jeopardy, thanks to the stipulations likely to be included as part of the
government’s bailout package. As a result, the stock was torpedoed a couple
of times in the last few weeks. However, the most recent plunge - if like
the last two - could be setting up a nice, trade-worthy rebound.
The pattern is really quite simple
… PFF works its way into an oversold situation, and then bounces sharply
by 10 points or more. We’re using a stochastics chart as an oversold/overbought
indicator, which as you can see has been a very effective trading tool
for PFF since October. More specifically, the iShares S&P US Preferred
Stock Index Fund is bouncing around in a rising trading range, and we've
just seen it push off the lower edge of that range.
The counter-argument is valid … preferred
stock dividends are truly at risk, and in the case of the banks may be
going away entirely under some versions of the ever-changing stimulus proposal.
As such, PFF isn't attractive.
It’s not an invalid argument, but
we have two responses to it.
First, this isn't a long-term trade
idea. In fact, it’s specifically a short-term idea. Besides, the threat
to dividends started long before either of the last three pullbacks, and
we’ve seen two rallies following sharp drops despite the continued risk
that government intervention poses. So, the question really isn’t one of
value … if the index isn't 'worth it' now, it wasn't worth it in October
or December either.
The second reason the iShares S&P
US Preferred Stock Index Fund isn't under as much duress as investors might
think is simply that many of the biggest preferred stock holdings that
make up the fund aren’t banking or financial stocks. Lots of other companies
are represented in the ETF, like Freeport-McMoran Copper & Gold (NYSE:
FCX), Metlife (NYSE: MET), and Schering Plough (NYSE: SGP). However, even
the fund's holdings in Citigroup (NYSE: C) and US Bancorp (NYSE: USB) preferreds
could be better served with help from TARP than without it. Indeed, the
worst for those stocks may already be priced in.
Additionally, as the economy's footing
becomes more encouraging, odds are good that dividend-paying equities are
going to be much more attractive during the rebuilding phase. This further
bolsters the short-term argument in favor of PFF, even if it is a longer-term
rationale. This idea could also be part of the reason the ETF has made
higher highs and higher lows since October … this is one group of stocks
investors are quick to buy on a dip.
In any case, the iShares S&P
US Preferred Stock Index Fund simply looks like a high-odds trade that
could produce some relatively easy money. We’re not shooting for the stars,
and of course we're keeping the trade on a short leash. The
chart, however, hints the market is trying to repeat the gift of gains
it's already given a couple of times over the last three months. |
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