To OTC Journal Members: 
 

A Recycled Plastics Bridge To Big Profits in 2010

I couldn't' let 2009 end without one last idea which looks really interesting for 2010. A number of followers have emailed me about this idea, and when I saw a short video clip on the company, I was hooked. 

This is a really interesting company- here's what intrigues me- Imagine a business model where you manufacture very heavy duty construction materials for giant projects, but have virtually no raw material costs.

Such a company exists, and they are getting lots of media attention and accolades from folks who plan to use their materials.

Here's the story- the technology was developed by scientists out of Rutgers University. They figured out how to melt down discarded plastic and turn it into all kids of constructions materials. The stuff can be used to replace anything made with traditional building materials such as wood, steel or concrete.

It's known as "ThermoPlastic Composites", and the material is proving out in testing done at Ft Bragg, the largest Army base in the US. This is going to be a really easy presentation, as all you have to do is watch a few videos, and you will get it.

The stuff is made out of discarded plastics- things like milk containers, plastic grocery bags, vinyl carriers of canned beverages- all of it can be recycled into these heavy duty construction materials.

Axion Holdings (AXIH) developed the manufacturing techniques with scientists from Rutgers, and the company has gotten a lot of media ink. If you visit their corporate home page found at http://www.axionintl.com/investors.html, you will find coverage on their technology from CNN, Business Week, and a number of YouTube videos.

This past year AXIH achieved two major milestones in proving out the technology. First, the company received a contract from the US Army to replace three of the existing of wooden bridges with their new Thermoplastic stuff.

This bridge made from AXIH material came from discarded milk cartons. The material proved to be far superior in many ways to the wooden bridge it replaced. The Army estimates the bridge will last 50 years with minimal maintenance vs about 15 years for the wooden versions Ft Bragg has employed for the last couple of centuries.

Furthermore, a 70-ton M-1 Abrams tank, too heavy for many bridges, repeatedly crossed a bridge made of AXIH's 100% recycled plastic. The wooden version of the bridge could not have supported the weight. It was only rated to 4.3 tons.

However, there's no need to take my word for it. Watch the video of the Bridge Dedication Ceremony found at the following URL on YouTube:

http://www.youtube.com/watch?v=0hE-ymdio44

The army commissioned three of these Bridges, but there's about $40 million in business available just replacing bridges at Ft Bragg. It is estimated the Army spends about $22.5 billion annually for corrosion replacement maintenance. AXIH's stuff is maintenance free. 

The Army is not the only customer or industry taking notice. America's aging railroads are in need of a face lift as well- the culprit- 40 year old disintegrating rail road ties made of wood.

AXIH offers the idea solution, and early this year received a pilot program contract from an unnamed, but major US railroad. The pilot project is being managed and tested by the The Transportation Technology Center, Inc- a subsidiary of the US Association of Rail Roads. 

There are over 200,000 formulations installed, and to date they have accumulated over 1500 million gross tons of traffic- no failures reported. The opportunity to be the "preferred" material used to replace the millions of rotting rail road ties across the US is absolutely breath taking. 

As has been widely documented in the media, the Obama Administration plans to spend hundreds of millions of dollars on infrastructure improvement and green theme programs.

Here's a home run- rail road ties infrastructure replacement with recycled plastics that work better and last longer. It's the holy grail of the 2010 stimulus package.
 

Some References

There's been a lot of media attention paid to this company. If you take a few minutes to review some of the video content, you'll understand why this stock has done pretty well in 2009, and could continue its path up the charts in 2010.

Here's links to some of the 411 on the company:

CNN Coverage: http://money.cnn.com/video/news/2009/12/01/n_ef_axion_plastic.cnnmoney/

Bridge Dedication at Ft. Bragg: http://www.youtube.com/watch?v=0hE-ymdio44

Business Week Article and Interview: Click Here

Channel 12 New Jersey Segment: http://www.youtube.com/watch?v=wQA_uFkrC2U

Watch some of this video content, and I believe you'll agree this could be one of the most interesting companies of 2010 if they start landing some big contracts.
 

Conclusion

If you're looking for a fundamentally sound idea, you aren't going to find it here. The company generated about $1 million in revenues through their first FY 9 months of '09- which was through June. We haven't seen September numbers yet because they haven't reached the drop dead filing date for their Annual 10k audited report, which is due out in the next two weeks. 

The best that can be said about the balance sheet for this relatively small company is they have almost no long term debt, and their current assets and current liabilities are within $500k of each other. It's insignificant, and the June numbers are very stale.

If you choose to own this stock, you're betting on the short and long term potential of the technology which is patented. You're betting on catalytic announcements and media coverage which will send speculators pouring into the stock.

Technically, the stock looks poised to shoot for higher levels on the next big volume surge. As you can see from the chart, the stock rolled from $1 up to about $3.25 during the month of September.

Since the latter half of the back to school month, the stock has been consolidating. That's 3 full months of consolidation during which the stock has traded sideways to down on lighter volumes. When you see a pattern like this in a speculative company with a great story, you know this sideways trading will eventually be resolved with a big move in either direction.

If the Army implements a program to replace disintegrating bridges that can't hold tanks, it could equate to $40 million in revenues at Ft. Bragg alone. 

If the Obama Administration decides the rail road infrastructure needs a "green" infrastructure make over, AXIH could be a recipient of some rather large contracts.

When the volume comes in, the stock is positioned to move up. In the meantime, I don't see a lot of short term downside, as the stock has had plenty of time to absorb year end tax selling and position squaring.

I love the idea this company makes a product that competes with steel, lumber, and cement. However, the raw materials to make their Thermoplastic Composites cost little beyond the shipping. Image a steel company with no cost of goods? This company makes steel out of discarded milk cartons. If the orders come, there won't be any shortage of cheap raw materials to fill them.

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