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Like I said in a blog entry from
April
3rd, of all the small cap tickers I'm following, I believe
China Energy Recovery Inc. (CGYV) still boasts the most attractive risk-versus-reward
ratio. Today's news validates my stance.
In short, tack on another $1.8 million
in revenue for 2009. The company was awarded a contract to build a waste
heat boiler system for a major fertilizer company, per this morning's announcement.
Just for perspective, that's about 7% of 2008's total sales, and
it's a little icing on April's cake - China Energy Recovery had already
reported they'd won a $1.4 million contract earlier in the month.
This news may be just the shot in
the arm CGYV needs to finally make the breakout effort we've been
teased with since November; we'll look at a chart below after a quick discussion
of the press release.
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CGYV:
The Ball is Rolling Again |
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Here's the news in a nutshell...
China's
stimulus package is already getting traction, augmenting the clean-energy
mandates put into place by the state government a couple of years ago.
We've seen a long trail of major contracts being awarded to China Energy
Recovery, and they're becoming more frequent. Check out this list:
-
 09/30/08
- $3.2 million boiler finished for Two Lions Chemical
-
11/06/08 - $11.6 million build-contract
signed
-
01/06/09 - $3.3 million project completed
for repeat customer
-
01/27/09 - Sopo Chemical group to acquire
boiler system for $8.9 million
-
04/07/09 - Hubei Yangfeng Group purchases
$1.4 million waste heat system
-
04/22/09 - $1.8 million contract
won from Dongsheng Chemical.
The last one is the one we heard
about today - a $1.8 million deal with Dongsheng Chemical, Co., which is
one of China's leading fertilizer manufacturers. It's encouraging to be
sure, but what I find compelling isn't the deal itself, but rather
the apparent renewal of the growth trend put into motion late last year
and very early this year.
If you'll recall, though there was
a build-up of economic worry through the fourth quarter of last year, January
was the month it (including confidence) all came unraveled. The
brakes were applied in all facets of spending, and the mentality
lingered for a few weeks. Now, however, the rails are being greased
again, and China's stimulus is taking hold there as much as the
U.S. stimulus is starting to work here. That's my long way of saying
I expect the pace of new contracts to pick up again - soon.
There's something else the
press release mentioned I want to focus on for a moment though... something
I don't recall if I've discussed before.
China Energy Recovery wasn't just
given the Dongsheng contract out of thin air. There's a bidding process
the company must go through to win many of these contracts. And, clearly
they've been winning a great deal of them. I only bring it up to demonstrate
how China Energy is well-positioned to remain competitive in the niche.
See, being awarded a contract when
you're the only game in town is nice, but risky - what happens if someone
else sets up shop right next door? All of a sudden, sales don't come
as easily. Well, China Energy already has competition they're bidding against,
so that particular risk is already addressed. It just so happens that the
company is growing its market share even with competition.
It's a subtle but important ingredient
to the success recipe, and one of the reasons why a maintain that CGYV
offers the best risk/reward ratio of all the ideas I'm carrying right now.
Anyway, about this breakout business...
 There
are a couple of lines in the sand we could call resistance levels for CGYV,
but I think it's become pretty clear over the last few days how the
$2.00 mark is the big one. We watched the stock peak at $1.99 in late
March, at $2.00 late last week, and with only a few exceptions,
the stock has found a ceiling around that level since November of last
year. Almost needless to say, getting past this line with one good
shove is likely to be the key to finally being rewarded based on the stock's
actual value.
I still don't know when the market
is finally going to fall in love with the stock in a big enough way to
make the breakout materialize, but my sixth sense is telling me something
is brewing. How so? Two reasons.
The first one is, the bears
have had more than ample opportunity to push this thing lower. It's
not often stocks drift sideways this long; owners tend to lose patience
fairly quickly, especially when other stocks are imploding. Not so with
CGYV - the buyers aren't yielding.
The second reason is, we're
seeing strong closes (like yesterday), strong accumulation (buying volume),
and a continued attack on the $2.00 scrimmage line. It's a cliche, but
it's true... persistence breaks resistance.
The good news for the current
owners is that the longer the consolidation phase (sideways movement) lasts,
the
stronger and faster the breakout is apt to be once it finally materializes.
The bad news for non-owners right now is that a breakout
effort could happen so rapidly, the stock could jump from $2.00 to possibly
$3.00 or more in the blink of an eye.
I'm not going to belabor the point
again - I'll just summarize my prior feelings that based on the company's
growth track and outlook, the
stock could be worth something in the neighborhood of $6.80. You've
read the same numbers an institution or fund manager is eventually going
to read. The stock is simply undervalued at less than $2.00, and the market's
not going to let it linger there for very long.
Either you're going to be along for
the ride, or you're not.
Here's the press release.
| Press Release Source:
China Energy Recovery, Inc.
China Energy Recovery
Confirms a $1.8 million New Waste Heat Energy Recovery System Contract
from Fertilizer Leader, Dongsheng Chemical
- Winning two large
contracts within a month demonstrates positive impact of China's stimulus
package on Company's energy efficiency business - Multi-million dollar
energy costs will be potentially saved annually.
SHANGHAI, April 22 /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, today announced it has secured a new contract
to design and manufacture a set of waste heat energy recovery system for
Dongsheng Chemical, a large, privately-held chemical fertilizer company
in Hubei Province in central China. The value of the contract totals RMB12
million (approximately US$1.76 million based on the exchange rate as of
the date of this press release). This makes it the second contract concluded
within a one-month period for China Energy Recovery--the other being with
the Yangfeng Group of RMB 9.73 million (approximately US$1.42 million)
in contract value announced on April 7, 2009.
"Winning two large contracts
within a one-month period has definitely demonstrated the positive impacts
that China's recent stimulus package and the focus on clean energy solutions
are having on our business," commented Mr. Qinghuan Wu, Chairman and CEO
of China Energy Recovery. "Winning these two large customer contracts through
open bidding demonstrates the recognition of our market leadership position
in the waste heat energy recovery field. Though there are still challenges
as the result of economic downturns in China and globally, viewing these
new contracts on an annual basis, it is anticipated the year of 2009 will
continue to grow and we expect that growth will be carried well into 2010
and beyond."
The above-mentioned waste
heat energy recovery system is designed to generate 120 tons of steam per
hour. This is equivalent to nearly 24MW of heat energy generation capacity
and will enable Dongsheng Chemical to reduce the cost of purchasing steam
from outside sources needed to support the facility operations. This project
is estimated to achieve an annual saving of roughly 52,000 tons of coal
(coal equivalent), which would otherwise be required to produce the same
amount of power, and consequently the reduction of roughly 138,000 tons
of carbon dioxide emission from the burning of that coal each year.
The contract numbers
presented above are the total contract values, which include a 17% value
added tax and the retainage amounts for product warranty purpose, which
are 5% or 10% of the total contract values and will be recognized as deferred
revenues. 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, CER's ability to execute on its business plan and strategies
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 Securities
and Exchange Commission, including CER's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 30, 2009.
For more information,
please contact:
Media
Sean Mahoney
Tel: +1-310-867-0670
Email: seamah@gmail.com
Investor Relations
Jim Blackman
Tel: +1-713-256-0369
Email: jim@prfmonline.com
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