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US Energy Lands
$55 Million Contract; Get Ready To Blast Off |
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It's a bit of a Rodney Dangerfield
story. US Energy- the company who's stock price can't get no respect
despite all their achievements has really knocked the cover off the ball
with this one. Let's take a moment to review.
US Energy has developed a
dual fuel system for diesel engines- a hybrid product. You take a diesel
engine, put the US Energy system on it, and it burns a combination
of natural gas and diesel instead of just diesel. The net result is massive
fuel savings and less pollution with no corresponding loss of power- seems
like an idea who's time has come.
There's a two markets for the systems:
The retrofit market where the system is installed for use with an existing
diesel engine, and the OEM market, where the system is installed on a newly
manufactured engine direct from the factory.
The company has sold a number of
systems in the US, but has spent this year focusing its sales efforts in
the Far East where diesel fuel is very expensive, hard to get, and in demand
due to the major infrastructure build out going on over there.
The company has delivered some very
significant milestones:
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At the end of May their Thailand based
distributor committed to the purchase of 1500 systems (about $5.2 million)
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In July, their European Distributor
committed to the purchase of 1000 systems (about $3 million)
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In early June, the venerable General
Motors agreed to build their systems into pickup trucks being manufactured
in the Far East.
Seems to me the company has received
some pretty good validation of their technology, and sales will grow very
rapidly on a quarter to quarter basis from here forward.
If you think this is good, buckle
your seat belt for today's news. If you have any doubts about whether this
company has great technology that has significant commercial potential,
forget about it. Get ready for blast off.
USEI efforts in the Far East
have paid off huge. The news I am going to share has not been released
by the company at this time. However, I am quite sure it will be before
the market opens on Monday morning.
The news is public information. It
was released at 11:00 AM Friday morning in Thailand. The OTC Journal
dug it up for you. You have the competitive information advantage. It was
released by GreenGas NGV Asia, USEI's Thailand based distributor.
According to the release, PS Natural
Gas, a Thailand company, has secured the contract to convert 10,000 buses
to natural gas hybrids over the next 5 years. The systems will come from
USEI.
According to the headline, the contract
is valued at a whopping $55 Million.
Just so there's no confusion- understand-
this is $55 million in revenues for USEI.It
equates to $5500 per systems, which should give the company excellent gross
margins.
Does it get any better than that
in a microcap situation?
Now, let's look at what it could
mean for the stock. The potential for price appreciation is our goal. As
you can see from the chart, this stock has been pretty much a mess since
making its high at the end of May. A few volume surges have carried the
stock higher, only to be sabotaged by excessive supplies.
There are 130 million shares I&O,
which is a substantial amount of stock. Furthermore, the company has engaged
in capital raises all along the way to get them to this point.
I am informed recent supplies have
been registered by investors going back 2 to 3 years- all owned in the
$.05 to $.10 range. No wonder the stock has struggled.
The plus side is the market valuation.
At $.18, the market is saying the company is worth $23 million.
This year alone, they have now inked contracts now in excess of $70
million over the next few years. Wow!!!!!!!!
The next couple of trading days could
go a long way towards eating through the excess supplies and getting this
stock closer to trading at and maintaining much higher levels.
Here's the problem: You probably
won't be able to buy it for $.19 on Monday. With news like this,
the stock will probably gap up and move higher.
It seems to me if you paid in the
$.22 to $.25 range for the stock you still have plenty of upside.
My SSL for the summer doldrums on this one was $.27. The stock might just
take off from there, or it might want to back and fill a little. I'll try
to post a BLOG with some thoughts, but I have to leave early for
the day on Monday. I will try to post something in the early going.
The way this company is moving along,
I can visualize major changes next year. Possibly a reverse split and a
NASDAQ listing. Who knows. Despite being over 5 years, a $55 million
contract for a company that delivered $800k in revenues last quarter
is quite an achievement. So, where to from here? Clearly this news brings
$.50 into the crosshairs, and $1 is not beyond the realm of possibilities
if the momentum continues. This big could definitely bring in a whole new
audience. Make them buy your stock from you at a higher level.
Here is the news which was released
at 11:00 AM Thailand time Friday:
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GREENGAS NGV (ASIA) LTD CONTRACTS
WITH PS NATURAL GAS CO LTD FOR THE EXCLUSIVE LICENSING OF USEI (Hybrid
Fuel Systems) FOR THE CONVERSION OF 10,000 BUSES OVER FIVE YEARS
Total licence valued at $55,000,000 in fees,
royalties and product sales.
GreenGas NGV (Asia) Co., Ltd and
PS Natural Gas Co. Ltd two of the leading companies in the rapidly growing
NGV market in Thailand have signed an exclusive licence for the conversion
of 10,000 buses over the next 5 years. GreenGas is the exclusive distributor
for the technology to be exclusively applied to the conversion. This patented
technology is an American system owned by United States Energy Initiatives
Inc (USEI – www.usei.com). The system, the “Hybrid Dual-Fuel Diesel Injection
system” ("HFS"), will have a majority local Thai content and is to be exported
to other markets as well as meeting the domestic demand for Thailand. The
system can also be used on trucks and lorries. As HFS technology is an
accredited tier one supplier to General Motors Thailand for their pickup
range, the bus market will benefit from both new vehicle conversions as
well as retrofits in the secondhand market. The licence applies to the
whole bus industry and includes: shuttle, minibus, and school buses as
well as larger, double-decker, single-decker and long distance VIP buses.
Under the licence PSGAS will exclusively
use “the HFS System” for all bus conversions in the territory. There are
90,000 buses in Thailand, all of which are potential users of alternative
fuels technology and the HFS system. Contracted volumes for the 5 year
term are 10,000 units. A minimum of 500 buses will be converted in the
first full-year of operation.
Total contracted systems sales for
USEI & GreenGas NGV for the 10,000 unit sold over 5 years will be valued
at US$54,000,000).
Under the terms of the Agreement,
PSGAS will pay to GGNGV a front-end fee and a royalty for each bus converted.
Mr. Robin Hughes, CEO of GreenGas
NGV Ltd said "deploying our technology into the bus sector makes great
economic sense for the bus operators who have been struggling to cope with
the increasing costs of diesel fuel and to PS GAS in its role as the leading
progressive company in the NGV bus sector. A key factor in our achieving
acceptance of the technology is that we guarantee the performance and driving
characteristics of the original engine. Our conversion does not in any
way interfere with the diesel engine. The impact on the environment will
benefit all Thai citizens who have long-suffered the dangers and health
risks of black exhaust smoke emissions. Front-end fees and royalties will
be worth 210,000,000 baht and two billion baht (2,000,000,000) in conversion
kit sales.
About GreenGas NGV (Asia) Ltd: GreenGas
NGV (GGNGV) has been in the NGV industry in Thailand since 2001. Its’ key
activities provide economic operating cost reduction solutions to fleet
operators and large corporate users of industrial fuels. A focus on environmental
improvement and “cleaner for a healthier future” is fundamental to the
marketing of technologies that achieve these solutions. In representing
HFS systems, GGNGV is able to provide to the market a proven technology
with accredited performance and tier one OEM supplier status. Innovative
financial solutions are a key attraction to its clients, whose operating
margins have been hit by the rapid rise in diesel prices in the past two
years
About US Energy Initiatives Corporation
and GreenGas NGV (Asia) Limited: GreenGas is the exclusive sub-licensee
for US Energy in Thailand. US Energy established in 1996, is an ISO-9001
certified manufacturer commercialising its patented dual-fuel diesel to
natural gas conversion technology to the automotive aftermarket and through
certain original equipment manufacturers (OEM’S). The Company's primary
facility is a state-of-the-art systems development and emission testing
lab in Atlanta, Georgia. The Company's current clients include General
Motors, United Parcel Service; US Postal Service; and many private purchasers.
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