Installations September 7, 2010 PSW Staff |
specializes in on site power generation, energy management and energy efficiency products and services. The company has seen some very substantial revenue growth over the past year or so, but has yet to turn a profit. This is primarily due to inorganic growth by acquiring several smaller businesses. At least one of their new entities based in New Jersey, however, has seen some real promise. When acquired, the business had open orders of around $3 million in New York, Connecticut and New Jersey. The business was merged into their core subsidiary called Titan Energy Solutions. Originally called Steller energy when it was bought back in 2006, TES saw some increases in revenues and customers as it expanded throughout the Midwest. Without the new northeast corridor business added late last year, sales increased by around $1/2 million in each of this years first two quarters compared to last years first two quarters. When we add in New York and the companies other acquisitions in 2009, revenues jump from just over $3.5 million, to $7 million in the first half of this year. The New York contributions totaled $350,000 in the first quarter of 2010, and $900,000 in the second quarter, an increase of over 250%. The other new contributor added in 2009, giving them some exposure in Florida, brought in $740,000 in the first quarter, $823,900 in the second, an increase of only 11.5%, but still not bad. What is particularly interesting about the New York based operations is that they have been involved in managing several major solar installations. The company recently announced that they have achieved positive cash flow during the most recent quarter, but it was a mere few thousand dollars. If revenues continue to grow, however, this company could easily turn earnings positive. Their major impediment to this achievement so far has been costs from the acquisitions, as well as the recent termination of an older business that was failing, and was also being sued. The company settled and the whole ordeal cost them around $1 million. What looks good for the company going forward, however, is some decent gross margins, and some improvements to efficiency on the corporate front. If they continue to see these cost reductions, and if they can carry over to the sales and marketing area, both of which are big if's, net income could rise quickly over the next year or two assuming revenues continue to grow at least in the 10% range and gross margins stay where they are or improve further. What makes this gamble enticing is the low share count in the 20 million range, and stock price around 50 cents. The balance sheet is interesting, not good, but interesting. The stock is selling at a whopping 8 times book value. They do have a significant amount of cash on hand, however, of about $670,000. Total debt, composed almost entirely of short term liabilities minus accounts payable, is at around $1.5 million. They have no long term debt, and also have a refreshingly small amount of preferred, convertible and other restricted shares keeping their dilution potential low, at least for now. Additional acquisitions could play a major role in the future fully diluted share count however, keep in mind that they have an extremely large 1.8 billion common shares authorized, as well as 10 million preferred shares available. The Tri-state area solar and electrical generator installations have clearly been the driving force behind this company's recent success. One factor that played a major role this summer believe it or not, was the weather. Record heat waves in the northeast added to the thirst for this company's electricity demand reduction solutions. The company believes that an aging electricity infrastructure will also drive future growth. Some risks and things to look for improvement in from TEWI include their short term debt load, future dilution potential, and the pace of any new acquisitions relative to overall revenue growth. The company's relatively small size and amount of competition in the industry adds a significant amount of risk as well. What could sure up some of these concerns would be organic growth by customer and revenue expansion into their existing markets, and the northeast division may be starting to provide that in a meaningful way. |
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