From another thread: Detailing FOCS
AN ANALYSIS OF FIBERCHEM
This is a company that I believe bears a great deal of watching over the next two months for both short and long range investment opportunities. The near term opportunities concentrate on developments within the regulated environmental protection areas, while long range
opportunities include developing projects for commercial application as well as the environmental areas.
1. ENVIRONMENTAL AREAS
The state of Florida has provided FOCS with an opportunity for tremendous income during FY99. In the summer of 1998, the Florida legislature passed into law more stringent requirements than current Federal EPA laws mandate. For most fuel tanks , the most economical
means for meeting these requirements is the installation of leak detection devices.Thus far, the only leak detection device approved for use by the Florida Dept. Of Environmental Protection is made by
FOCS. The following companies have ordered the FOCS detectors for installation: GATX, Shell Oil, Reedy Creek Electric,Florida Power, Jacksonville Electric and
Texaco. This installation is made through Whessoe Varec,a company with which
FOCS has a strategic alliance to be the OEM supplier. For each tank that has
FOCS detectors installed, the company grosses approximately $10,000. The total
market for the
state is estimated to be well over $300,000,000. GATX for example, has 107 bulk
storage tanks in Florida. So, it is anticipated that this one order would total over a
million dollars. The State of Florida has
already ordered portable leak detectors from FOCS which totaled over $450,000.
Since all fuel storage tanks have to be in compliance by December 22,1999, and
the state environmental agencies has stated
that no extensions for compliance would be granted, it should be anticipated that an
increasing streamof orders throughout 1999 will make this an extremely profitable
year for Fiberchem. It is my
estimatethat FOCS will make over $20,000,000 during calendar year '99 just in the
State of Florida.Additionally, the states of New Jersey, Pennsylvania, Minnesota and
Wisconsin have promulgated similar legislation with later compliance dates. I have
no estimate for the size of the markets in these states, but feel they will provide an
ongoing stream of 'income for FOCS over the next 2-4 year period.
Additional requirements have been mandated in the state of California, where the
Department of Defense has had to bring its bulk fuel storage tanks in compliance
with state requirements. FOCS leak detectors have been ordered and installed on
30 tanks thus far. FOCS grosses about $12,000 on each of these installations
which are done by Whessoe Coggins (sister company to Whessoe Varec
specializing in military applications). The total of DOD tanks in California is 160, or a
total market of $1,920,000. It cannot be assured that FOCS products will be
installed on all DOD tanks, but in light of the military tendency to standardize, I
consider the likelihood for such to be highly favorable. Additionally, it is estimated
that there are in excess of 5000 DOD tanks in the continental US for a total market
of $60,000,000. While there can be no assurance that FOCS will have a significant
market penetration into this area, I again believe the tendency for standardization
will generate an opportunity.
The FOCS detectors are also easily interfaced with the FAS computer system used
by DOD at its bulk fuel storage facilities. Of a longer term environmental
opportunity, is the current agreement with Gilbarco. Gilbarco is the world's largest
manufacturer of fueling equipment. Over 80% of all fuel nozzles used at service
station
pumps are made either by Gilbarco or companies manufacturing under license from
Gilbarco.Recent legislation in California has resulted in the requirement for refueling
equipment compliant with the onboard vapor refueling recovery measures. 60% of
all vehicles sold in California in 1999 have to be compliant with these measures,
phased in to 100"/o of vehicles over a three year period. The vapor recovery is
dependent on sensors installed in the vehicle and on the fuel pump that operate to
recover fuel vapors normally discharged into the atmosphere. Estimates are that
over 60% of service stations
nationwide will be in ozone non attainment areas and this will generate a total
market in excess of $500,000,000. The duration of this market and the opportunity
for FOCS is at this time hard to
estimate, however, I firmly believe it will generate well better than $100,000,000 over
the next 5-1 0 year period.Field tests by Gilbarco of FOCS sensors were
undertaken this past year and results were
extremely satisfactory. Another long term income opportunity for Fiberchem lies in
the offshore oil platforms in the Gulf of Mexico. Currently one of the techniques
used to force oil out of wells that have lost pressure is to pump water into the well.
As the oil and water come up, they must be separated, and the discharge water
checked to make sure it does not contain pollutants from the crude oil. The normal
method for checking this discharge water relies on an infrared detector and R12
refrigerant. R12 production has been banned and as existing supplies dwindle, an
opportunity is created for subsequent
technology to enter the market. The total market in the Gulf of Mexico is about
$335,000,000. FOCS sensors have been field tested by all major oil companies
operating in the area. To date, AMOCO, PENNZOIL,
andSPIRIT 76 (UNOCAL) have all ordered FOCS detectors for their affected
platforms. CHEVRON,EXXON, MARATHON, and SHELL are currently evaluating the
FOCS sensors. The total market for offshore platforms in the rest of the world is
approximately the same as the Gulf of Mexico. FOCS is currently pursuing market
opportunities in these areas with some success. There are many other
environmental projects with which FOCS is involved, such as with Bechtel(Nevada),
and with Osmonics, for those I refer you to the annual report as the market
opportunity for FOCS is still vague. (sec.yahoo.com/e/990113/focs.html )
II. NON ENVIRONMENTAL AREAS
A non environmental opportunity has recently arisen when FOCS entered into an
agreement with Bosch (biz.yahoo.com/bw/990202/nv_fiberch_1.html ). While
specific details of the agreementare not set forth, Bosch will be producing certain of
FOCS products under license. Since FOCS has been developing a fiber optic
sensor for fuel/air mixture, and Bosch is one of the worlds leading producers of fuel
injection systems, I think I can justifiably speculate on what FOCS product Bosch is
primarily interested in. However, FOCS also make an ignition interlock device to
prevent a car
from cranking if the sensor detects alcohol. Whatever the FOCS device to be made
by Bosch, the announcement makes clear that it has immediate commercial
applications. |
