Somebody thinks this stock is a BUY
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To OTC Journal Members:
Energy Power Systems (OTC BB: EYPSF) Releases Audited Year End Financial Results- Roller Coaster Ride Continues
As we anticipated in our weekend edition, Energy Power Systems hit our target price on Monday, and then continued higher to challenge the $6 level on Tuesday, trading to a high of $5.99.
Volume in this stock has been far beyond our expectations. Price appreciation has kept pace with corporate developments. The stock has risen to higher levels along with the company announcing new drilling and exploration programs.
The prolific volume in this stock has attracted the attention of institutional short sellers, and yesterday at about 2:00 PM Eastern Time, short sellers launched a cyber smear campaign on the company, and initiated one of the most flawlessly executed bear raids on a stock we have ever seen. Congratulations to the short sellers, it was impressive to watch.
There was a news release on Energy Power yesterday at about 2:00 announcing an obscure web site had published a report bashing the stock with rumor and innuendo, but no facts. Within seconds of the release the stock started dropping like a rock. Short sellers savagely attacked the stock, providing the appearance that the market was taking this smear campaign seriously. This is a psychological game that these people have mastered.
The press release was published illegally, and the wire services have since removed it. Later in the day, Energy Power released its 2001 year end audited financial results (end of June).
As measured from the end of June 2000 to the end of June 2001, Energy Power's revenues grew from $18.9 million(cdn) to $19.2 million(cdn), in line with expectations. However, EBITDA profits surged from a loss of $.2 million (cdn) to a gain of $.3 million (cdn).
The company also took $1.5 million (cdn) in non-cash write downs of assets, thereby giving the appearance the company lost money. In fact, the company earned about $.5 (cdn) million in positive cash flow for the year. The turn around was attributed to the first revenues from the newly formed Oil and Gas Division, which began operations on February 1st 2001.
September quarterly numbers are expected to be released later this week, and we are anticipating further evidence of improving cash flows.
What To Do From Here
Now that the 2001 audit has been released the company will continue to pursue its application for listing on the American Stock Exchange. If successful, we believe the stock will trade in a more orderly fashion.
The stock has a history of trading up in exciting high volume spikes as depicted in the chart. Tuesday's high volume run to $5.99 was the fifth surge of this kind since February, and we fully expect this pattern to continue. Each surge has taken the stock to a new high.
We believe this pull back represents an outstanding buying opportunity compliments of the short sellers. For members who don't own the stock, or took capital off the table early in the week, this is a welcome and unexpected chance to get back on this speeding train.
The June financial results were a snapshot of past performance, but stocks generally trade on perceptions of the future. Energy Power is currently drilling on new sites in Ontario and Alberta. New contracts for the Engineering and Offshore Division could materialize out of the multi billion dollar White Rose project.
We expect financial performance to improve much more dramatically in the first half of calendar 2002 as cash flow impact from drilling programs and existing producing wells is reflected in the Income Statement. A major discovery is always possible, and represents the dramatic upside in owning the stock. In the meantime, the consistent cash flow from the 30 year old Engineering and Offshore Division provides financial stability and minimizes your downside risk.
We also expect the Cyber Smear campaign to continue. It is estimated the public float on Energy Power is about 4 million shares. With the stock trading over 1.5 million shares everyday, the entire float is changing hands every two or three days, which is impossible. Short Sellers were extremely aggressive yesterday, and therefore have a strong vested interest in driving the price down to frighten you into selling them your shares at much lower levels. However, some day they will have to buy these shares back, which could drive the price higher.
If the cyber smear campaign concerns you, sell the stock and get out. You don't have the stomach for the dirty tricks in this end of the market, and this is not for you.
However, if you look at support levels for the stock as depicted in our chart, the stock is now a buy, and should be sold on high volume surges to the upside.
This story continues to get more interesting all the time. The price is like the weather in Montana, if you don't like it, wait a day. It's going to change.
Here is the complete text of the news release for your review:
Tuesday November 13, 8:34 pm Eastern Time
Press Release
SOURCE: Energy Power Systems Limited
Energy Power Systems Limited - Announcement
TORONTO--(BUSINESS WIRE)--Nov. 13, 2001--Energy Power Systems Limited (OTCBB: EYPSF - news; www.epsx.com; ``Energy Power'' or the ``Company'') announces that it has issued audited consolidated financial statements for the year ended June 30, 2001. These statements reflect the following activities of Energy Power and it's subsidiaries operating as an Engineering & Offshore Division and an Oil & Gas Division:
consolidated revenues of $19.2 million for the year ended June 30, 2001 ($18.9 million -2000);
consolidated gross profits of $2.5 million for the year ended June 30, 2001 ($3.8 - 2000);
consolidated EBITDA of $0.2 million for the year ended June 30, 2001 ($0.3 million negative EBITDA -2000);
consolidated loss from continuing operations of $1 million for the year ended June 30, 2001. Profit from continuing operations would have been $0.5 million before a non-cash charge of $1.5 million. ($1.4 million - 2000);
and consolidated basic and fully diluted loss per share from continuing operations of $0.23 ($0.46 per share - 2000).
Energy Power's consolidated revenues of $19.2 million for the year ending June 30, 2001 increased by 1% from $18.9 million reported during the same period the previous year. Increased activity from the Company's Engineering and Offshore Division and new sources of revenue from the Company's Oil and Gas Division, which commenced February 1, 2001, contributed to this revenue growth.
Consolidated EBITDA of $0.2 million for the twelve-month period ending June 30, 2001 was substantially higher against a consolidated EBITDA loss of $0.3 million reported for the previous twelve month period, a swing of $0.5 million. The consolidated EBITDA increase was largely due to the benefits of a corporate restructuring initiated at the end of fiscal 2000 as well as the additional cash flow from the introduction of the Oil and Gas Division. ``It was our corporate objective at the end of last year to turn the Company cash flow positive this fiscal year,'' stated Scott Hargreaves CFO, ``to achieve this we eliminated two non-core subsidiaries and created the Oil & Gas Division. We are most pleased with the positive trending improvement in cash flow as EBITDA increased $0.5 million for the twelve month period ending June 30, 2001.''
Consolidated loss from continuing operations for the twelve month period ending June 30, 2001 was $1.0 million, 29% less than the loss from continuing operations reported for the previous twelve month period. Profit from continuing operations would have been $0.5 million before a non-cash charge of $1.5 million.
The Engineering and Offshore Division is currently working on a backlog of contracts to carry over the next fiscal year and beyond. Further development of Atlantic Canada's offshore infrastructure could feed further growth for the Engineering and Offshore Division. In addition the Oil and Gas Division is adding positive cash flow to fund corporate operations and future development and growth strategies. At present the Company is expanding its exploration, drilling and development program to increase oil & gas reserves and production.
About Energy Power Systems Limited
Energy Power is an integrated energy source and service company operating as an Oil & Gas Division and an Engineering and Offshore Division.
The Company had approximately 7.3 million shares of common stock issued and outstanding at the week ending November 10, 2001.
For further information contact:
Scott T. Hargreaves, CA, CFA
Chief Financial Officer
Telephone: (416) 861-1484
Certain of the statements contained in this news release are forward-looking statements. While these statements reflect the Corporation's current beliefs, they are subject to uncertainties and risks that could cause actual results to differ materially. These factors include, but are not limited to, the demand for the Corporation's products and services, economic and competitive conditions, access to debt or equity capital on favorable terms, and other risks detailed in the Corporation's Form 20-F and Annual Report.
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Contact:
Energy Power Systems Limited
Scott T. Hargreaves, CA, CFA, 416/861-1484
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