June 7th 2002 Pick - EAR (CDNX)
geocities.com
" Earth Canada (EAR) on CDNX
June 15th Upddate:
Thank you for all the emails from everyone. One important to remember is don't invest in a stock's history but in its future. Remember call the company, its partners and customers to perform your due diligence.
*Announcement of vertical oil water seperation at Global Petro. Show June 13th (Globe & Mail) June 7th, 2002 Spotlight:
EARTH CANADA CORP.
ENVIRONMENTAL APPLIED RESEARCH TECHNOLOGY
TOTAL SCORE: 46/50 (Grade = A)
EAR CDNX, now TSX Venture (CHART)
Price: $0.25
Market Cap: $10 Million (Cad).
CEO: Mr. Akkawi
Head Office: 1210 St. Antoine East, Montreal, QC. Canada, H2L 2R1
Phone: +1 (514) 522-5550 Fax: +1 (514) 522-2643
Sector: Oil & Gas
Background Information:
Various Sources:
earthcanada.com
sedar.com
newswire.ca
slb.com (Schlumberger)
* Earth Corp. owns the worldwide intellectual property rights to a reusable petroleum absorbent called RPA, the only one of its kind in the world.
* Invented in 2000, a revolutionary oil water separation system called Total Oil Removal and Remediation System (TORR), EARTH owns 100% of the rights.
* TORR is the only system in the world able to treat produced water AND recovers the oil. Therefore, avoiding disposal costs.
* Technology verified by 2 governmental agencies and US government's Department of Interior
* Over US$40 Billion spent annually on produced water by 40 oil companies worldwide.
* Major Alliances with Schlumberger, $50 billion company in NY, Oiltools & Expro, both listed companies on the London Stock Exchange.
* Agreements in place for Alliances members to sell and manufacture technology
* Revenues grew from $60,000 in 2001 to $500,000 for 9 months ended March 31st for 2002
* The real growth lies in the Petroleum market, even though on their website they have many different markets they are able to penetrate with their technology.
* Company in the commercialization stage.
ANALYSIS
Look for out of favor or downtrodden stocks (10)
EAR is currently out of favor as the trading patterns suggest many shareholders are retail.
"Herd mentality" has led to EAR to tread lower on low volume over the last 60 days.
Low appetite for CDNX stocks due to "perception" of high risk.
Company revenue is likely to be perceived as not high enough
SCORE: 10
Promise of good cash flow in the next 12 months (10)
Company made NR to outlining actions to achieve revenue and market potential May 30th 2002. Highlights include:
biz.yahoo.com
ruf.rice.edu
* 41,000,000,000 barrels of produced water annually
* Cost per produced water according to Rice University:
* "Minimal pretreatment range from $0.63 to $3.15" not including oil removal
EAR can treat the same amount for a fraction of the cost at $0.05 per barrel.
* Profit per barrel
* Current Treatment Cost $0.63- EAR Cost $0.05 = $0.58 in Savings
* Cashflow
* Capacity 500,000 bbl/day X 365 days = 182,500,000 bbl treated /year
* 182,500,000 X $0.58 = $105 Million
* EAR must share with partners and their clients 75% of revenue, and 25% comes back to Company in form of royalties
* 25% ($105 Million) = $26 Million
Due to low operational risk involved because their strategic partners are building the systems and $1 Million in financing already in place for
ongoing operations. The prospects are bright.
SCORE: 10
Upside potential for revenue surprises (10)
Oil, like gold for HRG is always in demand. The clients of EAR are oil companies. When was the last time your heard an oil company go out of
business? Never or at least not for the last 20 years. Therefore if the product catches on, there could be significant upside because EAR has 3
major companies selling for them and not doing it themselves.
* Greater rate of adoption
* 3 Major companies with many employees and networks to sell TORR
However, due to the newness of the technology, upside is limited to projections as it takes time to install and run TORR
SCORE: 6
Unique product or strong demand for product or BOTH (10)
The oil water separation system is very unique.
* 3 major companies, which are competitors, signed up for the same license
* Technology is of definite value to them, scared of losing out
It is intuitive to say these companies must value the technology and even went as far to list EAR as a news release on their corporate website.
slb.com
Note this is the first time I have seen a $40 Billion company list a licensing agreement with a micro-cap company on the CDNX.
There are many technology barriers to entry to produce an imitation technology, not to mention the commercial barriers also. EAR has BOTH
and unlikely a competitor to come any time soon.
SCORE: 10
Market Psychology (10)
* Herd mentality over the last 2 months have made this an attractive entry point
* Technology easy to understand
* Many practical applications make it substantiate benefits
* Any reverse movement will easily shift momentum to positive
This is a stock with broad market appeal. Like HRG, EAR will reap a disproportionate amount of attention when it is notice by more people.
With both an environmental slant and economic benefits of its technology, great upside potential.
SCORE: 10
Total Score & My personal take
EAR is one of those stocks people like to buy because it is a "feel good" stock. At the same time it has the potential economically to revolutionize the field or create a niche in the billion-dollar oil water separation market.
On market sentiment alone it can double within 30 days. This is a technology play because their UPSIDE IS UNLIMITED. Using normal ratios and not valuing the technology and its upside can be a big mistake. With all this said, the stock can easily be $0.75 per share or more in the near term.
Note for this company, PATENTS are taken at NBV, not market value. Their absorbent and oil water seperation technology value is considerably greater than this number.
TOTAL SCORE: 46/50 " |
