₪ David Pescod's Late Edition December 12, 2007
TSO3 INC. (T-TOS) $2.68 n/c
ARISE TECHNOLOGIES (V-APV) $2.08 +0.16
We’ve whined more than a few times about being in the resource
sector in the main and how come with gold at $800 and oil
at $90, we’re not having a lot of fun. In fact we’ve seen many of
the natural resource stocks get clobbered 50% and uranium
stocks have been absolutely pummeled at this time.
That’s one of the reasons we’ve been looking around for other
sectors to be recognizing and as you notice the chart on TSO3,
this is one of the reasons we are following closely Canaccord’s
prize-winning analyst, Sara Elford. Yesterday, TSO3 announced
yet another sale of their ozone sterilizer and Elford writes, “This
sale represents TSO3’s 24th firm sale overall and its fourth sale
so far in Q4/07. To achieve the low end of the 15-25 target range
for Q4/07 requires another 11 sales by the end of the year (21
would be required to achieve the high end). Either way, we expect
investors to see firm confirmation of accelerating sales momentum
in the relatively short term. It is also worth reiterating that
TSO3’s business model (a high margin, proprietary system sale,
plus a healthy annuity stream over the life of the system from
consumables and service) is expected to generate high free cash
flow as sales and the installed base builds.”
She then writes, “We are maintaining our Speculative Buy rating
and C$5.50 target price.” But then she gets into math and if
you like math, read this. “We value TSO3 based on our DCF
model. Our forecast generates an intrinsic value of C$4.70-5.60
(using 2007 as the base year) at a discount rate range of 18-20%
and using a terminal growth rate of 3%. We have been waiting for
firm confirmation of strong sales momentum before we start edging
our discount rate lower (and our target price higher).”
All this is interesting, but as we note, this is the end of another
sales quarter and it’s the end of the year for many hospitals that
would need this product and the next two or three weeks are going
to be very, very, very important for sales. They are either
there...or they are not. Meanwhile, it’s been nice to see a stock
(anywhere) heading up and getting close to new highs.
We note another one of her favorite stories—Arise Technologies
also one of the top picks of Andy Gustajtis is going the way of
many resource-based or alternative-type stocks these days as
Arise is now flirting around $2.00 a share, down from a previous
high of $3.30.
When their plant in Germany is up and running, and if they can
produce their solar products anywhere near what people have
hopes for (with many other products on the way) we have high
hopes that this will have a much higher stock price. Sara’s target
on Arise is $3.75. If you would like a look at her report, just e-mail
Debbie at Debbie_lewis@canaccord.com.
CORRIDOR RESOURCES (T-CDH) $9.25 -0.73
Today we get an update on Corridor and you’ll notice
the first thing is that it’s one of those natural gas stocks
that has gone up compared to the 95-99% that have gone
down. Today they announce that their growth production
is at about 32 million cubic feet a day, which is a bit disappointing
as many of us had expected 40 million or better.
They announced that their field production from their
currently 15 connected wells will continue to decline until
the newly fractured wells are added to the gathering system
in January or February. Once connected, this should
move production up to the 37-42 million cubic foot range,
but they suggest that if the plan workover does work, then
it could be much higher than that. The catch is that the
gas plant capacity is only 45mmcf.
When we ask Andy Gustajtis his thought on this, which
is a little bit of a disappointment, he writes, “The press
release fails to give solid positive news, but if you understand
what they have experienced in the past, there is
every reason to expect MUCH HIGHER RATES with time.
Weakness is a buying opportunity.” Needless to say we
hope he’s right.
Meanwhile, for us, the big step of course is their deep
Dawson Settlement play. Is it there? If it is, Corridor is
multiples of current levels—we should know yay or nay by
February/March.
DELPHI ENERGY (T-DEE) $1.74 +0.07
Yesterday we talked about the bet between Josef Schachter and
ourselves about what might be one of the better junior oil and
stories out there. Today we get some comments from Josef and
some of them we probably deserve because when we won one of
our bets the last time, let’s just say we weren’t very humble about
it.
Today he e-mails us, how come we didn’t go over the last few
bets (the names and the returns…) well, I guess the answer there
is self explanatory. He also writes, “Also you might want to let
them in on the winner’s prize item and your learning experience
about non-boxed wines.” I think that’s a shot, don’t you?
Anyway, he comments on our stock pick of Bankers Petroleum
(he didn’t know what our pick was going to be at the time that we
interviewed him) and tells us that he also thinks Bankers is an
interesting pick. He writes, “I also hope Abby does his magic
again but not as good as a recovery in gas prices will do for Delphi.”
Today we notice that Delphi is up...obviously an accident,
right? |
