rdx.v -- Here is a recent writeup by Keith Schaefer, Oil & Gas Investments Bulletin, compliments of m8magic on Stockhouse:
Before my 4 day meditation seminar in Carefree Arizona (I couldn't make that up) I had dinner with CEO Dennis Danzik..that was last Sunday...and toured an empty plant on President’s Day—everybody was enjoying the day off except Dennis! It’s impossible to sit down with Dennis and not get excited about the growth story unfolding right now, and for what this company could look like 3 years from now. The way I look at this story right now is this: 1. Technology is completed and commercialized. There is no issue here. 2. Positive cash flow has been achieved, thanks to the Carthage facility and some RINs. I expect Carthage is about 80% of revenue right now, maybe more (RDX isn’t breaking out much operational data yet). While I don’t see any liquidity issues (phew!), growth costs money and the pace of growth has to be measured against liquidity. So this story is now about execution. How many (small to medium sized) refineries can they buy (which is like Carthage), and how many “blue-dot” franchises can they sign up and get going. I think that’s a good spot to be in. They don’t need the Market. They report their next quarterly this coming Tuesday. While I’m not expecting any big surprises here—positive or negative—I hope they will be able to update the Market on how they are growing the franchise model. They have a very aggressive growth plan—you read in the news release how they want to get at least 10 new blue-dot franchises per quarter as a minimum, and have 300 in place within 3 years—the end of 2016. I toured the empty plant (full of machinery and parts and equipment but no people due to the holiday) and they are gearing up to be able to build one of their blue-dot facilities in just 6 days. RDX has the five facilities already announced as a backlog, and they are hoping to start shipping them by mid-May, and be able to keep on rolling out any new orders they get. He did intimate quite strongly there is a bigger backlog but didn’t want to get into specifics in advance of the quarterly, and I respect that. There was actually a lot of things he couldn’t tell me, in the fair interests of disclosure, but it’s always good to meet management to get a better handle of who they are and how they operate. Dennis welcomed me into his home for 15 minutes before driving me to the RDX plant in north Scottsdale, Arizona. He is an eclectic CEO—not your standard boardroom guy, so investors have to understand that—he is the inventor of the technology. He sometimes wears cowboy boots and jeans around his Phoenix business, and he owns TWO Batmobiles—the one from the 1989 movie with Michael Keaton as Batman, and Jack Nicholson as Joker, and one from the 1967 TV series. He has the Shakespeare head bust from the 1967 series too (I think that opened the library books to the bat-cave). He has a great temperament and is quick to smile. I could never see Dennis doing something for a living that didn’t help society. He has a social conscience, but unlike most people, he doesn’t expect anyone else to pay for that! His business at RDX requires no subsidies, and he has disdain for others in his business and others that need it. You should be coming to the Toronto Subscriber Investment Summit onSaturday March 1 just to meet him. RDX and PEIX have the most potential of any stock in my portfolio right now. Email nichola@oilandgas-investments.com right now for your seat. BUT…there are some details to work out. They have to file all kinds of papers to offer franchises in various states. They don’t have any of the blue-dots installed yet. May is an important month at RDX, as they expect to make initial delivery of the first of the five blue-dots—which aren’t franchises per se, think of them more as customers. They’re like corporate stores. And of course nothing happens on time or without bumps. I’ve got my position—a big position—at higher prices and while I’m not buying any more stock just yet, I’m not a seller and I’m getting more excited. But I’m not buying any more stock just yet. It looks like SFS—Santa Fe Springs in southeast LA—will be a smaller blue-dot facility as opposed to a larger refinery site like Carthage. I think the Street is looking at SFS as being a larger revenue number than it will realistically end up being. And with the blue-dots, permitting can be an issue. Right now Dennis says plants should get permitted and installed in 60 days—but as yet there is no track record, and because the business is just starting, I’m willing to give them some leeway on that. Like I said, this story is now about execution. Can’t wait to see how they do. May is an important month (not do-or-die important, just to meet their milestones). For me it will also be interesting to see how much money can flow down to the bottom line. On page 15 of their latest MD&A (the Management Discussion and Analysis in the quarterly financial statement) they show a 25% gross profit margin and a 4% net margin (income). I asked Dennis how much that would improve by economies of scale and how much it would improve via different mix of business—remember, they are trying to reduce the straight water treatment customers and increase the # of customers who bring effluent to them that they can extract fuel from. He just smiled and said wait for the next quarterly. There’s another interesting opportunity for RDX, and there is a HUGE, no, COLOSSAL amount of low hanging fruit in it—treating SWDs, or SaltWater Disposal wells. For decades, the industry has put down gunk in these SWDs. They are regulated and water does have to be cleaned to a degree. But RDX technology should be able to draw up that water, clean it better than ever before at low cost, extract more energy components from it and sell it. That’s just what Secure Energy (SES-TSX; SECYF-PINK--and one of my favourite companies right now!) does, but RDX technology should be able to do a better job getting more hydrocarbons with their technology. Attitudes towards SWDs are changing in parts of the North American energy sector. I’m hearing stories of some SWDs being plugged up with gunk much earlier than expected. Now, don’t go thinking putting all this stuff down SWDs is bad. These SWDs are drilled down into deep underground water caverns where the water is already filthy briny salty sewer-water. These aren’t pristine ground water sources. But there are hundreds (thousands?) of them all over the continent and could be a ridiculously good opportunity for RDX. Dennis added that he will be giving annual guidance for the 2015 fiscal year—which goes from April 1 2014 – March 31 2015.
Read more at stockhouse.com
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I think the fact that Dennis owns 2 batmobiles would go under the category of "too much information". Lemmee see if I got this straight -- a significant amount of my stock portfolio is in a stock where the CEO owns 2 batmobiles? As Bcbob says, Holy Batfeathers! |
