Buying op .. At THESE prices, and looking forward over the coming 12 months, I would have to agree..
They won't lose revenue from Agility, and looks like they may even gain some additional as the purchase order has been extended through December, 2014 until the Hexagon-Lincoln/Agility CNG tank production facility is completed on the EAST coast (QTWW is located in California)..
I would suspect it will take AT LEAST 6 months to get this up and running, with quality testing on initial production. Long Lead equipment has to be ordered, installed, tested.. tweaked. workers trained.. quality assurance and certification conducted.. It may actually require up to a year given QTWW's experience in ramping up their own production.
It's pretty obvious from their PR that they want a dedicated CNG tank production capacity, and not to be dependent upon a sole source of production, especially when QTWW has connections with a lot of different OEM players (Chevrolet, Ford, Westport, Toyota, ZHRO), all likely to be competing for a dedicated stream of CNG tanks.
But in the meantime, Agility still needs CNG tanks, unless Hexagon is producing a surplus amount that they can make available. And Agility will share in the profits of that JV, which may be something that QTWW was unwilling to do at this juncture, assuming they were offered a similar JV opportunity. So it remains to be seen just how profitable that JV is for Hexagon. Agility is obviously trying to get their "piece of the CNG tank profit action".
It also sounds to me (my gut suspicion) that Agility totally blindsided QTWW's CEO with this JV announcement, hence the apology in the form of extending the current purchase order.
I would think that Quantum's CEO is pretty p*ssed off about how this handled and creating the impression that Quantum had immediately lost their biggest revenue source.
Based upon a 2012 PR from QTWW, both Agility and Quantum are sharing intellectual property and patenting rights to the unique mounting system they developed. Presumably there will be residual income on every Agility CNG system (Quantum or Hexagon) that is installed by this method.
There may also be the scenario where Agility continues to purchase QTWW CNG fuel systems for customers on the West coast, while the Hexagon JV supplies East Coast customers.
I still believe, primarily by gut feeling, that there is a lack of sufficient CNG tank production capacity to meet demand by customers. Companies, like GM, want to sell hundreds of thousands of CNG Bi-Fuel vehicles, not just a few thousands. They require the economies of scale to make serious money in this market. Insufficient CNG tank production is holding them back from making a serious commitment. I suggest this is the same for OTHER vehicle manufacturers.
On the other hand, we now have a Fortune 500 company with over 30,000 vehicles (Ryder) getting seriously interested in the CNG market. They will be able to offer their customers vehicle rentals that cost far less to operate, and that's an important consideration when it comes to customer's choices over which rental vehicle company they deal with. Ryder apparently has a current edge over Penske with regard to how many CNG vehicles they are currently making available. I suspect they want to increase that edge.
Someone on Yahoo message boards posted a VERY astute analysis of what Ryder's business could mean to QTWW. Estimating that it requires 3.5 tanks per vehicle, if Ryder were to upgrade just 1/3 of their vehicles to CNG, it would lock up ALL of QTWW's current production capacity. All of it!!
finance.yahoo.com
Does this sound like a bad thing? Does this sound like a company that is going out of business merely because Agility wants a dedicated supply of CNG tanks and 50% of the profit from that tank production?
I think QTWW is in an incredible position. I'll be surprised to see less than the 30% growth for this quarter..
What I'm not quite sure of is just how much of their tank production is being sold to WPRT? Why do I ask that? Because of the Kevin Douglas connection. I believe he also wanted to insure that he could protect his investment in WPRT (he's the largest shareholder there as well) by making sure they had access to sufficient CNG tanks. WPRT offers LNG solutions (and I'm not sure if they make their own LNG tanks), but they also need to offer CNG for their customers.
This is why I believe Kevin Douglas became Quantum's largest shareholder.. I think he's the "tie in" between QTWW and WPRT. It's a symbiotic relationship.
HOWEVER, QTWW also MAY have even greater value if they can make ZHRO's Diesel to CNG conversion process work. That is a HUGE untapped market out there for converting EXISTING Diesel engines to use CNG. I'm still somewhat cautious about that.. Just say "I'm from Missouri.. so Show me"..
But if QTWW can make it work.. you are looking at the greatest player in CNG out there and it's extremely undervalued..
I've watched this company (with a lot of disappointment due to prior management incompetence) for many years. I've understood the potential in CNG.. I always questioned why previous management didn't focus more on CNG fuel systems. Maybe the timing was just not right.. But it certainly is NOW!!
I think it's far greater than any other tech they've been involved with (Fisker Karma.. Hydrogen.. etc)..
Only time will tell..
Hawk |
