Gary:
Fwiw, some fundamental thoughts to complement your TA:
Summary of recent bullish events
They have now evolved (with a lot of pain - for management and long-suffering shareholders) 'cookie cutter' engineered plants for 400tpd and 600tpd 3rd generation TMPs. They have engaged a project management firm, Stothert Engineering, to manage the construction of their TMPs. This gives the lender confidence, (very important), that the plant will be built on schedule, within budget, to TT's quality standards.
They have worked out the process kinks in Hamilton and have validated that the financial returns exceed their financial model. The M.M.Dillon report has provided an independent validation for purposes of financing.
By FYE 1998, the Richmond 600 tpd TMP is to be the 'proof of the pudding.' It is to serve as a bellwether for international plants.
No project is started without a bankable feasibility study. This ensures that non-recourse debt will be secured for a minimum of 75% of the capital cost (although 80% is quite realistic and fairly standard) - that debt will become available against the guarantees related to the put-or-pay and take-or-pay contracts. The market appears to be huge. It is driven in part by government environmental imperatives. The market (i.e. sources of financing) is starting to chase after them - they are even able to arrange some projects (Oshawa and Niagara) at 100% non-recourse debt financing (non-recourse project financing is not easy to get, but 100% financing for this type of project is rare).
They project to have 5 -7 plants operating for a total of ~3000 tpd by fiscal year end (April 30, 1999), with seven to ten more to be under construction. [This may be conservative - the deal with US Filter could accelerate this. The potential is definitely for more].
They are not including any foreign successes in their projections, nor are they including any projections of royalty fees from the two spin-off companies and the tipping fee used in the M.M. Dillon model is towards the bottom of the range, i.e. $40 Cdn, whereas word is that they can get ~$90/ton US for the Staten Island plant. The order of magnitude 1998/9 FYE annual exit revenue stream from this (assuming plant capacity of 90%) is :
0.90 x 3000 tons/day x 365 days/year = 985,500 tons per year throughput
times
[ ($40/ton tipping fee + ($140/6)/ton product sales) = ~$63/ton
yields
~$62 million. More if we use a higher average tipping fee.
Further, investors will soon get a dividend for every 10 shares of TT that they own of 3 shares of Thermo Agri-Products and 1 share of Thermo Enzymes Inc. This is at present an intangible.
The >50% annual growth projections and attendant minimum share dilution projected from here on out by the Hudson Sloan report (at their website) seems doable, but after seeing the # fd shares at ~60M from the 6-K, I would increase the share dilution forecast by a further ~5M.
This is a small company that has struggled against heavy odds and now appears to be on the cusp of success.
The story is starting to get interesting. |
