To: All
It seems that we have found a bottom for the stock price, hopefully. We might go down a little but we will go up as well. I hope that we can get some good news to give us a lift to the next level which I hope will be in the $1.25 to 1.50 range.
In addition to what I mentioned in my earlier post, I overlooked a very important positive development for the company. The current tests being done in California can be extremely important for the following reasons. If the technology is approved in California, it will be easier for the company to convince other municipalities to try it as well. Please understand that we are dealing with elected officials who are slow to make decisions and have a fiduciary duty toward their constituents; they do not want to take chances and would not want to be criticized for not doing their homework. These contracts in some instances will have to be approved by City Councils. Therefore, if California gives us the O.K, this will be, IMO, a huge stamp of approval and will reduce the problem that we may have in certain places where officials will ask "Are we the first to use this technology from you?", "Is there anybody else currently using your products?" There cannot be a better name other than California to give us some legitimacy in the industry. I also understand from a post by Bryan on RB that some municipality in New York is also interested in testing SVSY's product.
I also concur with Bryan's point that a major issue for SVSY is financing. The company will have to give prospective clients the assurance that SVSY will be able to produce the systems in an efficient manner.
Finally, in looking at some old news stories on SVSY I came across two releases, one from Kostech and one from George Chelekis. While I know very well that these posts are very promotional in nature and contain a large amount of hype, they nonetheless contain some information that I think can spark a debate among us, especially regarding gross margin for SVSY. This can help us make some good estimates on the potential valuation that we can assign to the stock.
I hope that this can ignite a good debate regarding valuation, while we are all waiting for stock price to reach its full potential.
Go SVSY.
Happy Investing.
Krukov.
SVSY US: SVSY: George Chelekis' HOT STOCKS CONFIDENTIAL
3/5/96 17:8
96/03/05 Market News Publishing Inc. No: 000233
HOT STOCKS REVIEW ("ZHSR,BANDB")
SERVICE SYSTEMS INTERNATIONAL ("SVSY-L")
- SVSY: George Chelekis' HOT STOCKS CONFIDENTIAL
GEORGE CHELEKIS' HOT STOCKS CONFIDENTIAL
Get that Bug off my Grape 5 March 1996
EMAIL: <hotstock@gate.net> ** FAX #: 813-254-4677
RECORDED HOTLINE #: 813-251-0030
SERVICE SYSTEMS INTERNATIONAL: PART TWO.....
When one gets a whiff of what is going on with Service Systems
International (OTC BB:SVSY), one can see why I have devoted this
much time to researching and writing about this company. SVSY is
strictly an earnings play with the wildcard being: How much
revenues will they produce and how fast will SVSY produce them?
Usually, the future of a single-product marketing agent rests
upon getting a sale, any sale at all, when it comes to the size of the
sale SVSY is pursuing. At the low end, a contract would bring home
$350,000 per unit. On the high end, double digit millions (eight
figures). Already, one of the largest cities in the southwestern United
States wants what SVSY is selling. Several smaller, but sizable, US
cities have asked for the product. Before the turn of the century, I
believe that a large number of US municipalities will be treating
their sewage with the Ultra Guard system. It's a case of the better
mousetrap.
Which brings us to timing....Through some coincidence, the ides
of March bode well for SVSY. Yesterday, I discovered that the
Chilliwack sewage treatment center in British Columbia will premiere
the use of the Ultra Guard system on March 15th. Construction and
installment had been ongoing (having previously experienced some
minor delays) and the new system opens that day. On the very same
day, SVSY officials are meeting with the first of three California
municipalities who are eager to sign up and have the Ultra Guard
system installed at their sewage facilities.
Why the strong interest? (If there weren't a few important
elements behind SVSY, I myself would begin to think this story
smells.) First, SVSY didn't invent this product. They are not a
research team or high-tech breakthrough company. SVSY is simply
the marketing agent for a much larger privately financed company.
The company which invented the Ultra Guard system is based in
Germany -- an international conglomerate which spent tens of
millions developing the patented high-intensity, low heat ultraviolet
lamp, around which this system revolves. Without that special lamp,
there is no story.
The conglomerate? Braun-Boveri of Germany, whose R&D
division developed the High-Tech lamp. Through a series of freak
accidents, from which great opportunity springs, SVSY got the US
marketing rights. Another private group got its own manufacturing
facility in eastern Europe, Braun-Boveri got a healthy tax write-off
and SVSY is marketing this lamp. (Note: Another major US
manufacturer should commence manufacturing this lamp in
California during 1996, but revealing this name would cause
problems --something I have learned about mentioning big names in
this column.)
By the way, this lamp is already being used treat sewage in
New Zealand. When the Ontario-based Trojan, which also
manufactures a medium pressure, high intensity lamp, was offered
the NZ sewage facility and were given the specs for the job, they
politely ran back to London. The only product, which could meet
those standards, was Ultra Guard. There are two benefits which
appeal to sewage treatment facilities: (a) low heat and (b) the
modulating effect. Essentially, the competition has neither of these
features. By comparison, Trojan's lamp runs at 700 degrees
centigrade while Ultra Guard's generates a 60 degree centigrade
temperature. Combine this with the fact that the closest competitor
would need up to 200 lamps to do the same job as Ultra Guard's lamp
-- you instantly see the benefit!
(Note: There is also a side benefit to the Ultra Guard system. With so
much heat generated, a sewage facility would need to clean their
lamps every second or third day. Ultra Guard's lamps could be
cleaned as infrequently as every few months!)
It is the LIGHT, not the heat, which kills the bacteria and
disinfects the water. The concept of using ultraviolet light is not new.
What kills the deadly, contagious pathogens are 254 nanometers of
light (roughly more than an "arc flash" from a welder's arc), not the
heat generated. Compare 1292 degrees Fahrenheit against 140
degrees Fahrenheit. Now multiply 8-200 of the competitor's lamp
versus 1 of Ultra Guard's lamp. And that is what is creating the
demand for the Ultra Guard system.
It IS also in demand because of the constant health warnings
over CHLORINE, which is a poison and toxic. Governments want to
REDUCE pollution, not increase it. Further, they are turning away
from chlorine as a sewage solution. In Great Britain, for example, all
chlorine use in sewage treatment will be banned within 12 years.
ALL of it. The US and Canada won't be far behind.
Here's the REASON why California is so important right now.
Also why SVSY made California its top priority. California has a water
problem. California wants to use disinfected sewage water for
irrigation purposes. They need to water their plants and the food we
eat. Chlorine doesn't do the job. Present ultraviolet lamps aren't as
effective and pose too much of a "heat problem" to capture that niche
in the market. Ultra Guard is likely to be their solution. All because
we eat California fruits and vegetables! Amazing!
Three contracts have been lined up in very short order. Two in
the San Francisco Bay area (not SF), are eager to install the Ultra
Guard system. Two contracts: (a) $450,000; (b) $1.2 million. A third is
in southern California agricultural city. Contract size is $400,000.
For a company that has yet to generate any revenues, SVSY is
now staring at more than $2 million in immediate sales. Their profit
margin is 35% of the sale. Gross operating profits on the three
contracts would be $717,500. Earnings of approximately $500K or
$0.17/share.... and that would be expected within the first half of
1996.
There are nearly a dozen more leads for the rest of the year. I
can not and will not mention the major cities, but I would not rule
out that two very well-known, major US cities may be contracting for
the Ultra Guard system during 1996. Total contracts? More than $31
million dollars or approx. $10/share in sales or $3.50/share in gross
operating profits. Plug in a 10-25 PE multiplier and it is possible that
SVSY could be valued, within the next twelve months, at between
$25 and $62.50. Pretty wild and fantastic, but not completely
unrealistic. SVSY's close on Monday was $3 1/8. The public float is
outrageously small. Total number of shares are approx. 3 million,
with more than 1 million restricted. SVSY, plain and simple, is a very
tight deal.
A final note: The competition's system allows for 500-1000
pathogens per 100 ML of water. The US legal level is 200 pathogens.
California is demanding less than 100 pathogens. The New Zealand
plant, using Ultra Guard, is now operating at less than 20 pathogens.
I would say ZERO, but no one would believe me.
I plan to keep following the SVSY story as developments break.
Stay tuned.
************************************************************************
COPYRIGHT (c) 1996 by George Chelekis. ALL RIGHTS RESERVED. The
information presented in George Chelekis' Hot Stocks Confidential is
not an offer to buy or sell securities referred to herein. This is an
irregular financial gossip column, strictly for information purposes,
which should be considered neither reliable nor complete. Investors
are urged to obtain complete financial and other information directly
from the company as George Chelekis is not liable for any investment
decision made. George Chelekis is not an investment advisor, money
manager or stockbroker (past or present). Stocks featured in this
column are extremely speculative investments, laden with
considerable risk, plenty of volatility and unsuitable for all but the
most aggressive speculators who may lose all or part of their
investment. Annual Email Subscription: $195. Annual Fax
Subscription: $995.
_____________________________________
(c) Market News Publishing Inc. All rights reserved.
Tel:(604) 689-1101 Fax:(604) 689-1106
RapidFAX (tm) - To get the NEWS as it happens, call 1-800-667-1617
.
-0- (CMN) Mar/05/96 17:08
_________________________________________
KOSTECH SMALLCAP RESEARCH
5/2/97 14:44
releases bulletin on Service Systems International
Business Editors
SCOTTSDALE, Ariz.--(BUSINESS WIRE)--May 2, 1997--Kostech SmallCap
Research Friday released the following bulletin on Service Systems
International.
-0-
Service Systems International (OTC/BB:SVSY) develops, markets
and distributes advanced, environmentally friendly ultraviolet (UV)
disinfection systems for the water-purification market. These
systems, marketed under the name UltraGuard, utilize proprietary
low-pressure, high-intensity, high-efficiency ultraviolet lamps to
disinfect large volumes of water, such as sewage effluent and
industrial waste water.
Previous water-purification systems used chlorine as their main
element for disinfection. This process not only is inefficient by
comparison but also produces residual byproducts that are hazardous
to human health. Service Systems lamp technology uses ultraviolet
light to purify water, producing higher efficiency and eliminating
the need for dangerous chemicals.
Service Systems has been rapidly expanding its market in the
past few months, and recently announced the signing of its first
large sales and installation contract. This installation, when
completed, will generate $2 million in revenues and is the first of
five potential contracts. The company anticipates that additional
contracts will be received this year.
SVSY holds several patents for low-pressure, high-intensity,
high-efficiency ultraviolet lamps and related high-tech control
equipment and systems. This state-of-the-art process of water
purification is gaining rapid acceptance in the water-purification
market. Studies by the Environmental Protection Agency state that
between the year 1995 and 2006, numerous new facilities will have to
be built. In addition, existing facilities will have to be upgraded
to meet the influx of increasing populations. Many of the existing
facilities are 20 or more years old.
According to the Electric Power Research Institute, ''UV
treatment for waste water will be the most significant technology
advancement over the next several years, as many new and existing
plants shift to this cleaner and generally more cost-effective
method.'' The EPRI states that UV lamps currently process only
5 percent of waste water, and this number should increase to
25 percent in the next 10 years. As of this date, the UltraGuard is
the only successful, high-intensity, high-efficiency UV system on
the market.
The UltraGuard system requires fewer lamps than any other design
because of its advanced lamp and flow control. The high-power lamp
produces 504 watts of germicidal ultraviolet radiation from a
1500-watt input to the controller (33.6 percent efficient).
Competitive medium-pressure lamps are approximately 13.33 percent
efficient, with traditional low-intensity lamps yielding a 1.68
percent efficiency rating. Because of this increased efficiency,
the system requires 50 times fewer lamps than the conventional
low-intensity system and around four times fewer lamps than the
competitive high-intensity, medium-pressure system.
Environmental concerns and conserving energy have become
paramount in today's business arena. The advanced UltraGuard system
not only provides power savings to customers, it also achieves
additional savings due to UltraGuard's auto-cleaning system, which
substantially reduces labor costs.
SVSY is currently trading around 2-5/8.
Kostech SmallCap Research
kostech.com
702/827-8781 (phone)
702/827-9024 (fax)
-0-
NOTE: Copyright 1997 by Kostech SmallCap Research. All rights
reserved. Kostech SmallCap Research is an independent research firm
that produces research bulletins. These bulletins are derived from
many sources believed to be reliable, although no guarantees are
made as to the accuracy and completeness of the information. The
information in this bulletin is not intended to be and shall not
constitute an offer nor a solicitation to buy or sell securities.
Investors are advised to contact the company as well as their broker
or financial adviser before making any investment decision. This
company, which Kostech has previously reviewed to its paid
subscriber base, has recently retained Kostech for the purpose of
updating Kostech's free subscribers on company progress and
development.
--30--DB/la* JW/la
CONTACT: Josh Ward or Trond Matteson, 888/481-7879
svsy@123net.com
KEYWORD: ARIZONA
INDUSTRY KEYWORD: ENVIRONMENT ENMED
REPEATS: New York 212-752-9600 or 800-221-2462; Boston 617-236-4266 or
800-225-2030; SF 415-986-4422 or 800-227-0845; LA 310-820-9473
Today's News On The Net - Business Wire's full file on the Internet
with Hyperlinks to your home page.
URL: businesswire.com
-0- (BW ) May/02/97 14:29
EOS (BUS) May/02/97 14:29 86
-0- (BUS) May/02/97 14:44
|
