SW, found this info on PRCC on Raging Bull, it provides a pretty good overview of the stock and its potential.
UNDISCOVERED JULY 1999
GROWTH STOCKS
Pollution Research and Control Corp. (Nasdaq:PRCC $2.00)
BUY
12 Month Target Price $6.00
Company Description
The Company's main focus is the
design, manufacture and marketing
of equipment to measure and monitor
various types of air pollution.
Making Progress
 Pollution Research and Control Corp. (The Company, PRCC) successfully negotiated a $5.2 million contract with China's State Environmental Protection Administration (SEPA) beating out much larger competitors including a $1 billion Japanese corporation. The contract represents Phase I of China's strategic plan to turn its polluting economy “green”.
 PRCC delivered a shipment totaling $2,000,000 to Beijing on June 29 formally initiating Phase I, which includes 11 cities.
 The Company has signed a Letter of Intent for Phase II encompassing at least another 25 cities.
 Management is currently negotiating for the China manufacturing facilities necessary for competing in Phase III, which involves more than 100 additional cities. SEPA's ultimate goal is a nationwide air-monitoring network of 680 cities.
 The Company's advanced technology also has commercial potential in the medical industry for asthma diagnosis as evidenced by their partnership resulting in sales of this proprietary instrument to more than 50 leading research hospitals and institutions. .
Investment Rationale
We are initiating coverage of Pollution Research and Control Corp. now (July 1999) with the conclusion that the Company is significantly undervalued relative to its peers and commercial potential. PRCC should have a very strong news flow over the next 12 months, as we expect a number of key contracts relating to China's SEPA to be initiated and several corporate milestones to be achieved. The Company continues to be undervalued and SEPA's “greening” of China's polluting economy should drive PRCC to a substantially higher market valuation than its current $7.6 million market cap.
Exhibit 1
Corporate Data
Recent Price $2.00 Public Float 2.8 M
52 Week Range $0.375 - $2.375 Shares Outstanding 3.8 M
Daily Trading Volume 11,500 Long Term Debt $0.00
Introduction
The Company's core business for over twenty years has been primarily the design, manufacture and marketing of automated continuous monitoring instruments used to detect and measure various types of air pollution, such as “acid rain”, “ozone depletion” and “smog episodes”, through its wholly-owned subsidiary Desabi Environmental Corporation. Their products are generally used to measure air pollution levels in geographic areas ranging in size from small industrial sites to entire states or countries. PRCC also supplies computer-controlled calibration systems that verify the accuracy of its instruments, data loggers to collect and manage pollutant information and final reporting software for remote centralized applications.
In January 1998, the Company began a reorganization process designed to focus on its “core business” only with the result that any diversification plans designed to mitigate competitive price pressures were shelved. PRCC's management believed that it could secure substantial long-term contracts in The People's Republic of China sufficient to allow expansion of the Company's business independent of competitive price pressures.
In June 1998, the Company signed a $5.1 million contract with China to supply equipment and software to monitor pollution in eleven cities. The contract has been financed by the U.S. Export-Import bank and shipment of the equipment to initiate the contract took place on June 29, 1999. When the network installation is completed the Chinese EPA will be able, for the first time, to monitor and forecast air pollution levels.
The next phase of the project (Phase II for which PRCC has already signed a $10,000,000 Letter of Intent) will encompass 25 other cities puts the Company on substantially firmer ground for negotiations for Phase III of the project encompassing initial installation in another 300 cities. Having already successfully completed the process necessary for loan approval from the Export-Import Bank of the United States the loan approval for Phase II and additional phases should be finalized expeditiously.
The Air Pollution Industry
Air pollution consists of certain gases or particles, generally the products of combustion or other industrial processes, which may or may not be hazardous to human health including carbon monoxide, ozone, sulfur and nitrogen oxides, hydrogen sulfide and particles. Small amounts of these pollutants , such as a few parts per million or parts per billion, may be harmful. The instruments manufactured and marketed by The Company detect and measure these pollutants and are also utilized in calibrating other pollution measurement equipment.
In order to comply with governmental regulations industry is required to have certain equipment that enables them to monitor and measure the presence of pollutants. Further, governmental agencies, charged with enforcing standards regarding pollution, also need the correct equipment to fulfill their charter. Currently, international priority focuses on the control and monitoring of gaseous pollutants such as sulfur dioxide, oxides of nitrogen, carbon monoxide, ozone and particulates (suspended dust).
Although manual sampling of both gases and particulates is still performed routinely, improvements in the reliability and accuracy of automated, continuous monitoring equipment, such as that manufactured and sold by the Company, have made manual sampling less desirable and automated monitoring increasingly popular.
As a practical matter, before a monitoring instrument can be sold in the United States, it must receive EPA approval as either a “reference” or “equivalent” method. The testing and approval process generally spans 12 to 18 months, after which the EPA typically acquires and tests a production model of the device. If the model does not meet the standards established by the approval process, the approval may be withdrawn.
Legislation requiring more precise air pollution monitoring and enforcement is increasing as the sophistication of the technology improves and as concern for the environment, particularly the depletion of the ozone layer, becomes more acute. The Clean Air Act and the Clean Air Act Amendments of 1990 require increased control of industrial air pollution and represent an increasing threat of shut-down for U.S. industrial companies failing to obtain necessary permits and engaging in other conduct violate of legislation. Increased control requires increased management and monitoring of air pollutants, by both government and industry, it follows that the market for such devices will continue to grow in the foreseeable future.
The Instrument Market
The air pollution monitoring market consists of two segments: (1) source instrumentation for monitoring the source's pollutant emissions, and (2) instrumentation for monitoring ambient air pollution. The two markets differ in that source instrumentation is generally not subject to rigid governmental guidelines (because of the difficult analyses involved), while ambient air instruments are subject to rigid governmental guidelines because the pollutants are easier to identify and quantify.
Generally, the Company sells its products for use in systems for the measurement of ambient air pollution. In a system, air pollution monitoring instruments are united with additional equipment to provide a comprehensive monitoring unit. In an ambient air instrumentation system, the monitoring instrument is combined with a manifold intake, a calibrator and data transmitters. The system samples the ambient air, measures the pollutants and transmits the data. PRCC designs and manufactures all instruments employed in a system including the data tabulation and transmission devices.
The air pollution control market makes only minimal use of measurement instrumentation. This market is concerned with “purification” of exhaust gases emanating from combustion-related or chemical-only processes. “Purification” consists of using various types of equipment, which may or may not involve catalysts and/or reagents to cause reactions and/or mechanical removal of a high percentage of selected air pollutants. The highest percentage obtainable will relate to the technology involved and the economics of implementing the technology. The market is old, in effect dating back to the installation of soot collectors on combustion chambers. However, the market size is embryonic since technology has not materially advanced and implementation remains costly so as to prohibit any generally accepted control of pollutants. The Company holds patents for a “flue gas purification system”, but the commercial viability of such a system is as yet undetermined.
The Products
 Ultraviolet Ozone Monitors
 Microprocessor-Controlled Monitors
 Calibration Equipment
 Sub-Micronic Particulate Monitor
 Data Logger
 Micro-Processor Controlled Analyzers
 Proprietary Reporting and Predictive Software
Conclusion and Valuation
To value a company like Pollution Research and Control Corp. we can't utilize a comparable model, looking at a number of companies working on similar technology. There is simply not an adequate sample of companies available. Likewise, using a DCF model and revenue forecasts would require a large number of assumptions that would dilute results. Therefore, we feel it necessary and appropriate to base our recommendation on what the Company has already accomplished as a result of their focus on the China market. The strong foothold that management has established in China (a relationship that began 18 years ago) that led directly to the $5.2 million contract for Phase I of SEPA's long-term strategic plan and the “leg up” on Phase II do not guarantee that the Company will benefit from further business. Realize that there are political and diplomatic risks for any foreign entity currently doing business in China, and that any “gaffe” (such as the accidental bombing of China's embassy in Bosnia) can lead to an overnight change of fortunes.
However, it is important to emphasize that as small as PRCC is, they did beat out much larger competitors for the China business and have definitely established a solid beachhead in the largest air pollution monitoring and control market in the world. Although the competition is better capitalized, PRCC competes on the basis of technical advances, its reputation as a provider of quality products and services and its close friendship with the Chinese. Barring any event resulting in severe damage to U.S./China relations, we believe the Company is very well positioned to do significant business in the Chinese pollution control market for years to come.
Over the next 12 months we expect the Company to obtain additional contracts with China's SEPA and to have established a manufacturing facility on the mainland through a major joint venture agreement. Management has built into their bids the ability to provide the software capabilities necessary for local EPA enforcement agencies in China to determine the potential pollution effects of new construction and the ability for cities in the network to communicate and share data with each other.
All this strengthens the already substantial ties between China's SEPA and PRCC. The use of the Company's proprietary software in the early stages of the “greening” of their economy is addictive and solidifies future bids.
We continue to feel that PRCC is undervalued relative to its peers and commercial potential. The Company is in the enviable position of being able to do business in China without competitive price pressures evident in other markets such as the U.S. PRCC is not confined to China as they have, and will continue to, do business around the world. Indeed, they have sold their instruments and systems to more than 300 customers in over 30 countries in the past five years. We would expect increasing publicity surrounding the ambitious China plan to result in more foreign governmental contracts.
Revenues should fall in the $8,000,000 range for 1999 Vs 1998' $2,800,000 with EPS in the area of $0.10. Once Wall Street becomes aware of the Company, we feel that it will be valued substantially higher than current market cap. A P/E of 50 would not be unreasonable given top line and bottom line growth forecasts based on the “China connection”.
We are comfortable with our $6.00 price target for the next 12 months.
Disclaimer
WallStreetJudge is published by Capital Access Bureau Inc. The information herien was obtained from reliable sources and is believed to be accurate. The Publisher is not responsible for any inaccuracies. This publication should not be construed as an offer to sell or a solicitation to buy any security. The holdings of the Publisher and its employees may, from time to time, include the securities mentioned in this report.
CABI does not act and has not acted in any financial advisory capacity for Pollution Research and Control Corporation.
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