AIRG gets noticed again:
investor-list - analystgroup.com
******Undervalued Dog*********, Vol.4, No. 152, August 16, 1999
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analystgroup.com initiates coverage of AIRTECH INTL GRP (OTC BB:AIRG) ,
Inc. with a "Strong Buy" Recommendation
OTC BB: AIRG
Recent Price; $0.34375
Outstanding Shares: 9.37 million
Public Float: 4 million
Market cap: $3.22 million
Projected Revenue: $8.7 million
Projected EPS: $0.09
Book Value: $2.14 per share
Recommendation: Strong Buy
Short-Term Target Price: $2-$3
Contact Person: C.J.Comu, CEO
Tel: 972-960-9400
IR Person: Demonte,
Tel: 212-473-3700
E-mail: cdemonte@demonte.com
Company's Business Background:
AIRG (http://www.airtechgroup.com, airsopure.com, and
airsopure.net) has two principal operating divisions:
Airtech, the foundation of the company, manufactures, distributes, sells
and installs a broad line of air purification products, under its
Airsopure brand.
Airsopure, whose primary sales strategy is franchising. Currently the
company has franchisees in 14 states plus internationally, generating
sales and educating the market about the health hazards of contaminated
air. An aggressive franchise marketing campaign is underway to select new
Airsopure distributors in states not currently covered by existing
franchisees. The company anticipates signing six new franchisees by late
August, plus numerous international sites. The technology behind the
company's product line features a three-stage filtration system that is
completely self-contained and designed to work separately from the HVAC
system. The synergistic effect of a pleated pre-filter, an odor
controlling tri-sorbent filter and a hospital grade HEPA filter allows
AIRG's products to capture up to 99.97% of all smoke, viruses, bacteria
and hazardous gases found in all sealed buildings.
The power of an air purifier is measured in Cubic Feet per Minute, or CFM.
It reflects the amount of air that the purifier is able to move through
its 3-layer filter and is translated into the number of times that the air
in a room is "refreshed". The latter is the most important consideration
for the buyer, and a difference in rating is easily noticeable. Industry
statistics report that the minimum requirement indoors is 8 air changes
per hour; in a car it is 3 air changes per hour. The Airtech product line
exceeds all industry requirements of total air changes.
The Market
Few social and environmental concerns facing us are greater than our
concern with the quality of the air we breathe. In addition to the
industrial pollution that is affecting the outdoors, our homes, buildings,
institutions and public venues are increasingly re- circulating unclean
air. There has been extensive media coverage of the sick building
syndrome, and it is fair to say that, to some degree, every home and
indoor public gathering place in the country is a sick building. The list
of particles that are present indoors and harm even healthy individuals is
encyclopedic: mold spores, dust mites, bacteria, dust, ash, insect parts,
tobacco smoke, pollen, animal dander, exhaust fumes, fabric particles,
cleaning solution vapors etc. In addition, the ever-growing population
migrating to the warmer climate of our Sunbelt states (primarily
California, Texas, Arizona and Florida, the 4 fastest-growing states in
the nation) leads to the retention of cooled - but contaminated - air in
the sealed buildings we spend an ever-increasing part of our lives in.
Eventually the US could face another catastrophe like the Legionnaires
Disease outbreak in Philadelphia in the late 70's, which caused numerous
fatalities. The present danger of contracting a respiratory disease from
contaminated indoor air and leading to cancer is very much a reality.
An early proponent of purified air was the legendary inventor, movie mogul
and empire builder Howard Hughes, known as much as for his earlier
accomplishments as for his phobia against germs in his waning years in Las
Vegas. One of the most famous vehicles to come from the Hughes estate is a
1954 Chrysler New Yorker Sedan that is now part of the Imperial Palace's
classic car collection. This car, with a base price of $1,975, had its
windows permanently sealed at Hughes' orders and was outfitted with a
custom-built air purifier that took up the whole trunk, raising the price
of the vehicle to $3,433, nearly double its original cost. The man was
ahead of his time in more ways than one.
Today, the need for cleaning the air that is in our buildings has never
been greater. In addition to air being unclean from the list of man-made
and airborne pollutants, tobacco smoke is present in nearly every common
area, and the battle between smokers and non-smokers - in offices,
restaurants and hotel rooms - has never been more polarized. Lately, the
pressure has gone beyond just social pressure, to the extent that our
health costs are rising as a result of unclean air, liability lawsuits
related to the issue are rising as well. The signs of breathing unclean
air in an office building airplane or car are known to everyone: itchy
eyes, runny nose and sneezing.
A famous 60 Minutes broadcast in 1998 about the Environmental Protection
Agency's own "sick building" headquarters was an important wake-up call
for the whole country. There is no looking back. Of the 3 options
available to us – (1) re-circulation, (2) ventilation and (3) constant
purification - only the last one is a real, lasting solution.
Public companies that compete with Airtech in the air purification segment
include: Honeywell (HON), Trion (TRON), Flanders (FLDR), and Ceco (CECE).
Of these, HON is a huge conglomerate selling at a PE ratio of 23, TRON is
unprofitable, FLDR is selling at 16 times earnings and CECE, while selling
at a PE of 84, is really in the filter business, not air purifiers.
Therefore, a comparative financial analysis would not be meaningful.
Private companies in the group include Smokeeter, Alpine Air, Austin Air,
Micro Air and Clean Air Systems. There is very little financial
information available about these companies.
The difference between Airtech and the others is the depth of AIRG's
product line and its aggressive method of international product
distribution. IAQ (Indoor Air Quality) is a new and virgin market. Due to
the lack of interest by many of the old-line manufacturers of HVAC
(Heating Ventilation and Air Conditioning), such as Lennox and Carrier,
all of which have huge revenue bases, the market lacks aggressive IAQ
companies such as Airtech.
Summary
IAQ (Indoor Air Quality) is a new and virgin market and there isn't more
of a "pure play" in the air purification industry than Dallas-based
Airtech International Group, Inc., (OTCBB: AIRG - Bid 34c, Asked 44c). The
5 year-old company (public for only a year) has taken the lead in offering
purification solutions for every kind and size of indoor environment
(including cars), under its brand name Airsopure. The filters sold by the
company are able to rapidly turn any smoking room into a non-smoking
environment. Having received the endorsement of an ever-increasing list of
associations and companies that make clean indoor air their business and
with an aggressive, pro-active sales effort, Airtech has become a force to
be reckoned with.
With AIRG poised to report its first profits in the current calendar year,
we recommend aggressive accumulation of AIRG at current levels. The
company has approximately10 million shares outstanding. With the stock
trading at $0.34 and our earnings estimate for the current year (ending in
May 2000) of $0.09, this is a highly undervalued play in a very
fast-moving industry. Our short-term target for calendar '99 is $2.00 to
$3.00 and our target over the 18-month horizon is $10.00, based on EPS of
$0.36 for the fiscal year ending in May 2001.
AIRG's stock sold off in the first half of 1999 from the 80c level, after
the disappointment of its refinancing effort late last year. After trading
below $0.20 in October, at the lows, the company's story began to come out
and the stock rallied to $0.65 before settling back to the middle of the
recent range, at the $0.40 level, right at its 50-day moving average. A
rally from this level should take the stock past its recent high of $0.80.
The marketplace is going to recognize the importance of Airtech's
technology and market opportunity. With the stock is selling at only 3.8
times the current fiscal year's earnings and 16% of its book value, we
think this is a compelling investment vehicle in the environmental field.
Further, we believe the stock will soar after the release some awaiting
HUGE contracts and mind boggling contracts. Hence the stock is rated
strong buy with a short-term target price at $2 to $3.
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