Hornblower & Weeks, Inc. Initiates Coverage of Eagle Building Technologies, Inc. (EGBT) With A Buy
7/19/2001 10:34:00 AM
NEW YORK, Jul 19, 2001 /PRNewswire via COMTEX/ -- The following is being issued by Hornblower and Weeks, Inc, a member of the National Association of Securities Dealers, CRD number 4683:
Market Price $7.00 Common Shares Outstanding (000) 4,174 Market Capitalization (000) $29,218 52 Week Range: $1.50 - $7.90
Eagle Building Technologies, Inc. (EGBT) is in the business of the manufacture, distribution and application of technologically advanced building products through a series of licensing agreements with Integrated Masonry Systems International, Inc.(IMSI) of which Eagle owns 38%. Eagle markets its system abroad through well known local partners and manufactures the IMSI products using local materials. The Company has the exclusive right to market these products in China, India, Europe and Mexico. The license agreements provide the Company with the right to market and use the IMSI patented technology and trademarks. The Company is currently negotiating with IMSI for exclusive licenses in Spanish speaking South America and Brazil.
INTERNATIONAL HOUSING MARKET OVERVIEW
The international housing market is driven by two central demands; structures must be both cost effective and structurally sound. Yet, the lack of structurally sound, low cost housing is a growing concern world-wide. As urban centers and third world populations continue in their rapid growth, so does the need to construct enough housing to provide all people with this basic human right. Historically, structural integrity has been overtly sacrificed in the name of economic feasibility. This has resulted in the mass production of inexpensive, but unsafe structures, which do not adequately protect their inhabitants from severe weather conditions.
In the wake of recent natural disasters such as the devastating earthquakes in Turkey and India, the governments of the world have taken notice of the inadequacy of existing building codes. With this re-evaluation of many antiquated building codes and systems also comes a contemporary look at the impact of construction on the environment. Therefore, it is imperative that today's technologically advanced building systems offer an improvement in their environmental impact as well as their overall cost and structural integrity. In order to accommodate all of these demands on the modern international housing market, companies are forced to provide an exceptional building system possessing the flexibility to be implemented in any country worldwide. Eagle Building Technologies, Inc.'s IMSI wall construction system has satisfied the demands of the world's largest housing markets and has consequently placed Eagle on the cutting edge of the world's technologically advanced construction systems.
EAGLE'S IMSI WALL CONSTRUCTION SYSTEM
The IMSI wall construction system is the cornerstone of Eagle's portfolio of building technologies. This patented system was created in a joint venture between the U.S. Marine Corps. and Bringham Young University to quickly deploy structurally sound, cost-effective and energy-efficient housing world wide. The IMSI system incorporates three primary components that offer significant flexibility in design and finishing; proprietary masonry blocks, insulation and a surface bonding cement. The specially made, dry-stacked masonry blocks have a uniquely layered, patented design that eliminates the need for conventional mortar. Each block has molded channels in which snug fitting, non-toxic, fire-retardant polystyrene inserts are placed. The polystyrene inserts add superior structural insulation and also serve as an additional vapor barrier as well as a sound-proofing agent. Stacked and insulated bricks are sprayed with a proprietary surface bonding cement, which provides a water-tight, impact resistant surface. This exterior cement strengthens and fortifies the block while simultaneously disguising the block construction, eliminating the need for drywall.
The paramount benefit of the IMSI system is the simplicity of its installation process. Dry stacking of the bricks does not require the highly skilled labor needed for mortar based wall construction. This enables Eagle to hire local laborers who are easily available at a significant discount to the cost of traditionally skilled laborers. The absence of mortar in the IMSI walls also enables the structures to be built five times faster than conventional masonry products. IMSI structures are structurally stronger than traditional housing options due to their ability to sway. This makes the structures resistant to the earthquakes and high winds often associated with natural disasters. In addition to their structural integrity, IMSI buildings are energy efficient, sound proof, fire-resistant, rot-proof and maintenance free. All materials used in the IMSI system are sourced and manufactured locally resulting in significant savings on shipping and other outsourcing fees.
AFFILIATES
BULLHIDE LINER CORPORATION
Eagle acquired 44% of Bullhide Liner Corporation in March of 2000. Bullhide produces cost effective linings and coatings for building and other commercial applications. The Bullhide lining product is a two-component, fast reacting polyurethane elastomer that is 100% solid. Its combined properties such as PSI, tensile strength and elongation have rated it higher than all other 100% solid liners on the combined toughness index. Bullhide was originally designed as a commercial roofing agent as it provides a tough, seamless, waterproof surface which adheres to virtually anything, and it has recently been used as a liner for both private and commercial trucks and myriad other projects in which a durable liner is required. Bullhide products are applied using special low-pressure, high volume SprayAll machines with plural component capacity. These machines control the mix ratio of the polyurethane elastomer electronically, ensuring a constant and perfect mix ratio. Bullhide liners are available in various colors and textures and can be customized to fit the specific requirements of the job. As Eagle continues to expand its services on a global level, Bullhide will certainly benefit from participation in the roofing and waterproofing aspects of these international construction projects.
MASTER DOOR
Based in Italy, Master Door designs and manufactures a line of high quality doors for residential, corporate and security purposes. Master's fully automated plant significantly reduces labor costs while producing a superior quality product. It also allows a greater diversification among the number of models and functions of the doors produced. Master's numerous features and choices of door models as well as its ability to customize its products to reflect an array of specialized security needs significantly enhance the marketability of its product line which can accommodate orders from any point on the security or design spectrum.
Eagle recently completed the acquisition of 86% of Master for less than one times its assets. It is currently in the process of updating Master's internal computer system in order to streamline order-flow and production. In addition, a larger factory has been acquired in order to accommodate a significant influx of new orders from both Russia and Portugal. Master's strategic partnership with Cooplegno, another Italian door manufacturing company, gives Master the exclusive right to sell Cooplegno's high-end, interior doors in the U.S.. Cooplegno will also offer Master doors in Europe. Through this new partnership, Master will benefit from Cooplegno's current and future contracts in the European Union and continue to grow both through Eagle and on its own.
FLEMING MANUFACTURING
Fleming is a wholly-owned subsidiary of Eagle Building Technologies. Based in Cuba, Missouri, Fleming manufactures all of the equipment required for the production storage and distribution of Eagle's specially designed IMSI blocks. The cornerstone of Fleming's business is its mobile block producing plant. The mobile block plant is a technologically advanced machine that facilitates the end to end, on site production of all types of blocks, bricks and pavers. Raw ingredients of the blocks are fed directly into the machine, which then mixes, molds and stacks the blocks on palates to be trucked to the building site. The paramount benefit of the Fleming machine is that it can be shipped anywhere in the world and therefore ensures that countries lacking in either the technology or infrastructure to produce and deliver high quality masonry building materials will be able to produce these on site at a significantly reduced cost. This mobility is also a significant benefit for rebuilding projects at the sites of natural disasters and in areas where long distance block outsourcing is cost prohibitive.
EAGLE'S INTERNATIONAL BUILDING CONTRACTS
The core of Eagle's revenue is derived from the production and sale of its IMSI blocks on site at its internationally based construction sites. Eagle currently has contracts and construction projects in India, China and Russia. India offers Eagle its greatest growth potential in the near term. Operated by a wholly owned Eagle subsidiary, the India project is headquartered in Mumbai, the country's commercial capital. Current orders include a ten million block order from local architectural firm, JTCPL. Eagle is currently bidding for participation in a proposed 150,000 unit housing project in Gujarat, an area destroyed by recent earthquakes. Successful implementation of this project would call for approximately 90 million blocks, a fraction of which would represent a significant order for Eagle's operations. Due to its existing body of work within India, Eagle should see a significant increase in India-based contracts in the near term.
Eagle's wholly owned subsidiary, Great Wall New Building Systems is currently working on establishing itself within the Chinese Building Materials Bureau. Its stationary block manufacturing plant is in the process of filling orders for over 10 million blocks. With these orders in place, Great Wall should be able to capitalize on its relationships with companies such as the Minghua Group, for whom Great Wall is currently providing development services. The Chinese government has also taken an interest in using the IMSI system as a means of replacing its old system of constructing bricks from red clay. This process destroys valuable agricultural topsoil and is a significant agent of erosion. The IMSI block construction system would allow China to improve not only its building codes but its environmental policy as well. Through its continued efforts within the country, Eagle's China operations should continue to grow steadily.
Eagle has recently entered into a joint venture agreement with a St. Petersburg, Russia based building developer. This agreement will allow for the distribution and manufacturing of Eagle's IMSI systems within Russia. It calls for the purchase of a Fleming block manufacturing plant, a minimum percentage of order flow from the partner's own projects and additional marketing of the IMSI system to third parties.
INVESTMENT THESIS
Eagle Building Technologies, Inc., through its recent acquisitions, has compiled a large portfolio of high-tech construction products that will enable it to achieve a sequential growth pattern. The Company had zero revenue in 1999, and revenue of $3.35 million in 2000, posting losses of ($5.80) and ($3.39) respectively. For the first quarter of this year, ending March 31, 2001, revenues were $4.1 million and the Company earned $0.28 per share. Eagle's first quarter results reflect the beginning of the successful implementation of its long-term strategy.
The Company, currently trading on the OTC Bulletin Board, has applied for and meets the criteria for Nasdaq listing. We feel that the Eagle shares provide an excellent growth opportunity at this level. Looking forward, the Company's second quarter numbers should validate their current business model. By rolling out this successful, proven model, Eagle should see exponential growth over the next few quarters.
Information contained herein is based on data obtained from recognized statistical service, reports or communications, or other sources believed to be reliable. However, such information has not been verified by us, and we do not make any representations as to its accuracy or completeness. Any statements non-factual in nature constitute only current opinion, which are subject to change. Hornblower & Weeks Inc., or their officers, directors and their clients may have very substantial positions in the securities referred to herein, and may as principal or agent, buy and sell such securities. Neither the information, nor any opinion expressed, shall be construed to be, or constitute an offer to sell or a solicitation of an offer to buy the securities mentioned herein. This firm may from time to time perform investment or other services for the companies mentioned in this report.
SOURCE Hornblower & Weeks, Inc.
CONTACT: John Rooney or Paul E. Taboada, both of Hornblower & Weeks, 212-361-2266 (EGBT)http://www.prnewswire.com
Copyright (C) 2001 PR Newswire. All rights reserved. |
