Hello Bonnie:
>>Rather than just guessing and taking the risk of being incorrect, why not call the company and speak to the management. Ask them if they expect to issue more shares to meet the demand of 10,000 units per year<<
Calling management to check on the things that you suggested, it is just a plain waste of time for me. I've been on that side, and have dealt with financial inquiries from investors, analysts, etc. As management, we know how to response to analysts, institutional investors, and individual investors calling on us. Management's last priority is to individual investors, who normally get relegated to the investor relations person. Management's objective on all these calls is simply to be nice and give responses with positive spins. Management is mindful of securities legislation that prohibits informing persons of material information that have not been released as general information to the public. Management is cognizant that an investor should work with his/her investment advisor.
Analysts use the same tools that I have used and demonstrated on this thread, with heavy emphasis on dissecting the financial statements, press releases, industry reports, and integrating them with business experience. Many of them don't call management for at all. I can cite several cases off the top of my head (PTS being one of the more recent) where this is the case and with good accuracy on what a stock is reasonably worth. There is a post on this thread somewhere of the Canaccord analyst's view of AFS, and one will see an analyst's approach to how the stock is worth, and it is parallel to what I've done on this thread.
>> Judging from your various posts it appears obvious that you have a good grasp on accounting, margins etc., therefore you must also know that profit margin on revenues of $48,000 would NEVER be the same as on revenues of $20 million. Is this an attempt to mislead readers? Profit margins in the auto parts industry average around 30 to 50%. Your numbers are most likely way off base<<
Normally, we analyze based on information that is objective and already there, in this case, the audited statements. AFS has no real revenue history to go by, and there could be all sorts of conjectures on the profit margin. Mark posted *80%* profit margin. AFS may very well get more margin for the units, however, I don't think anyone knows at this time what margin it can get for the main contract of 10,000 units for 10 years. I suspect the Mexican will want a good deal too, with 20 other suppliers in the wings.
No I don't intend to mislead anyone on this thread. For one thing, I don't think anything we say here at SI will affect the stock one way or another. The big money uses investment advisors and analysts, not us at SI. We all pose our views for what they are worth on this thread, and they will make no difference in the overall scheme of things of what the real outcomes will be.
<How is management going to get this funding to support the sales? Presently it appears their cashflow is very, very tight. This will explain why recently they issue a private placement for 100,000 shares for $150,000.>
>>Here is another unfounded 'guess'. I took the time to call the company on this and was advised that this placement had nothing to do with a tight cash flow, rather, it was an option agreement. Seriously do you really believe that they would raise funds $150,000 at a time?<<
It is an experienced guess not an 'unfounded guess'. Any CFO worth her/his salt will know to issue a public offering should the Mexican contract comes true, and especially if the stock price goes higher then. CFOs do this all the time!.
Bonnie, a private placement is not options being exercised. Private placement is further issuing of shares, and causes further dilution. And yes it is not unusual that small companies issue stock $150,000 at a time. Many do whenever they can find "mezzanine" investors. Any one here willing to invest $150,000 or more can approach AFS as a mezzanine investor. There is no need to issue a prospectus at this level of financing, and only a disclosure with the regulators is sufficient.
>>Keep in mind that the company has a clean balance sheet, with no long term debt and has an approximate $20 million deficit that it can write off against income taxes. To come through so many years of development with a deficit this size, particularly for a company opening so many doors in so many foreign markets at the same time, shows considerable spending control. A total overhead of $1.3 million per year is quite reasonable<<
A small company has two options, debt, or equity. In the case of AFS, it has issued 24 mill shares to this point. This is a lot and investors should be very conservative when investing in a company with this many number of shares. I've given several examples before comparing to other small companies. Looking at their filings issued with Sedar, one can see that they paid their way by issuing shares.
As far as their progress to this point in time, I have read all that's been posted here, all news releases, all filings with Sedar, Laurel's e-mails ( been on trial subscription from your postings )...etc. My view is that this company has actually made unusually slow progress to this point in time. The lethargy in getting results and the large amount of shares issued are the two reasons why I will NEVER buy this stock with a long term view. I agree with the sentiment expressed in the Sun's article... a company's management track record is a very important criteria for me.
>> Management has been also strongly supported both financially and in their business for years by the Simmons Group (Simmons Petroleum Producers/Services, of Calgary) and Dale Simmons is the Chairman of the Board of AFS. If they need funding they can likely get it here but I think with firm contracts in hand they will have no problem getting what they need with a short term loan from the Royal Bank<<
Where ever they get the funding, there is a price to it - debt, or more shares.
< Someone in this thread mentioned that AFS will get paid in advance. Ugh, ugh, that's not how business works. Produce, deliver, then get paid. With a foreign country, getting paid is a bigger
concern. That's why there is the letter of intent. It shows AFS don't trust it'll get paid and the money is escrowed in the bank to be released when products are delivered. >
>>You sure know how to put a negative twist on everything. Again call the company and ask because I don't think what you are saying is correct<<
AFS was very clear in its press release - cash advance for the project, letter of credit to be drawn on after the units have been delivered. Should this project turn into the main contract, AFS's commercial link is with CCM. It is almost impossible that that AFS will get paid before products are delivered, so they will need substantial working capital to manufacture the units.
<And thirdly, ask them how they secured the Mexican project and beating 20 other competitors - was it clearly because of better technology, or better pricing. >
>>This is really not right. Think about it. Do you really think this consortium-CCM, CEM, Pan American, Hydro Quebec, Gaz de France, the Krause Group are going to spend all this money, with the worst air pollution in the world in Mexico City and use inferior technology that might just jeopardize everything they are trying to accomplish?<<
All those names bring no additional weight to me in terms of validating AFS stock prospects. The situation as I understand it is quite straight forward. Mexico has a pollution problem. CEM (a govermental agency in auspices with other heavy weights) figures the way to go solving the problem is to have this switching capablity from diesel/gas to CNG. AFS has a commercial contract with CCM not CEM. How CEM and CCM came up with the decision to go with AFS for this pilot project instead of one of the other 20 competitors, we don't know. You may call it putting a negative twist to things, but how contracts are awarded in emerging countries are not necessarily related to purely technology superiority.
>> Once again if you were to ask the company you would discover that the AFS system costs a bit more but is easy to install and very effective. There's two years of testing here Denise, in a worldwide competition. The ONLY conversion system with MOT approval in Japan also<<
Bonnie, a company will always say theirs is the best in technology in some ways. All I can judge from is the fact that this switching technology has been with AFS for quite some years now (reference CAP), and no sales, until this one project, and the letter of intent. The fact that they don't have clear patent and share this technology with Caterpilla is also uncomfortable for me in terms of the extent of the firms intellectual capacity and its prowess for technology leadership.
>>Or they may just set up AFS Europe, ASF Asia and AFS South America public companies, raising financing, increasing value without diluting the parent company. Those of us who believe in the company will be here to wait and see<<
Bonnie, if they raise money through global subsidiaries, it will still mean dilution for stock holders of the parent company. The investors of the global subsidiaries will expect to be paid too.
>> I have to wonder, for someone who has done so much dd and still thinks the stock is only worth .60 and with the market valuating it at $1.90, what is your ongoing interest in this company?<<
I'm just being caught up with it. If you check the timing of my starting thread, the article in FP initiated my curiosity on this stock and being a new member of SI, I thought I'll take time to take part in this thread. I am now on a break ( a very long one, I hope ) from professional life, and hope to enjoy life more and spend more time attending to my portfolio. Naively, I've shared my financial analysis and stock valuation estimates with the thread as I went through my due diligence. Being new at SI, I thought it would lead to a healthy balance to all readers. Instead, it seems that the longs are easily threatened and think that any contrarian views on this thread will affect the stock price one way or the other.
<< Is there anyone involved in a stock that does not have a conflict of interest one way or another? The brokerage industry does most of the analysis on Canadian stocks and brokers have a lot of
experience. I think they should be welcome here--no one has to tell anything about themselves if they choose not to ---that's the beauty of a chat group<<
You're right... it's just my finance background instinct. I do believe though that brokers who participate in SI thread have an agenda contrary to what participants are trying to do here.
BTW, I enjoy all your posts here, and this is not buttering. I really do, you've done a lot of homework on the qualitative issues of AFS. However, FWIW, do keep a bearing on the financial issues as well... they inevitably have the final influence on a stock price.
Take care,
Denise |
