This went out on Stockwatch today:
Weather All Man. USA Inc. (WAMC-OTC/BB):
Current US$0.20
Ph: 1-877-233-3131;
Fax: 604-685-5750;
WC: $0.0m
Shares Out: 5,607,000;
Fully Diluted: 9,607,000
www.weatherallusa.com
Introduction
Those of you who know me know that I have owned and operated a number
of businesses during my career. In fact my background led me nearly two
years ago to Napier (NIR-T). Napier turned into my biggest winner ever in
part because I recognized a revolutionary product in its very early stages.
Weather All Manufacturing USA Inc. (WAMC) may be in a similar position,
albeit for an entirely different reason. WAMC does NOT have a revolutionary
product that will change the marketplace. What it DOES have is a cutting
edge group of products designed to meet the needs of a demonstrably large
market. For investors, the "kicker" is easy: awesome leverage in this startup
company.
WAMC manufactures specialized, environmentally friendly coatings at its
facility outside of Vancouver, BC. These coatings are designed for both new
construction and renovation markets in the residential, commercial, and
industrial fields. WAMC has, in total, 43 different products it can offer
although it is focused on only three or four.
Products
Typical of these is an elastomeric coating that for all practical purposes
looks much like a can of thick paint. Unlike paint, however, this coating is
actually nearly 70% solids and stretches even long after it is applied. Now, a
thick, stretchy paint may not sound like much to some of you. But consider
that the prime markets for this coating are concrete and stucco-clad buildings.
Concrete and stucco, of course, often shrink and/or crack. Once they have
done so they are no longer waterproof.
My former business used elastomeric coatings as part of a standard
repair and protection process. Regular paints simply cannot bridge the gap
across a crack and even if the could they still could not stretch and flex to
accommodate future movement in that crack. Elastomeric coatings are
designed for this purpose.
Elastomeric coatings are part of he $6.2 billion US Architectural Coatings
industry sector. (Paints and coatings of all types is a $16 billion market.)
Unless you have been living in a box you have heard of acid rain and the
effects it is causing to the environment. One of the effects of acid rain,
especially in North Eastern USA and Central and Eastern Canada, is the
damage it causes to structures built with concrete, stucco, and brick.
As acid rain penetrates into concrete it accelerates the corrosion of interior
reinforcement steel. The corroding steel further degenerates the concrete
structure and, if left unrepaired, can actually lead to total failure of the
structure. So not only are elastomeric coatings a necessary part of most new
concrete buildings and structures today, they are also the first choice in the
refurbishment of existing buildings. Only those products that are both tough
and pliable are able to provide a long term solution to this common
problem.
On the west coast of North America, particularly in places like Vancouver,
Canada; Seattle, and San Francisco; the problem is one of incessant rain.
New building techniques concentrated on the use of stucco cladding for
residential buildings, which in fact is best used in drier climates. Seattle
receives about 3 feet of rain each year; Vancouver about 4 feet of rain each
year. In these wet climates the problems are serious and expensive.
Vancouver is dealing with phenomenon known as the "leaky condo"
problem. Local, Provincial and even Federal governments are being
petitioned to provide assistance. Task force studies have determined that
over $1 billion in repairs are urgently required just in the city of Vancouver
to solve the problems. After the major structural repairs are carried out
nearly all professionals agree that a high quality elastomeric coating must
be applied to help prevent recurring problems in the future.
When I was active in this industry, my companies were the largest purchasers
in some markets from the world's leading suppliers of similar products. As
you might expect I was an important account for these suppliers and they
took care of my needs. But never once did I come face to face with a product
to compare with one particular product of WAMC's: an elastomeric roof
coating.
WAMC has an elastomeric waterproof roof coating that can be applied to
metal roofs. If there are similar products to this in the market I simply do not
know of them. Is it significant? Think for a moment about the millions -
perhaps billions - of people living outside of North America and Europe who
live in huts with tin roofs. WAM151 is designed to be applied to concrete
and masonry and primed metal or wood. This amazing product can
waterproof roofs at low cost for millions of potential consumers who might
previously have had no option for a dry roof.
WAMC has already held talks with a representative of the government of
Jamaica regarding the widespread use of this product.
Elastomeric coatings are just one of several major product lines. Others
include concrete and brick sealers (one of which is environmentally safe to
use even for storage tanks for drinking water); degreasers used for building
cleaning and maintenance; liquid plastic "paint" for products as diverse as
buildings, ships, furniture, and stone; and binders to improve the adhesive
and strength characteristics of numerous products in the construction and
rehabilitation industries.
An interesting product is WAM43, a concrete sealer and waterproofer. In
official tests, after 24 hour exposure to 98 mph wind driven rain, no moisture
was observed penetrating the protected concrete. This meets official US
Federal specifications.
WAMC products are environmentally friendly in most cases. Traditionally,
coatings were manufactured using volatile chemicals. But in the US the
Environmental Protection Agency (EPA) has already mandated that all
paints and coatings can no longer use Volatile Organic Compounds (VOC's)
by the year 2003. WAMC's elastomeric coating contains zero VOC's. Looking
ahead we can safely assume that companies whose products contain volatile
chemicals are destined for failure.
Risks
Competitors include companies such as Harris Specialty Chemicals, a large
conglomerate that offers a zillion different products and services in dozens
of countries. Although large, a company like Harris cannot reasonably be
expected to materially benefit from, say, a single $1 million or $2 million
customer order. Likewise, investors in huge companies cannot expect the
stock price to rise at all after such an order. WAMC is the only public
company in this field that I am aware of that will allow investors to
meaningfully benefit from their day-to-day business operations. But the fact
remains that competition in these industries is tough. Many of WAMC's
competitors are large companies. We can always hope that, should WAMC
turn into a success, one or more of these competitors might try to takeover
our company. Harris Chemicals, for example, has bought several competitors
in recent years.
WAMC is also in need of expansion and operating capital. The company is
in discussions now with unnamed sources to arrange a $1 million financing.
Should this financing complete the company will be in a good position in
the short term to further its business plan. Without financing the company
cannot be expected to progress rapidly.
WAMC is a startup company. It effectively has no operating revenue
although its predecessor has completed many projects. We have no way of
determining its' true "value" via any type of financial statement analysis.
The company's potential future success will rest in large degree upon its
ability to generate acceptance and use of its products in the professional
fields prior to such use by the everyday handyman.
Stock Potential
There are risks associated with all startup companies, but there is also great
potential. Some of my readers made handsome profits on Napier because
they were introduced to the story at $0.12 - long before it attracted attention
by other analysts and subsequently rocketed to nearly $5.00. The same is
true of Argentina Gold which was rated as a "Strong Buy" in May 1998 at
$0.60 and subsequently has reached $5.75. The risk associated with early
involvement in a spec. company is real - but so is the potential reward.
WAMC offers strong potential gains because the company is small. With
only 4.8 million shares outstanding and a public float estimated at under
1.0 million shares, even small pieces of good news should be reflected in
stronger stock prices. The President owns 65% of the outstanding stock. Each
of the 4 million escrowed shares can only be released one-for-one with each
$1.00 in pre tax profit earned. Talk about incentive!
Consider that in the company's business plan it hopes to achieve $1.4
million in 1999 sales and a net profit of $99,000.00 ($0.021 per share). In
2000 it hopes to achieve $3 million in revenue and $662,000 in net profit.
($0.138 per share). In 2001 it is forecasting revenue of $4.4 million and a
net profit of $1.2 million ($0.25 per share). Using a P:E multiple of 20 this
implies a 1999 stock price of $0.42 per share; a 2000 stock price of $2.76;
and a 2001 stock price of $5.00. With a P:E multiple of 30 the corresponding
potential stock prices are: 1999 - $0.63; 2000 - $4.14; and 2001 - $7.50.
The company believes that these are extraordinarily conservative
projections. For example it had previously received a 500,000 gallon order
from a major US retail distributor that it was unable to fill since it represented
2 years of production capability. If that order can be resurrected or another
similar order won, then the stock price could rise quickly.
Today's average P:E multiples in the market in general are about 25:1.
Thus based on WAMC's revenue estimates its stock could reasonably be
expected to trade between $0.42 and $7.50 during the next three years.
Marketing
WAMC has a simple marketing strategy that could pay big dividends. Its
products have already been used on several high-profile commercial and
office buildings. Official product testing is an ongoing process and the
WAMC products are meeting official requirements. The company has
already held meetings with leading engineering firms in an effort to have
their products specified for use on publicly tendered projects. WAMC will
continue to meet with engineers and architects in various cities as it gains
acceptance in these vital professional markets.
The WAMC elastomeric coating is a high quality product with 69% solids
content. This means that as it dries and cures on your building wall, 69% of
what you have applied to the wall stays there. Many low quality paints and
coatings have only 10% - 15% solids contents: with those inexpensive
products most of what you are applying is water. The 10-year warranty
offered by WAMC should help to attract the professional community.
WAMC has a second major marketing thrust. It intends to deliver the most
often chosen product by the do-it-yourself homeowner. WAMC hopes to
reach the handyman with distribution through networks such as Home Depot
and Eagle Hardware. Such distribution agreements have not yet been made
-- but if they are we should expect the stock price to react favorably.
WAMC is the first company in the industry of which I am aware that also
intends to market and sell its products directly over the Internet. This
E-commerce capability at www.weatherallusa.com should be operational
soon and will allow customers to easily order the products they need. The
company will ship to their door via UPS or other carrier.
The internet approach has a couple of interesting considerations. First is
whether consumers will embrace the concept. On-line shopping is growing,
by some estimates, by over 20% each quarter. So, even if the total volume
is low today it will not be long before this amazing growth curve must be
reckoned with. If WAMC can capture a portion of this market before its larger
competitors get wind of the idea, so much the better. Secondly, the InterNUT
phenomenon in stock investing is alive and well. Investors cannot get
enough of certain ".COM" stock stories and drive share prices to unrealistic
heights. While I don't for a minute advocate such stock buying, still there
remains the possibility that WAMC could find itself swept up in the craze.
Such an eventuality would be music to our ears and pocketbooks.
Success in either of these two different marketing channels could be
sufficient for the company to meet its sales goals and thus drive the stock
higher. Success in both would be outstanding.
The company manufactures its products at a modern facility just outside of
Vancouver, Canada. It is generally less costly to manufacture such products
in Canada than it is in the US in large part due to currency exchange rates
of US$0.65 : CDN$1.00. The most cost effective locations to manufacture
similar products for consumption in the US market are Canada and Mexico.
WAMC can manufacture up to 281,000 gallons of product per year (at retail
prices of up to $45/gallon) without any significant expansion using efficient
just-in-time techniques. Single day made to order production cycles will keep
inventory costs to a minimum. A planned expansion will increase capacity to
1.4 million gallons per year.
Summary
WAMC holds the right to manufacture and distribute 44 leading edge
products to a large market. Constant demand for these products in certain
restoration and repair sectors ensures that, to some degree, WAMC sales are
"recession proof". While the small size of the company is a risk, it is also a
huge potential benefit since investors can participate in growth that could
be reflected in sharply higher stock prices. WAMC is a low cost producer
compared to some of its competitors and might also benefit from product
sales over the Internet: a marketing channel not exploited by its competitors.
This direct sales channel might also result in higher profit margins since
distributors are not required. The stock structure is extraordinarily tight and
could offer outstanding price appreciation should the company benefit from
increasing sales.
(Disclosure: Because of my prior business expertise in this market micro
sector, I have agreed to assist WAMC by providing the company with an
exhaustive industry and marketing study. WAMC is compensating me for the
marketing study with 100,000 shares of common stock.)
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