They just did a 1 for 4 reverse in February. So guess who is pushing them on their sites. superstockpick.com
Engineering Power Systems Limited
(OTC BB: EGPDF)
Corporate Web Site: www.epsx.com
Full Profile: Click Here
EGPDF Mailing List: Click Here
Closing Price Today: $2 bid, $2.125 ask 16,500 volume
We believe that at current levels, the stock of Engineering Power Systems Limited has the best
risk/reward ratio of any Company we have ever covered. Here is our brief overview of the Company. If
you wish to read our full profile, click on the link at the end of this newsletter.
This company currently has a solid revenue foundation. In fiscal 1998, they achieved over $33 million (CDN) in
revenues, up from $8.7 million (CDN) the previous fiscal year. This represents a 370% growth rate.
The company had losses, the majority of which were attributable to the $3.1 million they chose to invest in
development costs for their upcoming Power Barge Project, one of the most exciting new ventures you will ever
read about. We will discuss it later in this edition.
Engineering Power Systems Limited (OTC BB: EGPDF) is a Toronto, Canada based Company. Through
its subsidiaries companies, Engineering Power fabricates, designs, and builds power facilities and infrastructure for
global resource development.
Recent Developments
We originally covered this Company back in November of 1998. The stock was victimized by wide spread year
end tax selling and dropped to absurdly low levels. The Company decided that it would be in the best interest of its
shareholders to effect a four-for-one reverse split. This is the opposite of the more traditional forward split.
On February 5th, 1999 the Company reduced its number of issued and outstanding shares from over 30 million to
9.5 million shares. Of that, approximately 3.5 million are publicly traded. The purpose of this move was simple.
The Company has made a total commitment toward obtaining recognition on the US NASDAQ market. With
$26 million (CDN) in assets, and nearly $5 million (CND) in shareholders equity, this company easily
qualifies for a full NASDAQ listing with one exception. Their legal counsel advises them that their only
deficiency for obtaining a full NASDAQ listing is a $4 bid price. With this stock trading at rock bottom prices,
and the supply of stock significantly reduced, the $4 stock price should be much more easily attainable.
Engineering Power Systems has spent over $500,000 in legal and accounting fees going through the process of
filing their SEC Form 20F to become a fully reporting foreign issuer in the US markets, and fully intends to take
advantage of that investment. Moving from the Bulletin Board to the NASDAQ will open the door to an entire
new audience of institutional investors for this stock.
Therefore, we believe that in the near term, a $4 stock price is imminent with much higher levels in
the future. This is just our opinion. Time will tell. However, with a 52 week high of $14.50, and a low of $1.50,
any decent volume surge should take this stock higher. Moreover, this stock behaves as if there are no sellers left,
which lends itself to higher levels.
There is one more important factor for your consideration. This company has issued shares to very sophisticated
institutional investors to raise capital. The absolute lowest price paid for the stock by any of these
institutional investors was $3.20, which is 50% higher than current levels. This is a rare opportunity for
individual investors to get in below the big boys. For a complete list of fundings and associated prices, click here.
The Power Barge Project
On June 20th, 1997 the Power Barge Project was brought to life when Engineering Power announced its intention
to build, own and operate two 100 Megawatt, Barge Mounted Power Plants (the "BMPPs") in Kakinada,
Andhra-Pradesh, India. According to the terms of the Joint Venture, Atlantic Seaboard Industries Limited ("ASIL")
of Newfoundland, Canada, a wholly owned subsidiary of ASI Holdings Inc., which is 77% owned by EPS, had
been awarded two engineering procurement and construction contracts whereby ASIL is responsible for the
design, construction, delivery and commissioning of the BMPP's. The contract value is estimated to be $208
million for the construction phase alone.
In short, this branch of the Indian Government has agreed to purchase the power that can be produced by two
barge mounted power plants to be moored in a river in Kakinada.
This is a massive project for a relatively small company. Since the formation of this Joint Venture, the following
events have occurred:
On September 17th, 1997, EPS announced that it had retained Everen Securities (NYSE: EVR) to
serve as its Investment Banker. Everen, formerly known as Kemper Financial, is the 12th largest
brokerage firm in the US, and highly respected on Wall Street. Click Here to read the original press
release.
On February 17th, 1998, EPS announced the engagement of SNC-Lavalin ("SNC") to provide
construction management services for the construction of two Barge Mounted Power Plants. SNC-Lavalin
is an enormous construction management firm with extensive contacts and experience in India. Click Here
to read the original press release.
On July 2nd, 1998, CMS Energy (NYSE: CMS), and EPS announced an agreement to develop,
finance, construct, own and operate barge-mounted electric generating units throughout the world. Both
companies believe there is a large global market for such movable electric generating units. CMS Energy
(NYSE: CMS) is a world wide monolith in power plants. They have over $10 billion in assets, $5
billion in annual sales, and are currently the largest Independent Power Producer in India.
Click Here to read this press release.
Once underway, the bulk of the revenues for the construction of the Power Barges will flow to Engineering
Power through its subsidiaries. Therefore, Engineering Power has the potential to go from an
annual revenue run rate of $33 million to over $150 million with the launching of this project.
The Company anticipates netting about $15 million in pre-tax profits during the construction
phase.
Once completed and operational, it is anticipated that the Power Barges will generate $60
million in annual revenues. Engineering Power expects to garner 50% of the profits generated
from those revenues.
Conclusion
Engineering Power today is trading with a market value of roughly $18.5 million. The Company is already doing
twice that in sales. This Company is probably worth more than the $2 level at which the stock now
trades without the Power Barge Project.
If and when a NASDAQ listing is achieved, the investment banking relationship with Everen (NYSE: EVR) and
the partnership with CMS Energy (NYSE: CMS) insures that Wall Street will recognize this Company if
success is achieved.
The launching of the Power Barge Project looks like it will result in over $1 per share in earnings
during the construction phase. By any measure, this would put the stock at a $10 minimum, a 500%
return from today's levels. Hence, our earlier statement that we believe that this stock, at current
levels, has the best risk/reward ratio of any Company we have ever covered.
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For those skeptics that don't understand the opportunities created by year end tax selling, check another one of our
client companies, Wordcraft Systems (OTC BB: WORC). Investors were disappointed with the Company's
performance in 1998, and the stock traded from a high of $.80 in 1998 down to $.10 at year's end. Since that
time, the stock has rebounded to $.48 per share, for a 300% plus price appreciation since January 1st.
We originally profiled the Company at $.21 in May of 1998. Although there are no guarantees, we
are hoping for a repeat in Engineering Power Systems Limited (OTC BB: EGPDF).
Final Notes
For our complete and comprehensive profile on this Company, click here
If you have an interest in following the progress of this Company, please sign up for their mailing list by
clicking here, and submitting the form.
The OTC ticker symbol for this stock used to be EGPSF. After the reverse split, the ticker symbol was
changed to EGPDF. The "D" signifies the reverse split. On March 8th, the ticker symbol will revert to
EGPSF.
EGPDF closed today at $2 bid, $2.125 offer on 16,500 shares. For those of you who check quotes on
Yahoo!, their quote is incorrect. |
