1/17/9 addendum: ESA has put out some numbers. They are impressive but confusing. ESA has been trading at an effective p/e of around 3.22. I believe ESA to be extremely undervalued given its growth prospects, financial strength, and its strategic location.
This illustrates the point that ESA is very young as an actual company. The latest quarter figures are actually for only 6 weeks.
Message 25329520
Here is a collection of posts where I attempt to explain how good ESA's numbers are
Message 25329572
Note that most of the figures currently in Yahoo are bogus. The are using 6 weeks of revenues and earnings as if they were for an entire year.
The real numbers are all contained here in their recent SEC form 10-K filing:
secinfo.com
Original thread introduction:
ESA now known as Energy Services of America has finally successfully completed its SPAC IPO process.
To have an understanding of ESA one should start with Marshall Reynolds. Marshall Reynolds has a long history of deal making centered in the West Virginia area. His style is not that of a typical corporate raider like that of Michael Douglass in the movie Wall Street.
Rather he generally searches out small well run and profitable niche type companies and packages them together so as to bring synergies and economies of scale. In contrast to the typical corporate raider, Marshall Reynolds looks to improve employment and benefit his area's economy in addition to richly rewarding his investors. Marshall Reynolds likes to create real companies that provide real services to real customers while realizing real earnings and generally paying a dividend.
After carefully rationalizing and improving the management of these smaller companies joined into one, he then generally will sell his deals at a large multiple. I have no doubt that this is his plan for ESA: to make it a profit making machine and then sell it out at a large multiple to today's price.
And his investors have done well. Informally Marshall Reynolds has been known to claim that he has created more millionaires than any other living American with the exception of Bill Gates.
Marshall Reynolds apparently had a vision some years back about the need in the USA for domestically produced energy and that environmentally clean NG would be crucial for meeting this need.
West Virgina and the other Appalachian states happen to be sitting on top of the Marcellus Shale NG field.
Message 24656876
Apparently the Marcellus Shale contains huge amounts of NG in close proximity to the huge energy markets of New York, New England, the Mid Atlantic the Midwest states. Not only is this NG conveniently located, but it appears very economical at least according to a recent Deutsche Bank study.
Message 24840066
ESA comes into the picture with its just approved purchase of two pipeline companies.
biz.yahoo.com
The most important highlights of the deals can be found here:
sec.gov
This is the huge more than you ever want to know version. This crucial SEC document took over 1 year of working nights and weekends to finalize. ESA has shown that it is very careful about making sure it passes regulatory muster. All the ts were crossed and every i was dotted in this document:
sec.gov
One of these companies is CJ Hughes.
cjhughes.com
herald-dispatch.com
C.J. Hughes management overlaps with the ESA management itself including its CEO Ed Burns. C.J. Hughes has been in business since 1946, but has recently enjoyed exponential type growth in its revenues and earnings. It is a preferred contractor for Marathon Oil (MRO) among others.
In addition while ESA was undergoing its arduous SPAC acquisition progress in May 2007, C.J. Hughes itself acquired a nifty company called Nitro Electric. As detailed in its web site Nitro Electric is sort of an electrician to the electric utility companies. From what I understand the profits from its first large contract payed for its entire purchase.
nitro-electric.com
Nitro Electric gives the pipeline businesses of of ESA a further advantage in procuring contracts. The contracting companies like to avoid confusion by dealing with a limited number of providers and now with ESA they can directly contract for a wide variety of services ranging from pipeline to a full gamut of electrical services including high voltage power line construction.
The second part of the acquisition was ST Pipeline. Its founder Mr Shafer played a major role in the construction of the original Alaskan pipeline, but he had the foresight to recognize early that West Virginia was going to be where the action was. So in 1984 he came to West Virginia and founded ST Pipeline where they have also enjoyed success and have their own loyal customers..
stpipe.com
ST Pipeline will be run separately because of the very personal nature of its sales force and because although both C.J. Hughes and ST Pipeline enjoy excellent labor relations, the unions of the two companies are quite separate and would probably not be worth trying to merge. They will enjoy significant cost saving synergies in terms of sharing heavy equipment and in the purchase of insurance.
After the dust has cleared with the closing of the SPAC acquisition, it appears that ESA will have about 12.5 million shares outstanding. In addition there are approximately 20 million warrants exercisable at $5.
<Each warrant entitles the holder to purchase one share of our common stock at a price of $5.00. Each warrant will become exercisable on the later of our completion of a business combination and August 29, 2007 and will expire on August 29, 2011 or earlier upon redemption.>
sec.gov
<Energy Services may redeem the warrants at any time after the warrants become exercisable, in whole and not in part, at a price of $.01 per warrant, upon a minimum of 30 days prior written notice of redemption, if and only if, the last sales price of our common stock equals or exceeds $8.50 per share for any 20 trading days within a 30-trading-day period ending three business days before the notice of redemption is sent. Redemption of the warrants could force the warrant holders (i) to exercise the warrants and pay the exercise price therefor at a time when it may be disadvantageous for the holders to do so, (ii) to sell the warrants at the then current market price when they might otherwise wish to hold the warrants, or (iii) to accept the nominal redemption price which, at the time the warrants are called for redemption, is likely to be substantially less than the market value of the warrants.>
sec.gov
For now at least, ESA and its warrants are best suited as an IT or LT investment and should not be bought for ST trades:
Message 24886348
For anyone unfamiliar with SPACs please reference Glen Petersen's thread header and thread.
Subject 55438
Notice: Anyone who posts on this board is expected to do so reasonably and with courtesy. Anyone who posts in an unreasonable or inappropriate manner will be immediately banned. I will be the sole judge of this. |
