Picture a company that acquires a throwaway toxic waste at a cost of zip, processes it, and then sell it for $5.60 a gallon - and there's over a billion gallons of it within easy reach.
A Top Pick for 2013 --- - GlyEco (GLYE.OB)
- Type 1 Certified Recycled Glycol will be delivered into the market, "during the second quarter of 2013 or sooner."
For those new to this exceptional green story, GlyEco owns the world's only technology that can take hazardous glycol waste and produce the premium Type 1* glycol-which is indistinguishable from refinery-grade glycol. The buy low/sell high aspect of GlyEco's business model brings to the company an unusual profit outlook. Because there's an immense market out there for 'virgin' glycol, the revenue and bottom-line earnings potential sets in place what looks to be an uncommon investment opportunity.
The average sales price of ethylene glycol in 2011 was approximately $5.70 per gallon. The world uses over 5.5 billion gallons a year, creating about a billion gallons of waste 'feedstock'. These core metrics begin to illuminate the value / profit potential.
In less than a year GlyEco has inked seven accretive acquisitions of companies that produce Type 2 glycol from wastes used in the manufacturing of glycol products and/or their disposal, and in the last four months or so five have been finalized. Notable is that since the majority of their acquisitions were made in Q4 2012, the SEC 10-K financial reporting including those recently acquired operating entities will not be released until the upcoming 10K is filed.
The recent (12/13/2012) asset purchase of the Elizabeth, New Jersey company** that has grown to be one of the largest Type 2 glycol recyclers has concluded and GlyEco is now in the permitting process with local agencies before the Type 1 production gets underway. Once that local regulatory hurdle is behind them the company indicates that delivery of the Type 1 Certified Recycled Glycol will be delivered into the market, "during the second quarter of 2013 or sooner." So said John Lorenz, GlyEco chairman and CEO, in a recent interview.
Another Lorenz quote is noteworthy: "This proprietary technology" represents "a multibillion-dollar market opportunity."
To grasp the supply of feedstock available, ponder the amount of polyester fibers, plastic bottles, airplane de-icing fluid, antifreeze, and air conditioning fluid that all are made of glycol; it shouldn't be surprising that a massive amount of toxic waste is created in their manufacture and/or their disposal.
So returning to our core metrics: Glycol right out of the refinery is sold for about $5.70 a gallon and the world uses over 5.5 billion gallons, thus $30 billion a year. To make this product about 20% goes to waste and is currently disposed of with miniscule recovery. And because of glycol's noxious chemistry it is a regulated hazardous waste, so GlyEco is a true 'green' business that carries no taxpayer responsibility in the form of government subsidies.
** The NJ facility is already one of the highest-capacity Type 2 glycol recycling operations in the world, and with the Type 1 technology roll-out that's now fully operational, but awaiting local permitting prior to commercial production, it looks to double that capacity to over 20 million gallons per year. My analysis indicates that GlyEco could reach the break-even point at about 1 million gallons of production.
The NJ facility is the world's first commercial entity able to produce Type 1 glycol and is the cornerstone of a strategy for introducing into the global market the patent-pending GlyEco Technology™. Key is that it's the first technology to clean all types of waste glycol. The newly-acquired NJ facility's footprint size, location, shipping capabilities and rail access position it to take in very large quantities of non-antifreeze waste feedstock. The NJ facility also has over 3 million gallons of glycol feedstock storage capacity with space available for expansion of storage and processing capacities.
The acquisition of the waste glycol costs little and in some instances, as is the case in Europe, payment for removal is common. Now for the first time ever, by using GlyEco's breakthrough and disruptive technology that cleans all types of waste glycol, a virgin glycol-indistinguishable from refinery grade glycol-can be produced from the former waste and then sold immediately to a huge global marketplace.
More re Management
Central to the GlyEco proposition is that it's being orchestrated by the company's founder and CEO John Lorenz, who created the company Waste Management (WM). He founded Environmental Waste of America, Inc and served as President and CEO between 1986 and 1997 until its merger with Envirofil, Inc., a public company that is now Waste Management, Inc. This company grew in seven years-- from $2 million in revenues to $14 billion-- through a series of acquisitions of smaller cartage, garbage and waste companies. Waste Management's current market cap is $17.3 billion.
GlyEco's management team is seasoned in the operational details of large-footprint commercial applications and is comprised of managers experienced in solid waste management, mergers and acquisitions, chemical engineering, and glycol recycling.
Regarding Financials and Risk
To date GlyEco has already closed on its first five acquisitions with four additional acquisitions scheduled for 2013, as I understand it. There are hazards in acquisitions involving unexpected increases and complexities related to the multiplication of moving parts while orchestrating the benefits of centralization and integration of multiple and growing entities-all this can be a huge challenge. The future scheduled acquisitions discussed here are subject to further capital injections. I believe GlyEco has the resources to complete additional deals via cash flows and its recent raise of $6.2 million. Again, delivery of the Type 1 Certified Recycled Glycol into the market is targeted "during the second quarter of 2013 or sooner."
A New and Disruptive Technology Enters the Global Market
While GlyEco is just recently operational with the five accretive and closed deals already in commercial production of recycled anti-freeze grade Type 2 glycol, the newly inked New Jersey operation sets in motion distribution of Type 1 glycol, a product of the same level of purity expected of refinery grade glycols.
GlyEco has further identified additional potential customers and developmental partners in North America, Europe, throughout Asia, Mexico, South America, India, and Australia.
Using the above-mentioned, highly successful Waste Management roll-up as a model, I believe that GlyEco's management will complete additional accretive acquisitions along the lines of its seven announced deals. In my opinion, revenues and profits should expand significantly as the acquired assets upgrade to the GlyEco technology producing Type 1 material, and that news flow will drive share price. With a market-cap of only $31 million I can see it escalating significantly, much the way Waste Management tracked share price in its early hyper-growth days, if management keeps up the same development and acquisition pace. Hence my optimistic outlook re the GlyEco shares.
A Succinct Quote from CEO Lorenz Points to Extraordinary Potential
"This proprietary technology will allow GlyEco to expand its services beyond the used car antifreeze recycling market into four additional large industrial markets which create waste glycol, representing a multibillion-dollar market opportunity."
Recent News Flow, SEC Filings & the 7 deals since February
The recent news flow paints the picture of management's ability to execute on their strategy. Multiple closings of the accretive deals that were first announced earlier this year have been filed with the SEC and press releases have been generated. Add the recently completed PPO offering and it sets up the ability for GlyEco to continue its move forward on all fronts.
* The patent-pending GlyEco Type 1 recycling process is the only technology that can process and clean all five types of hazardous waste glycols to meet or exceed ASTM standards indistinguishable from refinery grade glycol. Furthermore, the U.S. Environmental Protection Agency [EPA] requires most federal agencies to buy products like antifreeze with the highest recycled content level practical. Most federal agencies report a lack of supply of recycled glycol to meet their demand.
Disclosure: I am long GLYE.OB.