I wrote an article on Ocean Power Technologies (NASDAQ:OPTT) on January 23rd titled:"Ocean Power Technologies: A Speculative Opportunity." In the article I pointed out that the stock was trading below net cash and recommended the stock as a speculative buy.
Ocean Power Technologies is a pioneer in wave-energy technology that harnesses ocean wave resources to generate reliable and clean and environmentally-beneficial electricity. OPT has a strong track record in the advancement of wave energy and participates in an estimated $150 billion annual power generation equipment market. OPT's proprietary PowerBuoy system is based on modular, ocean-going buoys that capture and convert predictable wave energy into clean electricity. The company is widely recognized as a leading developer of on-grid and autonomous wave-energy generation systems, benefiting from 15 years of in-ocean experience.
I see at least 3 reasons to buy the stock currently:
1. The company announced a teaming agreement with Lockheed Martin
On July 11, 2012 the company and Lockheed Martin (NYSE:LMT) entered into a teaming agreement with the goal of developing a 19 megawatt wave-energy project in Portland, in the state of Victoria, Australia. This is one of the largest wave-energy projects announced to date, and leverages a grant from the Commonwealth of Australia. The Commonwealth of Australia has granted $65.3 million for the project.
2. The stock is trading below net cash
According to the most recent quarterly filing filed on March 12, the company's total cash, cash equivalents, restricted cash and investments were $37.8 million on January 31, 2012. Net cash used in operating activities was $9.7 million for the nine months ended January 31, 2012, compared with $14.0 million for the same period last year. The company has 10.2 million shares outstanding, which creates net cash of $3.70 per share. The company will report its fiscal fourth quarter and full year 2012 financial results before the market opens on Friday, July 13, 2012.
3. The company has six projects ongoing
- LEAP Autonomous PowerBuoy in New Jersey: OPT has successfully operated an autonomous PowerBuoy off New Jersey, designed and manufactured by OPT under the U.S. Navy's Littoral Expeditionary Autonomous PowerBuoy (LEAP) program for coastal security and maritime surveillance.
- Project Coos Bay in Oregon: OPT is proposing to develop a utility-scale, commercial wave park in North America at Coos Bay, Oregon. The planned size of this park is up to 100 megawatts, and it will be the largest wave energy project in the world when it is completed.
- Project Reedsport in Oregon: OPT is developing a commercial wave park on the west coast of the United States located 2.5 miles offshore near Reedsport, Oregon. The first phase of this project is for 10 PB150 PowerBuoys, or 1.5 megawatts.
- Project Santoña, Spain: In July 2006, OPT formed a joint venture with Iberdrola S.A., global oil major Total (NYSE:TOT), the Spanish Government IDAE (Institute of Energy Savings and Efficiency), and the local regional development agency SODERCAN, for the turnkey construction of a wave farm off the North coast of Spain. OPT has been awarded funding by the European Union to deploy a PowerBuoy at the Santoña site developed by the joint venture.
- Project Cornwall, England: OPT aims to develop its PowerBuoy technology at Wave Hub, an innovative renewable energy project in the South West of England, which expects to create the UK's first offshore facility for the demonstration and proving of arrays of wave energy generation devices.
- Project Portland, Victoria, Australia: Ocean Power Technologies (Australasia) Pty Ltd is developing a 19 megawatts wave power station connected to the grid near Portland, Victoria. The project has received an AU $66.46 million grant from the Federal Government of Australia.
I recommend the stock as a speculative buy below the net cash level of $3.70 per share. It is possible that we get more catalysts for the stock from the six ongoing projects.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OPTT over the next 72 hours.