Seeking Alpha
View as an RSS Feed

Kevin Quon  

View Kevin Quon's Comments BY TICKER:
Latest  |  Highest rated
  • Will Solazyme Meet Its Margin Guidance? [View article]
    futuretrade,

    Bunge actually never stated they would sell their sugar business, although the media appears to be broadening that suggestion altogether. They one thing they did say, however, was that it would look at a "full range of options" for its unprofitable sugarcane-milling business in order to increase shareholder value. Specifically, that the "status quo is unacceptable, and that we will be active in finding better ways to position ourselves"

    But the thing is if you listen to what the company's saying, there is only one particular problem unit in the sugar division itself: "sugarcane milling operations". Global sugar & ethanol trading along with merchandising is doing well. Risk management capabilities is doing well. The value chain & customer focus is also doing well. But it comes down entirely to the milling operations (largely due to things unable to be controlled like weather).

    Now there is one thing that would typically offset poor sugar production and that is ethanol production. But government policies are preventing this from offsetting the problem.

    So this brings us down to what Bunge will do from here, and quite honestly it doesn't sound like they know yet either (or aren't willing to give any hint yet). Despite 6 years of effort, they can abandon it altogether (sell everything). They can also adjust certain aspects of their business segment (add/sell/upgrade certain aspects of the problem unit. They can also diversify the method of offsetting the problem (ie through new tech like szym).

    Out of all three of these options, the last seems very feasible to me. The only issue is that it takes money and a lot of time and it might seem bold to investors who probably never even heard of szym, let alone trust their technology. Perhaps Bunge is vocalizing a problem now in order to justify later their willingness to extend their relationship with SZYM.

    I don't see BG backing out of its joint venture, even if that stands as a possibility should it sell out its sugar business. But offhand, it doesn't really sound like selling off the sugar division is really the intention altogether.

    However, if BG does dissolve the JV, szym has the right to buy out its portion according to the framework agreement (and with the financing arrangement already in place, this clearly isn't something szym can't afford). It shouldn't be a problem to work with the new owner too, who would obviously benefit from szym's production plant already based at the mill.


    Kevin
    Oct 24, 2013. 10:08 PM | 1 Like Like |Link to Comment
  • Will Solazyme Meet Its Margin Guidance? [View article]
    8621971,

    I appreciate the input, & for our past conversations. As for your own question about currency, I'm not sure. It would probably be dependent on where the JV is buying/selling, although presumably much of this would be in Brazil.

    Kevin
    Oct 24, 2013. 01:26 AM | Likes Like |Link to Comment
  • Will Sugar Hold Solazyme Back? [View article]
    jhahn197,

    I believe Proterro is just a complementary source of sugar for SZYM. While I would hope an acquisition is possible, such speculation is always unfounded until it becomes a reality. Proterro appears to offer a significant advance in sugar production, but its implications are for the entire biofuel industry. Valero, ADM, Pacific Ethanol, etc. & all 1st gen ethanol makers are just as likely to find significant value in Proterro's tech.

    While I don't know if an acquisition can be expected down the road, I can very much visualize an interesting use of the technology as a co-generation possibility. Imagine a field of Proterro's photobioreactors feeding off of a sugarcane mill letting off a significant amount of CO2 from burning the spent cane bagasse. Recycling the otherwise lost carbon only helps to increase the yield of a particular plant. It would definitely be an efficient method of spending a minimal amount of capital to enhance an existing operation.

    Kevin
    Oct 20, 2013. 11:55 AM | 1 Like Like |Link to Comment
  • Will Sugar Hold Solazyme Back? [View article]
    Walter P. Chrysler,

    The Minnesota facility is being handled through the DD & BP joint venture, Butamax, which has been in a patent dispute with GEVO for as long as I can remember over the core technology. The technology holds a fair amount of promise, but even Gevo struggled to ramp up its operations which may be a sign of their ability to control it. Those two factors alone give reason to be hesitant about the new operation for Butamax. Honestly, I'm a bit surprised that Gevo hasn't been acquired by its competitor considering its low market cap of <$100 million. I'm not a big supporter of biobutanol just yet. It may be a step above corn ethanol, but the market still seems subject to lower margins and feedstock price volatility in my opinion. According to this (http://bit.ly/1cGzuBj), the annual global market for butanol is only $6 billion right now. That's great for now, but will require a very significant improvement down the road for rapid expansion.

    Kevin
    Oct 19, 2013. 12:46 PM | Likes Like |Link to Comment
  • Will Sugar Hold Solazyme Back? [View article]
    Hi jimcoe,

    Quite honestly, there aren't any public companies that really catch my eye in terms of this new sugary frontier. I'm not a fan of ceres given its financial issues. Codexis isn't exactly a company I find much confidence in either. In each of these instances, we're talking about seeds or enzymes really. If you do find yourself wanting to go down this path, maybe a more established company like Novozymes (which is profitable) would be better.

    Overall, I'm not a big fan of investments trying to break into a single commodity market without something revolutionary altogether. better bred plants & better enzymes don't cut of it for me personally. They can succeed, but the risks seem high. Private companies like Renmatix & Proterro seem more promising to me down the road.
    Oct 18, 2013. 10:37 PM | 1 Like Like |Link to Comment
  • Will Sugar Hold Solazyme Back? [View article]
    Thanks chudzikb, I appreciate it. Despite what some will say, these alternative sources of sugar sure appear to be well on their way to becoming a commercial reality thanks to new approaches in technology.
    Oct 18, 2013. 10:29 PM | Likes Like |Link to Comment
  • Unilever Increases Its Commitment To Solazyme's Technology [View article]
    1 ring binder,

    I note that you wrote this after the article was already published. You can read it here if you like:

    http://seekingalpha.co...

    kevin
    Oct 2, 2013. 10:59 PM | 1 Like Like |Link to Comment
  • Solazyme: Progress Continues Even As Uncertainty Spreads [View article]
    Maxx,

    I am not going to go back and forth with you, so this will be my only statement to you. Let us be clear about what has occurred here.

    By ignoring the fact that analysts had fully consolidated their revenue estimates, you unfairly held their numbers accountable to almost half of the production the analysts were using. You ignore that all of the revenue is accounted for, not just SZYM's share according to full consolidation as guided by management. This practically doubles the supposed ASPs that SZYM would need to support in order to meet analyst estimates. The only bad numbers being thrown around were your own. Rather than comparing apples to apples, you threw in an orange in order to carelessly throw out the word "doom."


    To testify to these bad numbers was the additional fact that you inexplicably used 15 months of production in order to compare against a 12-month revenue estimate in order to come up with a target ASP supposedly covering 12 months. While using non-consolidated estimates nearly doubled the ASP figures without justification, the latter brought it down. What resulted from all this was a target ASP on the high side to back up your argument that szym may be "doomed" by supposed analyst optimism.


    Yet your opinion can only be supported if you ignore the standard that everyone else was using to begin with.


    What I find most perplexing is that you now criticize my scale-up rate for being too high. Ironically, while I only expect 75,000 MT (62.5%) of capacity in 2014, your tables suggest that you expect 99,700 MT (83%) of capacity to be utilized when you add back in Bunge’s share of the production. In fact, by using your higher capacity utilization figure your article would really be suggesting that analysts are only expecting target ASP’s of $1725 per MT. Clearly though, you can't print such figures. To do so would fly against the very purpose of your article, and I haven't seen a correction yet.

    I welcome your supposedly cautious articles when they're embedded in truth. But this one was not. I have nothing else to say that hasn’t already been said.


    Best regards to you as well,
    Kevin
    Oct 2, 2013. 10:27 PM | 8 Likes Like |Link to Comment
  • Unilever Increases Its Commitment To Solazyme's Technology [View article]
    RWRATTI & 1 ring binder,

    If my article gets approved by my editors, you'll see my response and thoughts on the matter. I just submitted it.
    Oct 2, 2013. 04:10 AM | 1 Like Like |Link to Comment
  • Unilever Increases Its Commitment To Solazyme's Technology [View article]
    Appreciate it, 1 ring binder. Wish you the best as well.
    Sep 27, 2013. 09:00 PM | 1 Like Like |Link to Comment
  • Unilever Increases Its Commitment To Solazyme's Technology [View article]
    1) It would be misleading to believe that Unilever's oil is necessarily looking for a palm kernel oil relacement. The two have been designing tailored oil profiles for some time. Hints of oils that increase cleaning capabilities in soap have been made along the way. With possible yield increases & capabability increases, it'd be a stretch to ascertain a fair price based on pko alone. Also, while oil prices have fallen, so have sugar prices since the stated time. The rate of research gains also suggests that production costs may have come down over the last 3 years as well since the stated $1000/mt. I find it unlikely that SZYM will throw its hands up & chase a low-margin market after holding out on Fuels which it could produce at the low margins you suggest based on current PKO prices.

    2) I'm not sure how you came to that conclusion on $1500-$2000 without knowing about the green factor & logistical supply factors & novel capability factors, and etc. My guess is you're just comparing against standard transformer oils.

    3) That's one way to look at it. I disagree, and could waste time arguing against it. But you seem committed to this belief. Instead, I'll just refer to my article for those who want to see things differently: http://bit.ly/1eNXFRA
    Sep 27, 2013. 08:44 PM | 1 Like Like |Link to Comment
  • Unilever Increases Its Commitment To Solazyme's Technology [View article]
    centerroad,

    While $1000/MT represents fuels & chemicals, ASP's of ~$1500/MT would suffice in capturing the 30% gross expected for this category.


    On the other hand lets consider food where Painter noted prices will be north of $5000/MT (see transcript below). Even if costs were $2000/MT (as seen on the high end of the margins graphic seen above), we're looking at 60% gross margins.

    http://seekingalpha.co...


    Just something to keep in mind.

    Kevin
    Sep 27, 2013. 03:05 AM | Likes Like |Link to Comment
  • Unilever Increases Its Commitment To Solazyme's Technology [View article]
    RWRATTI,

    I can't really take credit for graphics the company made. Thanks though.

    Well, should we use your estimate of $3000/MT and SZYM's 70k MT capacity (0.5[100k] + 20k), you are looking at $210 mil right there.

    This is before considering the effects of co-products and Algenist (which is contributing $20-25 mil on less than 1.8k MT capacity alone). This is likely to grow given the increased product offering & ramped up sales.

    Consider also the high amount of research revenues coming in ($6 mil last quarter alone) which may increase with additional partnerships.
    ----------------------...

    Practically speaking however, ramp up will limit the amount of oil revenues coming in - my guess is 75% capacity for the year. I do believe that food will have a bigger impact that people realize (high rev figures/MT). Then theres the already annoucned relationships, Akzo, Dow, Mitsui, BG, ADM, which will likely convert over.... even if its not publicly announced.

    Kevin
    Sep 26, 2013. 10:40 PM | 2 Likes Like |Link to Comment
  • Unilever Increases Its Commitment To Solazyme's Technology [View article]
    6125501,

    There are several leads that indicate SZYM is exploring the use of "green" drilling fluids and other products used for the oil & gas industry. I roughly refer to one particular lead in an article written last year found below:

    http://seekingalpha.co...

    Kevin
    Sep 26, 2013. 10:30 PM | 2 Likes Like |Link to Comment
  • Unilever Increases Its Commitment To Solazyme's Technology [View article]
    That "green cred[ibility]" is already underway. It's why Akzonobel joined forces with SZYM. Same with Mitsui. For that matter, probably everyone who partnered already had some aspect of this in mind. I'm not so sure if UL will be the motivator for others to join, but the credibility is already well known. If anything, it does serve to entice new investors, however, given the well-known brand of Unilever & its green conscience.

    Even food companies (like Unilever) who are facing qualms with palm oil in the present have to concern themselves with being green. Expect a food deal w/ Unilever down the road IMO.
    ------------

    As for your other topic, anything is possible. But I believe the idea of something that technically hasn't been announced or taken place yet serving as the motivation for selling pressure is a bit of a flawed concept. Profit taking and/or testing new supports are more likely candidates.
    Sep 26, 2013. 10:27 PM | 1 Like Like |Link to Comment
COMMENTS STATS
1,275 Comments
1,841 Likes