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A speculative play on UQM

|Includes:UQM Technologies, Inc (UQM)

I threw a few hundred shares in the basket the other day as a trade. But I've been watching the company for a while looking at it as a potential growth story. Today I went to the web site and again read everything there, looked at past performance (woefully inconsistent and under-achieving, especially in management performance compared to its peers in the segment) and looked at recent developments.

In fiscal 2010 they generated about $114.5K per employee (alternately, they are projected to generate $132K/employee using 2011 fiscal year estimates) in revenue annually, but there has been a transition undertaken that should bump that considerably if they are successful. Since fiscal 2010 actual revenues were only $8.3M, you can see from the estimates below that revenue per employee should jump substantially when you add in a new manufacturing facility being so automated. There should not be commensurate jump in head count.

P/S and P/B are nasty ATM. Fiscal estimates are for 2011 @ $10.3M, 2012 @ $33.2MM and 2013 @ $79.6M. If some of the irons in the fire hit, these could be absurdly low estimates, assuming they were generated before all these things came into play.

The most significant thing is the transition they are attempting from a more-or-less one-off design, engineering and contract firm to a high-volume-capable manufacturing outfit with supporting design and engineering services for both in-house and contract use. They have restructured into 4 operating segments to better suit their new strategy.

Along this same transition vein, they support their customers with GUI interfaces for the programming of control modules, reducing cost and shortening lead-times for them, especially important to the automotive industry.

The biggest steps in this transition are the new management team, brought in last year, that has large-scale automotive experience, a new manufacturing facility, DOE grants for the transition, Rolls-Royce selection of UQM for their EV, development fleets in test with SAAB and Audi, and production contracts with CODA (start-up, so can't really bank on that) and Proterra (has sales already in So. Cal. and elsewhere, but also new).

Remaining from their past activities, they also supply control modules to Eaton.

They sponsor a motorcycle racing team that just set new records with UQM equipment. Performance PR can't hurt.

Not listed in their materials yet is another start-up that uses their motors, Wrightspeed. You may recall that their initial target is class 2(?)-6 delivery vehicles and they received funding from California to get their manufacturing going.

ISTM that *if* just one of the start-ups or the majors hit it big, UQM will be OK. *If* oil prices remain high, *if* consumers begin to accept the various EVs they will be offered, *if* UQM can execute, ... they may become a quite profitable concern. That's a lot of big "ifs" just off the top of my head.

On the competition side, I only recall Parker-Hannifin, used in the CPST auto solution. But I've not yet gone looking. Barriers to entry should be fairly high as UQM holds many patents that make their motors more efficient, smaller, lighter,  flexible, and they claim packaging makes them easier to integrate than many of their peers' products.

Adding to the barriers to entry would be the facilities, expertise, automotive validation process, and technology needed to enter a market where very high efficiency, reliability and longevity are at a premium.

As with any new application for a product, the first adopters may set the stage for a long trend of adoption by others. With high-end brands like Audi, Jaguar and Saab possibly getting the ball rolling, I can foresee some potential growth going on here. If any of the start-ups - Wrightspeed, CODA, Proterra - take off, that's icing on the cake.

At this point I still call it a speculative play, but one that seems to hold a little less fear for dipping a toe in the water. There are options available but I see no strike price, delta and pricing combinations that I like. OI is small so there's also not much liquidity in them

Under these conditions, it's better to just play the stock directly, IMO. I plan a small core position with trading blocks around it, as I do with most of my long-term holds.

Next reporting, IIRC, is for around 5/23. I'm not expecting any earth-shattering results and with the recent expenses of transition going on there might be a miss. However, with $45M in funding from the DOE, their cash position should remain quite reasonable.

Here's some links for folks that might have an interest. Your own DD and considertion of your personal profile should be paramount as this is certainly no slam-dunk at this point.

Here is a quick read of the latest company presentation (PDF).

Here is the latest shareholder meeting presentation (PDF) from 8/2009 (I haven't a clue as why there's not a more recent shareholder meeting - transition to new management team?).

Here is the UQM web site.

Since CODA is the largest single contract right now and it's a start-up, I thought investigastion into CODA's web site might be warranted - it's slim pickens (no, not the old western actor!) though.

As always, your own DD and profile should guide you and you should keep in mind my experimental nater (that is, I'm new and all).

HardToLove

Stocks: UQM