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As a System / Business Solutions Engineer in the computer industry, have played an analyst role to assist Utilies and Wall Street firms to apply the technology in their business processes. My role was then tranformed in HQ to Business Management : across multiple system/software products,... More
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  • Is there a Supply Imbalance coming? PEIX, AVRNQ, GPRE, ADM
    A Wall Street article today raised the specter of the industry re-creating a supply imbalance as idle plants ( such as PEIX) re-open, or near-completed facilities become online.

    Everyone looks at the RFS demand jump from 2009 to 2010, and possibly an extended mandate for fuel mix from 10% ethanol to 15%    in the gasoline stream.  I would like to add a third demand argument to the 2010 scenario which will cause our supply and demand to be balanced.

    By now, the lack of rain in India and the surplus of rain in Brazil  have caused world sugar demand to push Brazil to allocate sugarcane 60% sugar 40% ethanol.  This shift was signaled back in 2009 spring-summer when the early Indian production challenges arose.  But since,  sugar yield in Brazil have been less and  harvest of total sugarcane is less due to rain prolongation into December ( Dec. 22 is a key date for closing harvest in Brazil ).   Now ADD to this, the sugar yield from the first two weeks ( Dec 1 - 18) Indian harvest is 9.6% less than expected.

    Australia's production, as 3rd  world sugar exporter, will also be short aprroximately 400K tones.

    Net, everyone will be pulling on Brazil sugar and Brazil Ethanol will suffice for its own need but at a higher price.  The Price and Supply factors in Brazil will keep the ethanol export  flow to pre-committed contract levels. Since for ethanol, there is no long term futures contracts ( like for sugar). No need to commit to export EXPORT. Other nations, in need of ethanol, will just have to bid up the price.

    So far, the US ethanol supply will  replace most of the exports from Brazil, since the US corn-based ethanol is cheaper than the sugarcane based Brazilian ethanol.   

    Enclosed here is the early trend of export from Brazil. Note that this period ends in October.

    BRAZIL´S ETHANOL EXPORTS (April through October, in 1,000 liters)

    Country/Region 2008/2009   2009/2010    % change

    Caribbean Basin 889,025       690,386       -22

    European Union 828,336       664,842        -20

    India                    52,037       317,675       +510

    Japan                  144,019      206,402        +43

    South Korea         69,886       184,428       +164

    United States    1,242,703      152,424        -88

    Nigeria                  60,771        72,221        +19

    Switzerland             2,547         41,334      +1,523

    Other                   110,624      192,988      +74

    Total                  3,399,949   2,522,700      -26%

    Source: Secex
    Brad Addington,

    Data above is April thru October, while the severe harvest shortfall was noticed in November/December. By my estimates, the US  in 2010  have to make up 2B liters or 500mil gallons shipped by Brazil to the Caribbean and the US.   Some demand from India, South Korea  might also flow to US supply base.   .

     A US policy question  might arise on the use of corn already produced. Mainly, an allocation of corn for food and then allowing  surplus above a reserve level to go to ethanol.  

    US  ethanol production from idle and near-completion plants  seems to have a demand environment left open by Brazil tight 2010 supply.


    Disclosure: Long PEIX, BIOF,
    Tags: PEIX, GPRE, ADM
    Dec 21 4:55 PM | Link | Comment!
  • NSM Top Line AND Bottom Line Better than Expected ?
    NSM beat on the top and bottom and projected a better top line for next quarter.

    So how about bottom line for next quarter?
    We heard :
    1- top line will at par par with current quarter and MARGIN will be about the same.
    BUT TWO QUARTERS ( from Nov.), expect 300 points better!!!

    2- Consensus bottom line was 14c for 2Q and they came in at 20C! So we should expect at least 20c next quarter - not the current 14c estimates!

    3- In 2Q, they had $28M of re-org cost. They said that plant closing will be $5-6m. Does this mean reorg cost will be $23M less? Was there an implied LESS re-org cost... Do not know. May be someone can comment.

    4 - Revenue Growth with a more aggressive margin was on NEW BUSINESS where the factory cost are already sunken in. The comments made on more aggressive price was related on new products in a different line of products ( for example LED LIGHTS for CARS, or SMART PHONES)... Areas where they got $15M ( out of $340M rev) and expect to triple revenue.
    The margin comments were specific to new business lines, not current products.

    At this rate, FY ( April 2010) earnings will be 20c HIGHER than consensus.
    80c total anyone from the current 59 consensus?  Tell us your thoughts.

    In 2011, interests will be lower( will pay back some $300m bonds) ;
    margins better by 300 points after reorg is done,
    and NEW PRODUCT LINES will kick in
    $1.20 earnings per share anyone?

    Put a  growth P/E on this and this is a steal here. 

    Disclosure: Long
    Dec 11 3:06 PM | Link | Comment!
  • Is APWR Different?
    As part of investing, one has to get a sense for what the company is all about.
    Started to follow them 6-7 months ago. and invested today after their call.

    What is different about this company:
      - at first, their contract with GE got my attention.  But today I got to hear :
         a) they have a backlog for many many entities and will ship to multiple customers rather than satisfy 1 oe 2 large customers.
         b) although the gov't would like to take a lot of their supply, they are going after the end market

       - They are not limiting them selves to one segment of the wiind power... the 2.7MW... they even had orders for 750KW units that they did not bring up in their release but they have a backlog there.

       - In the last quarter, they got into the 'solar' business for buildings... very different than wind power, wouldn't you say?

     - Lastly, I got won over when in the last question and answer they CLARIFY THAT THEY A 'PAYGO' ( my words) company. What does this mean? They have contracted to get paid for their work as they go along. Let's say that it takes n months to build a $4M unit,  they get a pre-order advance and they get paid as they  spend to build the unit. So revenue recognition is a PAYGO process.  the Sign of a true SERVICE COMPANY and not a manufacturing mindset ( pay at shipment).

      - 2010 backlog is not quntified but described as 'bigger than one would think of' ( my words).

    Worth listneing to the call.

    I am in
    Tags: APWR
    Aug 27 11:16 AM | Link | Comment!
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  • Does PEIX,AVRN,BIOF,GPRE Ethanol profits has long tail? Yes! Brazil short on export supply nxt 18 mths.US industry can supply WW slack
    Nov 27, 2009
    Nov 27, 2009
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