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adt's  Instablog

Investment Professional; Stockbroking and Funds Management; Analyst across many sectors; Past Specialisation in Banks and Financial Services; Economics, Investment Strategy and Financial Advisory background; Presently - Private Investment endeavours.
  • APOWER Q3 Earnings And Outlook
    Apower reported Q3 earnings of $0.28 on a Non-GAAP basis and $0.02 loss on a GAAP basis, incurring warrant and derivative losses along the way, and achieving expanded gross margin of 13%. Management re-iterated guidance of around $320M revenue for 2009. On a slightly increased number of weighted average shares, this implies full year eps of around $0.90 – Non-GAAP and $0.60 GAAP, and Q4 eps of $0.55 Non GAAP.
    The work book is such that eps will rise dramatically at some stage in the next two years, and probably approximate $2.00 per share, per annum during 2010 - 2011. As some commentators have pointed out the contracts in-train highlight huge revenue growth despite a number of contracts being won through partnerships and alliances – JV’s. Another thing to watch for with Apower, as a lead to the revenue growth is the cash deposits from customers, evidenced in the balance sheet but I imagine not taken to profit. These have been expanding also through 2009. Further, the GAAP losses will not always be there.
    Some of the issues that will dictate the extent of Apower earnings multiple and share price will be as follows:
    The proportion of earnings from wind turbine manufacture as opposed to distributed energy generation – renewable energy powered grids (micro) – which Apower now has contracts for in numerous forms of renewable energies. PE’s for grid construction as opposed to wind turbine manufacture appear quite disparate and earnings split, along with the significant growth rate the group is achieving (PEG less than 1), will dictate PE;
    What of the Evatech acquisition in Japan? How will this feed into group strategy? and
    What of mooted takeover? The group has been linked, albeit perhaps very casually to NRG Energy, which this year acquired a Texas retail distribution business, where Apower will in part be located, is looking for a wind project developer (offshore?), and last I saw is sitting on approximately 24,000mw of electricity production, 550mw under construction, and $5B cash.


    Disclosure: Long APWR
    Tags: APWR, Renewable Energies, Wind
    Dec 07 10:40 am | Link | 1 Comment
  • Early Nomination For Blooper Of The Year.
    Early Nomination For Blooper Of The Year Award - Zacks Research On A-Power Energy.

    I was going to make this note a very lengthy dissitation and leave it until Decmber 31. However I'd say the fat lady is singing already.

    Three times in 2009, mainly around the middle of the year, Zacks Research publicised Strong Sells on A-Power Energy Generation Systems. These were in the range $6 - $12 per share. They mainly eminated from Technical analysis, of which I am an advocate. But I have a clear view to fundamentals as well. Each time the stock showed noticable weakness and has had a highly volatile year as a result, contributed to by the keeness of Hedge Funds to Short it.

    The stock now stands at $17.50, having reached an intraday high of $18.15 - roughly double at least one of Zacks Strong Sell Recommendations, which always put A-Power at the top of their Sell List, despite its Small Cap size, even still at only $600M.

    The fundamental story on A-Power is now quite clear. The space it is in is extremely and strategically attractive going forward, almost regardless of broader economic conditions - a secular play; And the company as I have stated on this site before has built some considerable structure and mass through 2009.

    With all the volatility through the likes of Zacks and Hedgies et al, which only goes to increase corporate cost of capital, along with their short trading profits, and through periods in the last 12 months has threatened corporate existences, I am relieved the stock has made it through. It would appear set to reap the rewards it appeared it would from the time of the announcement regarding wind turbine component agreements with the likes of GE.

    Well Done to the Companyand Management. And well done to those who have ridden the volatility and are enjoying the current run. And to Zacks and the Hedgies who took delight in shorting it along the way.......................................................! I hope you are getting squeezed now, but probably never enough. From an investing perspective, I guess the way to combat stock voltility like this is through Advanced Options Strategies.
    Tags: APWR, Zacks Research
    Nov 27 05:39 pm | Link | 1 Comment
  • Global Financial Institutions Tax?
    Global Financial Institutions Tax?
    In the last 12 months Banks and Financial Institutions have been given the earth, only to sit on the funds, trade markets and create market, commodity and stock volatility and increase the cost of capital. In fact they have increased the cost of capital through both not lending and through financial market trading.
     Why shouldn’t they be taxed further?
    The appropriate tax of course would be additional tax on their Global Financial Markets Trading Profits. Exactly the source of the current cost to the economy - perhaps reflected in delayed private sector recovery - and the cost to corporate capital. By way of introduction it could be perhaps a Large Scale Financial Markets Transaction Tax or a Trading As Principal Tax.
    It is no doubt a good thing that we have a healthy financial system and healthy financial institutions, and they needed propping up. But in all reality they have no more right to government aid and capital (taxpayers capital) than any other corporate, yet they have hogged a lot of recovery aid. Furthermore, they debatably caused the crisis that brought about the layers upon layers of aid driven government debt through their irresponsible securitisation, derivates, trading and in some cases lending (inordinate loan to valuation) activity. I say debatably, but I believe there is no doubt they are the root of the recent financial system and economic evils, not Central Banks as some would have us believe. Central Banks set conditions, Financial Institutions and other Corporates react to these conditions.................................................not always in the right way.
    There has been a severe lack of flow on lending, following dollops of government aid around the world. This has come in many forms including Deposit Guarantees. Yet, many erstwhile projects have had to resort to raising equity capital against underpriced share prices and therefore at unduly expensive cost of capital, or they have seen corporate restructures, de-listing and at the extreme bankruptcy. I can nominate projects across Copper and Gold Mining, Rare Earth Mining, Renewable Energies and Agriculture and Food Processing, to name but a few, that failed to gain bank finance in 2009.
    While on the one hand it would seem unreasonable to broadly tax entities that have just started breathing after delivery of significant food parcels, some are breathing very well and many are taking the opportunity to trade markets and take easy Global Financial Market Profits rather than do what banks are meant to do. That is lend and act as an intermediary between saver and borrower, preferably in the Real Productive Economy and not the Speculative Economy. Many banks can afford some sort of tax and morally, even though for example in the US funds are being repaid by banks to government, the taxpayer decision to prop them up, when many were irresponsible and contributed to the financial crisis, deserves some sort of thankyou if you like.
    Certainly the issue from here is not further aid or stimulus to banks, although there would appear likely further write-offs / losses – derivates and lending related. It is Private Sector recovery eventually taking over from Government monetary and fiscal stimulus. Financial institutions are of course important in this process. To date they have not really responded, rather remaining in the speculative, easy money domain. Perhaps a Global Financial Markets Trading Profits Tax or where decipherable – Trading As Principal Tax, would be a way of shifting Financial Institution focus away from Speculation and onto the Real Economy and lending for Real Projects, while at the same time saying thankyou to governments and taxpayers for saving their skins.
    It would appear that banks have gone from one extreme to another. Finance anything that moves in order to propel asset prices and create even more leverage, to, are we a bank? Are we supposed to lend? Oh, is that what banks do.
    Goldman Sachs, which is now of course a Money Centre / Trading Bank, as opposed to its previous Investment Bank status, and which is one of the higher generators of Trading Profits in the world, would appear to have made some response – in the US – having apparently recently financed a shopping centre. Well Commercial Real Estate finance is fine. What about putting up a Parking Lot as well? You never know what you’ve got until its ....................... So Americans will be able to shop with limited advancements in the means of production required to create employment, income growth, preferably export income, and consumption.
    Tax their profligate As Principal Trading Profits. And in so doing help reduce government deficits and debt and reduce financial market volatility and the cost of capital. Maybe additionally governments can look even more to lend to or form equity partnerships with the private sector through Development Corporation style entities, on relevant projects, thereby replacing or crowding out banks. In some countries I guess this is already in train through the significant bank equity governments’ have taken. Maybe government ownership should be retained and grown, or at least not relinquished. One hopes lending policy can be influenced at least in the near future. And there are many relevant projects such as Mining, Renewable Energies, Electricity Generation and Smart Grid utilising Renewable Energies, Rare Earths Mining and Processing, Products and Manufacturing Industries utilising Rare Earths and / or Renewable Energies, and Food.
     
    Andrew D Turner
    adt
    Nov 10, 2009
    Tags: GS, Banks, Global Politics
    Nov 10 03:06 am | Link | Comment!
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