Honeywell: Detecting And Cleansing The Air Of COVID-19

Edward Vranic, CFA profile picture
Edward Vranic, CFA
5.75K Followers

Summary

  • There is growing evidence that COVID-19 can spread through the air. This is concerning as society tries to get back to normal and open schools, stores and restaurants.
  • Honeywell has produced its Healthy Buildings solutions to help manage virus outbreaks within an enclosed space.
  • Two microcap companies named Kontrol Energy and Manganese X are also developing their own solutions for detecting and cleansing COVID-19.

Much of the focus of traders and investors with respect to managing the COVID-19 pandemic has been on developing a vaccine, testing, hand hygiene, personal protective equipment and contact tracing. But one area that I believe might be relatively overlooked is building management. The Centers for Disease Control revised its COVID-19 guidelines earlier this month. The CDC has announced that the virus “can linger in the air for minutes to hours and travel farther than six feet". This poses serious issues for containing the virus, particularly as society tries to get back to normal with schools, retail outlets and bars and restaurants opening up. This also presents an opportunity for companies that are developing HVAC COVID management solutions.

Honeywell International Inc. (NASDAQ:HON) recognized this problem and opportunity months ago, launching its Healthy Buildings solutions in May. The company is able to combine its air quality, safety and security products with advanced analytics in order to provide building managers with personalized service to monitor for and minimize any potential virus outbreak. The stock has underperformed the market since the virus outbreak despite the launch of this solution and its heavy involvement in distributing PPE. So investors who are looking for an under-the-radar stock that has benefited from the coronavirus economy might have one in HON.

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A temporary win on virus management could lead to permanent new revenue streams in a variety of industries

Honeywell's opportunity is enormous and varied, as evidenced by a recently announced collaboration with the Carolina Panthers NFL team to manage the safe return of fans back to the team's home stadium. The Healthy Buildings solutions will continuously monitor the air quality within Bank Of America Stadium and Honeywell will provide fans with Panthers-branded hygiene and protective gear such as masks, hand gel and cleaning wipes. Given the resistance of some people in the United States to obeying safety protocols which has led to further spread of the virus, the branded gear might help to encourage proper use.

Once the threat of COVID-19 subsides, the Honeywell solution can morph into an IoT building management service. In addition to monitoring for the virus, it will identify and correct building controls issues such as carbon dioxide levels, temperature and humidity. The Healthy Buildings dashboard can manage aspects of building management like fan capacity and cleaning tracking. This can lead to cost savings and service improvements as resources and employees such as janitors can be more timely and efficiently deployed. The virus acts like a door-opener for Honeywell's building management solutions that could lead to permanent new business that might otherwise have been a harder sell without the immediate urgency.

Other companies looking to capitalize by detecting and cleansing the air of COVID-19

While Honeywell will be a major benefactor in this sector, there are smaller companies that offer a more "pure play" speculative upside approach to COVID building management than a $100 billion company.

Kontrol Energy Corp. (OTCQB:KNRLF) (KNR.C) recently created what it calls BioCloud technology in order to manage the pandemic. This wall-mounted unit detects the presence of COVID-19 in the air and triggers an alert system to warn building managers so moves can be made to control an outbreak before it occurs.

Last month, the company was featured in an article by the CBC (Canada's government-owned national news media outlet), causing the stock to more than double in price after it already had a good run. It currently has a market cap of approximately $110 million. The immediate target market will be schools, hospitals, long-term care homes and mass transit. The company estimates a $12,000 price tag for each unit and says it has secured the manufacturing capacity to produce up to 20,000 units per month. The technology was independently tested so the next step would be securing contracts.

In addition to BioCloud, the company recently procured a new order for its SmartSuite® smart building technology across four apartment buildings located in Ontario, Canada. So much like how Honeywell is able to leverage its virus management solutions into an IoT building management contract, Kontrol may be able to do the same thing on a smaller scale.

While Kontrol has developed a virus tracker and early warning system, Manganese X Energy Corp. (OTCPK:MNXXF) (MN.V) is looking to go one step further and outright kill the virus once detected in a building. Earlier this month, its subsidiary Disruptive Battery Corp. signed an MOU with PureBiotics to acquire a significant equity share of up to 50% in a PureBiotics Environmental Air Quality Control Company. Even though it's still in the MOU phase, PureBiotics' CEO Lino Morris recently joined the company's Advisory Board.

The two companies are combining forces to develop a product that will circulate air disinfection agents through a building's HVAC distribution system. It leverages Manganese X's patented disinfection apparatus system with PureBiotics' existing product lines and technologies in order to cleanse buildings of COVID-19 and any other pathogens. Lino Morris has over 40 years experience in the pharmaceutical industry. That experience will come in handy as he will be the one spearheading additional testing and validation of the product. He is reaching out to universities to test the air quality control delivery system. Just like Kontrol, Manganese X wants that third party validation of its product.

Manganese X sits at around a $25 million market cap, a fraction of Kontrol's valuation as the additional hurdle of validation needs to take place. If validation is successful, Kontrol represents a demonstrated upside for Manganese X shareholders. The stock has already moved up healthily over summer prices and has experienced volatility recently. Hype over Tesla's (TSLA) recent inclusion of Manganese in its battery and desire to source battery materials is the primary reason for the increase. Manganese X owns the Battery Hill Manganese project situated just north of the U.S. border in New Brunswick. I briefly outlined it and the company's familial connection to Tesla in a previous article. Manganese X shareholders have a reduced risk from diversification built in due to these two disparate lines of business. Should one not pan out, that has absolutely no impact on the probability of success for the other.

Without getting too heavily into speculation, assuming that both solutions from Kontrol and Manganese X progress as hoped, it would make a lot of sense for a building manager to have both products on hand. BioCloud to detect COVID-19 and the Manganese X solution to cleanse the virus through the HVAC system.

While Honeywell offers a virus building management play for conservative investors, these type of small cap companies are more attractive to risk-tolerant small cap investors such as myself. Both Kontrol and Manganese X have moved up a lot in the past few months, so speculative investors are no longer "buying low" and have to be prepared for volatility. Early stage investors who are in at lower prices might choose to take their profits along the way. But based on Kontrol's market cap of approximately $110 million and Manganese X's market cap of approximately $25 million, they leave a lot of room for upside. I will continue to monitor the small cap sector for indoor virus management opportunities such as Kontrol Energy and Manganese X.

This article was written by

Edward Vranic, CFA profile picture
5.75K Followers
I am a private investor based out of Toronto, Canada and I have been investing since 2003. After 8 years in Corporate Finance with a Canadian Telecom company I have decided to dedicate myself full-time to the capital markets. I write on Seeking Alpha to demonstrate my financial analysis and writing skills across a variety of industries and to take advantage of any story-based trading opportunity that may arise. My passion and greatest depth of knowledge is on Canadian small cap stocks and I consider my blog posts to be some of my best work. I am interested in any freelance opportunities that may arise outside of Seeking Alpha on Canadian or American listed stocks.

Disclosure: I am/we are long MNXXF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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