Aemetis (Nasdaq:AMTX) is a company trading at Nasdaq at $3 ($60 Mln Market Cap) that operates 2 plant (1 in California: 65 Mln Gallons per year capacity and 1 in India: 50 Mln Gallons per year capacity) focusing on several growth business:
- Health products, including high grade alcohol, refined glycerin, blended hand sanitizer gel and liquid as well as packaged sanitizer products;
- Renewable fuels, including low carbon and below zero carbon ethanol, biodiesel, waste wood, ethanol and byproducts, including carbon dioxide and corn oil;
- Dairy biogas, including, renewable natural gas for transportation fuel and technology development;
- Refined glycerin and distilled biodiesel – biorefinery on the east coast of India near the port city of Kakinada.
Aemetis made positive progress toward increasing revenues and sustained profitability in each of our four businesses during the second quarter of 2020, infact the Analyst expectation was for a loss -USD 0.30, but the company posted a +USD 0.1 profit.
In response to a national shortage of hand sanitizer used to slow the spread of the of the COVID-19 virus, in late March 2020, the FDA and the Treasury Department’s TTB agency issued temporary regulations, allowing fuel ethanol plants to produce alcohol for hand sanitizer. Responding to this approval and the spike in demand for sanitizer products, Aemetis delivered the first sanitizer alcohol within a few days and it was a massive event that let the firms to become profitable since, in order to give an idea, ethanol for fuel is sold at less than USD2 per gallon, but on Amazon you can sell hand sanitizers (done for 70% from alcohol from ethanol) at +USD30 per gallon!
Aemetis is also the only big Hand Sanitizers producers in all WEST US serving +100 Mln people.
The company has already taken in place or it will start soon new project that will increase profitability like the CO2 sales and the land lease for the CO2 plant, Dairy biogas, ZEBREX membrane, the heat exchanger, solar panel microgrid, vapor recompression system,... and other projects that are and will increase profitability in the next quarters.
Aemetis is also in the process to do the technology improvements in order to get soon the USP certificate and during the IIQ the management told that they want to convert big part of the US plant to Hand Sanitizers letting the profitability to increase massively since the company has already commencemed contracted production of hand sanitizer under its branded Aemetis Health Products label for sales to government, businesses and academic customers, as well as directly to consumers via the Amazon Marketplace.
The company is also in the EB-5 Program and it has closed a $35.5 million Phase I EB-5 Program, which was funded by 71 foreign investors that will help the company to payback the high cost debt held with Third Eye Capital (unitl 15% that can be taken away from the new EB-5 debt at between 1%-3%).
Giving quick numbers and without considering the new projects going online, the possible fast payback of high cost debt and the continuos and increasing production of hand sanitizer, we can say that:
IIQ 2020 --> EPS:$0.1 X 4Quarters = $0.4
Energy firms has low P/E Multiples of around 10/15, giving the transformation to hand sanitizers (healthcare) and the growth to the Amazon market place (more techology), I would say that a fair P/E multiple could be 25
$0.4 X 25 = $10
This is a 3Bagger from current valuation and it does not consider several positive factors that can impact profitability as the one listed above. If we take them into consideration, the fair value can be a lot higher and maybe reach a Market Cap of $1 Bln, that is $40-$50 for share.
Disclosure: I am long on AMTX (and also PEIX a similar company) and I am thinking to buy more in the next days.