Dr. John L. Faessel
ON THE MARKET
Commentary and Insights
1. rep·li·cate (rpl-kt)
To duplicate, copy, reproduce, or repeat.
2. or·ches·trate (ôrk-strt)
To arrange or control the elements of, plan and direct, as to achieve a desired overall effect.
"Best Idea for 2012" (OTCPK:GLYE) Inks Acquisition #7 in just over four months*
Recall the fabulously successful story of $15 billion market-cap Waste Management (NYSE:WM), and how it grew in seven years from $2 million in revenues to $14 billion through a series of acquisitions of smaller garbage / waste companies? It was a business plan for the ages, a model for advanced MBA study and a success in execution of a pre determined strategy that can best be described by the French term: par excellence - "to a degree of excellence; beyond comparison."
Opportunity now knocks on participation in another company along with key management that rolled-up the waste disposal business. Much of the genius of the above acquisition strategy is now being replicated and orchestrated by its creator, legendary roll-up virtuoso John Lorenz.**
GlyEco, Inc. (OTCPK:GLYE) $2.40 OTCBB
Yesterday (OTCPK:GLYE) announced that they "acquired" assets from another company in their roll-up strategy to consolidate assets of profitable companies that produce waste glycol as a waste byproduct in their business; it's their seventh acquisition in just over four months.*
The new 'green' undertaking is pointed at the $25 billion market for hazardous waste glycol that is reclaimed in the automotive industry from anti-freeze, heating and air conditioning, polyester fiber and plastic bottle manufacturing, aircraft deicing, and medical sterilization sources. The "supply" i.e. the amount of global waste glycol feedstock is immense. The USA creates approximately 700 million gallons of waste glycol and the rest of the world likely generates more than a billion gallons. We should note that the global number is hard to track as the huge amount of "other" glycol, with the exception of what Europe generates, is being dumped.
Key in this thesis is that with (OTCPK:GLYE)'s patent-pending technology most of this hazardous waste can be cleaned and reused again and again.
After installation of GlyEco Technology™, (OTCPK:GLYE)'s New Jersey facility will produce the highly sought after Type 1 (ASTM E1177 Spec) recycled material - indistinguishable from newly produced glycol. The sales average price of ethylene glycol in 2011 was approximately $5.69 per gallon. Central here is that right now (OTCPK:GLYE) can sell Type 1 product for over $4.50 a gallon. Big picture, glycol sales prices are on the rise, with global consumption over 5 billion gallons per year while processing costs stay relatively constant.
(OTCPK:GLYE) is one of my "Best Ideas for 2012" and I believe that this is a profit proposition that seldom comes down the pipe. What makes this deal scream-out is that after processing, the recycled and now "virgin" glycol can be sold for at least as much as refinery produced glycol. Also central to the proposition is that the waste glycol is acquired at an extremely low price and in some cases, as in Europe, 'you' can be paid to take it away.
Buying waste glycol low and selling the 'new' product high brings an astronomic EBIT to this story. Profitability looks to be extraordinary and I envision that (OTCPK:GLYE) will be a big dividend payer out in time.
My analysis indicates that (OTCPK:GLYE) will reach the break-even point at about 1 million gallons. The company plans to increase processing capability in their New Jersey plant to 10 million gallons per year during the installation of its patent-pending GlyEco Technology™. Obviously, these seven deals in just over four-months indicate an immense ability to execute and add to the compelling nature of the story.
I see a potential 10 bagger here as Lorenz plays out his acquisition strategy.
· Year one EPS projected at $.40 a share
· Projected revenue 2012 - $6 million
· Projected revenue 2013 - $48 million
· Projected revenue 2014 - $73 million
Management has said that it has already identified potential targets and developmental partners in Europe, Asia, India, Mexico, South America, and Australia. Management experience, breakthrough technology, market size where intrinsic demand and built-in supply is of staggering proportions, plus high estimates of EBIT make (OTCPK:GLYE) an outstanding investment in my opinion. My prediction is that additional deals will keep coming - soon - in both the USA and globally that will drive share price. They see a total available market of $3.5 billion.
Also notable: John Lorenz, Chairman and CEO of GlyEco will present at the Marcum MicroCap Conference on June 20th in New York City at the Roosevelt Hotel. The event is held by Marcum LLP, one of the top ten auditors of U.S. public companies.
Data to know re glycol: Approximately 35% of all ethylene glycol produced is used to make PET solid-state resins, 26% is used in antifreeze, 24% is used to make polyester fibers, 4% is used to make polyester film, 3% is used in PET chip resin exports, and 8% is used in surface coatings, polyester and alkyd resins, chemical intermediates, and other miscellaneous industrial applications.
* See yesterday's press release re the Antifreeze Recycling, Inc acquisition: http://www.nasdaq.com/article/glyeco-completes-agreement-to-acquire-antifreeze-recycling-inc-20120613-00422
** Mr. John Lorenz is a founder, the CEO and Chairman of the Board (19.3% shareholder) of GlyEco (OTCPK:GLYE). Mr. Lorenz founded Environmental Waste of America, Inc. in 1986, where he served as President and CEO between 1986 and 1997 until its merger with Envirofil, Inc. This is the public company which, through a series of mergers and acquisitions, morphed into Waste Management, Inc. (WM) NYSE with a market cap of $ 15.5 Billion. Waste Management currently offers environmental services to nearly 20 million customers. Together with its competitor Republic Services, Inc., the companies handle over 50% of the municipal solid waste disposal and recycling in the US.
(OTCPK:GLYE) has cash of $453,405 as of 3-31-2012 per 10-Q.
I'll have more on this exceptional opportunity in further reports.
If you wish to receive my Best Ideas for 2012, send a request to: Dr.Faessel@onthemar.com