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A
Chart That Actually Tells the Company's Story |
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There's
nothing more satisfying to an investor than a chart that actually reflects
the value of the underlying company. And yes, it does happen
sometimes... honestly. Case in point - China
Energy Recovery (OTCBB: CGYV). While the last few months have negatively
disrupted the stocks of some very strong corporations, watching CGYV
shares make progress since mid-December has been fun if nothing else.
 However,
as fun as it may have been to see the move from the December 15th low of
$1.44 to Tuesday's close of $2.00 (a 38.8% rally), there's actually
a more serious aspect to the chart.
Though the company
has done everything they said they would be doing since our
coverage began in September, the stock just didn't get the respect it deserved.
The
last four weeks have been different though. Buyers are starting to
trickle in - gradually - and the stock is starting to move higher
on rising volume.
Part of the
reason may just be the fact that investors aren't outright terrified anymore,
and how a new administration in Washington is actually injecting some certainty
into an uncertain situation.
The other part
of the reason may be the more important one we've been waiting for though...
the big sellers are nearing an end to their effort, and/or the big buyers
(i.e. funds and pensions) are starting to accumulate positions.
To be fair,
it's not as if we've seen any massive volume days like the two we
saw in early November. The volume trend has remained well paced, actually,
even when it decidedly tipped in favor of the bulls. That's ok though -
fund and money managers are walking on egg shells like everybody else.
In fact, we'd rather see a moderate pace to any rally. The big one-day
wonders just haven't garnered any follow-through in months. The well-paced
rallies that never work their way into a short-term overbought situation
have been the only ones that have been able to be sustained lately.
Point being,
this
rally looks like it might have legs. That's great news for those of
you in a CGYV position.
For those of
you not yet in a position, however, we'll also note that the
pace of the rally does appear to be accelerating. Translation -
the time to 'wait and see' may be over.
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Puttin'
the Pedal to the Metal |
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This is more
of a trading concept than an investment rationale (though
all 'investments' start out as 'trades'), but CGYV's slow - but accelerating
-
journey to higher highs could act as a slingshot of sorts. The near-term
triggering action is likely to be an eclipse of the $2.10 mark, or last
week's high. Beyond that, a move above November's high of $2.25
could spark an even bigger rally.
 The
idea may seem counter-intuitive on the surface. After all, a move higher
is a profit-taking opportunity, and may even mean many regretful, 'would-have'
buyers end up choosing not to pay the higher entry price... after
seeing just how much shares gained while they were simply watching
from the sidelines.
The reality,
however,
is that the more progress a stock makes, the more buyers are inspired
to jump on it. That's greed kicking in.
Eventually
somebody will start locking in their profits, but the euphoria may not
wear off until the stock is a couple of points higher. That would be
an outstanding move for current CGYV owners.
As we mentioned
though, speed is a factor. The faster and faster a stock makes gains,
the more desperate the market is to pile onto that rising star... fueling
the very rally investors were hoping for.
Point being,
China
Energy may start move too fast for buyers to catch up until the bulk of
any gain is history. We're not saying it's absolutely going to happen
that way; we're just saying it would be very regrettable if it did,
and some investors missed out.
Oh, the coolest
part of all... the stock is rising for completely justified reasons.
That's
the real key to a rally's longevity.
Like we said
above, China Energy's chart is telling the company story quite well.
It may have
been easy to forget just how far CGYV has come since September; the economy
and the market imploded in the meantime, and we've all had way too much
information to process while in survival mode.
To 'regroup',
we thought it would be helpful to list the major events along the company's
timeline over the last five months, and mark those milestones on a
chart. Having done so, we can comfortably say the stock's progress makes
perfect sense. Here are the major milestones...
-
 09/30/08
- $3.2 million boiler finished for Two Lions Chemical
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10/14/08 - Alkali
recovery boiler completed for Zhuji Paper Mill
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11/06/08 - $11.6
million build-contract signed
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11/17/08 - CER
posts 9-month (YTD) figures... record-breaking results
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12/04/08 - R&D
subsidiary launched
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12/17/08 - China
Energy Recovery featured on CNN
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01/06/09 - $3.3
million project completed for repeat customer
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01/13/09 - China
National Salt's sulfuric acid plant is completed (see release below)
It's actually pretty
amazing, all things considered - the global recession didn't really
hinder the company's business plan.
A major
part of the reason for this continued progress was something we stated
early on in our coverage ... it's an investor's dream how the demand for
China Energy's product is rooted in China's new state energy policyas
much as it's rooted in the corporate need for cheaper, cleaner coal
energy. One or the other would translate into strong sales growth.
With both the state and corporate initiatives stirring the pot though
(and likely to keep doing so for several years to come), we expect
to see sustained revenue growth and appreciation in the stock's price.
Just to establish
perspective, China Energy's market cap is roughly $50 million now, and
we're looking for revenues in the neighborhood of $40 million for 2009.
That translates into a price/sales ratio of 1.25, versus the current
market-wide average of about 2.0.
We're also compelled
to remind you China Energy swung to a profit in late 2008. And, based on
our progressive timeline above, we have no reason to think they won't
further widen their margin this year. Our initial expectation of earnings
around $4 million was conservative. However, even on a conservative
basis that still translates into a P/E of 12.5... lower than
the norm when the economy is strong and we're in a bull market.
To see China
Energy produce these results in a hostile environment speaks very
highly of the investment opportunity. More importantly though, the
recent and steady upward move for the stock hints that the proverbial cat
is finally being let out of the bag.
| China Energy
Recovery Announces Start of Operations of a Key EPC Project with Built-in
Waste Heat Recovery System Resulting in 3MW Power Generating Capacity
SHANGHAI, China,
Jan. 13 /PRNewswire-Asia/ -- China Energy Recovery, Inc. (OTC
Bulletin Board: CGYV; "CER"), a leader in the waste heat energy recovery
sector of the industrial energy efficiency industry, announced today that
a new sulfuric acid plant (the "Plant") that CER built under the EPC (Engineering,
Procurement and Construction) model (the "Project") for Hunan Yongli Chemical
("Yongli") was commissioned and has been operating successfully since December
28, 2008. Yongli, located in Hunan province, China, is a key chemical subsidiary
of China National Salt Industry Corporation, the largest salt company in
Asia. The Project demonstrates that CER has successfully established a
strong presence in the EPC market in recent years.
The Plant is designed
to produce 200,000 tons of sulfuric acid a year and generate 30 tons of
steam per hour from waste heat energy captured during production. The steam
will partly be used to generate electricity with 3MW power generation capacity
and the rest will be returned back into the production process and utilized
directly. The utilization of the remaining steam can be translated into
another 3MW power generation capacity. This EPC project has enabled Yongli
to execute its strategy to expand production capacity while improving energy
efficiency and meeting environmental requirements. The new plant is expected
to achieve an annual savings of roughly 13,000 tons of coal (coal equivalent),
which would otherwise be required to produce the same amount of power,
and the reduction of roughly 34,000 tons of carbon dioxide emission each
year.
The successful
startup of operations is also a good recognition of CER's strong engineering
capability to carry out EPC projects for new chemical plants and integrate
energy recovery technology into the plants so as to help the industrial
customers improve energy efficiency and reduce pollution. At the Startup
Ceremony, Mr. Zhenrong Lu, the General Manager of Yongli, praised CER for
making the Project a success, which has laid a solid foundation for future
business opportunities between the two companies.
What is Waste
Heat Energy Recovery?
Industrial facilities
release significant amounts of excess heat into the atmosphere in the form
of hot exhaust gases or high-pressure steam. Energy recovery is the process
of recovering vast amounts of that wasted energy and converting it into
usable heat energy or electricity, dramatically lowering energy costs.
Energy recovery systems are also capable of capturing harmful pollutants
that would otherwise be released into the environment. It is estimated
that if energy currently wasted by all the U.S. industrial facilities could
be recovered, it could produce power equivalent to 20% of U.S. electricity
generation capacity without burning any additional fossil fuel, and could
help many industries to meet stringent environmental regulations.
About China
Energy Recovery, Inc.
CER is an international
leader in designing, manufacturing and installing waste heat energy recovery
systems which provide facilities with greater energy efficiency. The company's
primary focus is on the Chinese market. CER's technology captures industrial
waste energy to produce low-cost electrical power, enabling industrial
manufacturers to reduce their energy costs, shrink their emissions footprint,
and generate sellable emissions credits. CER has deployed its systems throughout
China and in such international markets as Egypt, Turkey, Korea, Vietnam
and Malaysia. CER focuses on numerous industries in which a rapid payback
on invested capital is achieved by its customers, including: chemical,
petro-chemicals, refining (including Ethanol refining), coke processing,
and the manufacture of paper, cement and steel. CER continues to invest
in R&D and plans to build China's first state-of-the-art energy recovery
system research and fabrication facility to allow it to meet the increased
demand for its products and services. For more information on CER, please
visit: http://www.chinaenergyrecovery.com/s/Home.asp
. Information on CER's website does not comprise a part of this press release.
Forward-Looking
Statement Disclaimer
This press release
includes "forward-looking statements" within the meaning of the Securities
Litigation Reform Act of 1995, as amended. All statements, other than statements
of historical fact, included in the press release that address activities,
events or developments that CER believes or anticipates will or may occur
in the future are forward-looking statements. These statements are based
on certain assumptions made based on experience, expected future developments
and other factors that CER believes are appropriate under the circumstances.
Such statements are subject to a number of assumptions, risks and uncertainties,
many of which are beyond the control of CER and may not materialize, including,
without limitation, the efficacy and market acceptance of CER's products
and services, and CER's ability to successfully complete orders and collect
revenues therefrom. Investors are cautioned that any such statements are
not guarantees of future performance. Actual results or developments may
differ materially from those projected in the forward-looking statements
as a result of many factors. Furthermore, CER does not intend (and is not
obligated) to update publicly any forward-looking statements, except as
required by law. The contents of this release should be considered in conjunction
with the warnings and cautionary statements contained in CER's filings
with the SEC, including CER's Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 21, 2008.
For more information,
please contact:
Media
Sean Mahoney
Tel: +1-310-867-0670
Email: seamah@gmail.com
Investor Relations
Jim Blackman
Tel: +1-713-256-0369
Email: jim@prfmonline.com |
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Updated: 8:15 pm PDT (03:15 GMT), November 2, 2010
