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China
Energy's 'On' Switch Gets Flipped Overnight |
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For
those who were wondering about China
Energy Recovery's (OTCBB: CGYV) unprompted 73.4% gain over the last
two days, we've got at least a partial explanation for you today.
The other part of the explanation relies on conjecture, though we
think a pretty evident one. Either way, CGYV finally seems to be attracting
a buying crowd that's long overdue.
Since we began
coverage on the company back in mid-September, we just resigned ourselves
to the idea that volume would be thin for China Energy Recovery shares
while the company found its footing; on average, about 80,000 share
traded hands per day. Needless to say, Tuesday's 494,000 shares
got our attention - it was only about six times the norm. More than
that, it was completely unprompted... or so it seemed. On Wednesday,
319,000 shares were traded. Though not as strong as Tuesday's total, the
gain that day was actually bigger.
 All
told, the stock moved from $1.09 on Monday's close to $1.89 by Wednesday's
close. Volume for the two days was unprecedented.
What gives?
There are a couple of potential forces at work here.
The first
one
is simply the possibility that one or two of the known likely sellers (a
couple of funds) are out of the way. It took them a while - about
40 trading days - to shed their holdings, if indeed they were selling.
Given the way the chart progressed between mid-September and now though,
we can reasonably assume they're no longer selling into any strength, and
therefore they're not holding the stock down.
The second
possibility
became clear on Tuesday. A few large block trades were made at a great
price that was surprisingly available at the time. In other words, it looks
like whoever was buying CGYV knew how to 'phase' into a big trade
without running the price up. We saw similar action on Wednesday...the
bulk of the volume was logged after a slight pullback, and the volume tapered
off when the stock started to heat up.
Both possibilities
can co-exist, though it doesn't really matter how it all came about.
The important part is just that buyers suddenly outnumber the sellers,
and the buying effort has stayed relatively strong as the price has moved
upward. We suspect it's one or more major players getting into a trade,
which is ultimately a positive thing for current owners. More of
the same could be on the way.
The reason
for the interest this week wasn't entirely clear at the time, but an announcement
this morning may answer the "Why now?" question.
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Bigger,
Better, and More Of It |
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You may not
have noticed this during our short coverage period, but China Energy's
contracts are getting progressively-bigger. As of the end of the first
half of the year we determined the average installation 'project' was worth
about $190K each. On September 30th though, CER finished a $3.2 million
installation for Two Lions Fine Chemical Co. On October 14th, a $735K project
was completed for Zhuji Paper Mill.
 Now
fast forward to today; we just learned they've lined up an $11.6 million
project for 2009. This brings the known total revenue for 2009 (so
far) up to $19 million. Considering the company is expecting to do a total
of $26 million for all of 2008, getting $19 million slated for a year
that hasn't even started yet is an exciting omen.
What will
the grand total be next year? It's hard to say until it's over. However,
it's worth mentioning 2008's top line will be more than twice that
of 2007's total sales of $11.8 million. And, 2007's total is more than
twice 2006's $5.5 million. We're not saying to expect a double again
in 2009, but we are saying the company has repeatedly demonstrated
the ability to do so.
Another observation....the
contract awarded today is worth almost half of 2008's total sales, yet
the company didn't even blink at the idea of filling it. Four or five comparable
projects alone in 2009 could more than double 2008's numbers.
Will they
start to run into capacity problems? No, they can deliver the goods.
Slightly before
we started following CER, they went through a major financing that allowed
them to increase their capacity. In fact, the whole point of
the fund-raising was to be able to take on mega-projects like the $11.2
million installation. So no, don't think for a minute China Energy is biting
off more than it can chew.
The details
of today's news can be found in the press release below.
With each heavier
dose of trading volume, and each gain made, CGYV becomes a little less
speculative. Don't misunderstand...it's still a small cap, and the
overall market is still a question mark. However, the growth
has become reliable, and the company swung to a profit in the first
half of 2008 (and should finish the year profitable as well).
That's about all any investor could ask for.
As for current
or prospective owners, the last two months have certainly been an
adventure. The action from early this week suggests there's a light at
the end of the tunnel though. Will today's revelation lead to a third
big winning day? Possibly, though at this point we can't help but wonder
if the news will give any current owners one last burst of bullishness
to actually sell into to lock down some profits - the bulk of today's
announcement may well have already been priced in with Tuesday's and
Wednesday's rally.
In the bigger
picture, even a pullback today won't entirely matter. The buyers have
revealed their numbers, and the company has been publicizing a steady stream
of bigger and better contracts. A longer-term uptrend may have just
switched to the 'on' position, and we suspect more news like today's news
could keep the uptrend sustained. A pullback may be an entry opportunity.
Here's the press
release.
| China Energy
Recovery Announces Signing of a $11.6 Million Contract to Build World's
Largest Straw Pulp Alkali Recovery System
Thursday November
6, 7:00 am ET
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A Key Pollution/Waste
Treatment Project Sponsored by Asian Development Bank
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Contract Expected
to Result in Continued Growth into 2009
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System will have
12MW of heat energy generation capacity estimated to recover 145 tons of
alkali per day for reuse - bringing multiple cost saving benefits
SHANGHAI, China--(BUSINESS
WIRE)--China
Energy Recovery, Inc. (OTCBB: CGYV) ("CER"), a leader in the waste
heat energy recovery sector of the alternative energy industry, announced
today that it has executed contracts for designing and manufacturing the
world's largest straw pulp alkali recovery system in alliance with CMIIC
Engineering & Construction Corporation, one of China's largest industrial
construction firms. The recovery system is a key part of the Shandong Hai
River Basin Pollution Control Project sponsored by the Asian Development
Bank. The total project cost is estimated to be RMB95 million (approximately
US$13.9 million based on the exchange rate as of date of this press release
date), of which RMB79 million (approximately US$11.6 million) represents
the estimated cost for the alkali recovery system that CER will design
and manufacture leveraging its own technology.
The system is
to be built for Shandong Tralin Group ("Tralin"), one of the top paper
manufacturers in China. The CER technology will treat the toxic residual
black liquor generated from the pulp making process to create cleaner discharge.
The system is designed to process 1,200 tons of black liquor per day and
expected to enable Tralin to meet the government mandate on minimizing
pollutant discharge.
The system is
also designed to generate 145 tons of steam per hour. This is equivalent
to nearly 12MW of heat energy generation capacity and expected to enable
Tralin to reduce the cost of purchasing steam from outside vendors needed
to power its paper making facility. Additionally, the system is expected
to recover 195 tons of alkali per day, which can be reused in the pulp
making process, thus further reducing material costs and bringing multiple
benefits to Tralin.
"We expect that
the system will be the largest of its kind in the world upon completion
and designed and developed entirely based on our own technology. This signifies
an important milestone for our further expansion in the market of waste
treatment and energy recovery of the paper-making industry both in China
and abroad," commented CER Chairman of the Board and CEO, Mr. Qinghuan
Wu. "We're pleased to see that both the Asian Development Bank and Shandong
Tralin Group have seen the value that CER can bring to them by endorsing
our technology and system which we believe can specifically address their
problems."
Mr. Wu also commented,
"With the addition of this project, we have already secured orders with
a total contract value of approximately RMB130 million (US$19 million)
for 2009. We have seen a steady flow of new business bookings, which we
expect will bring continued substantial growth in 2009. Our dual growth
drivers of reducing energy costs while reducing pollutants are continuing
to drive our growth. The current global economic slowdown does not appear
to affect that."
The numbers presented
above are total contract values, which include a 17% value added tax and
the retainage amount for product warranty purposes, which is 5% of the
total contract values and will be recognized as deferred revenues. The
numbers presented represent values based on current exchange rates. Changes
in the currency exchange rates would result in a commensurate change in
contract value.
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 energy recovery systems, with a primary focus 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.
Contact:
for China Energy
Recovery, Inc.
Media
Sean Mahoney,
310-867-0670
seamah@gmail.com
or
Investor Relations
Jim Blackman,
713-256-0369
jim@prfmonline.com
Source: China
Energy Recovery, Inc. |
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Updated: 8:15 pm PDT (03:15 GMT), November 2, 2010
