 |
In
This Edition... |
|
*China
Energy's Technology Pays For Itself
*Spicy Pickle
Skips the Steps, Leaps Instead
|
 |
China
Energy's Technology Pays For Itself |
|
|
Last week we
took a highly-detailed look at China
Energy Recovery's (OTCBB: CGYV) cost/benefit ratio. We're going
to build on that conversation today by looking at another, more recent
piece of the puzzle - the size and price tag of the heat recovery unit
they just delivered. Previously, the average cost per unit was under
$200K; this one sold for over $3 million.
Though not all
of them will be that big going forward, the size of this contract
supports the idea of strong top line growth.
 While
these higher-end deals are clearly good news for CGYV owners, from the
customer's perspective, even at $3 million this latest installation will
almost certainly pay for itself within a few months. So, as exciting as
the dollars are for China Energy Recovery, we'll reiterate the point we
first made three weeks ago - the attraction to CGYV as an investment
lies in the fact that they offer their customers an immediate and clear
financial benefit ... or a favorable cost/benefit ratio.
The numbers
behind the most recent installation speak for themselves - Two Lions Chemical
Company took delivery of a 50 MW heat recovery system, and paid approximately
$3.2 million to CER for it.
If the news
seems familiar, it's because
Two Lions was also featured last week when they announced their existing
CER waste-heat recovery equipment reaped the sulfuric acid company a nice
$2.5 million for the sale of their carbon credits. This is where the numbers
get really interesting...
One of things
we didn't know for sure last week was the initial price tag on Two
Lions' first installation of their waste-heat system. We just knew
it was a 54 MW system, and ultimately allowed them pocket $2.5 million
... and would allow them to sell those same carbon credits year-in,
and year-out (probably for around $2.5 million annually.)
Though prices
change over time, it's relatively safe to assume the original (2005) Two
Lions 54 MW system also cost around $3 million ... and this year
they profited $2.5 million because of the system. It almost paid for
itself with just one year's worth carbon credits alone; that profit
will be recurring as well. At the same time, the system also saved
the company millions in energy expenses.
It wasn't clear
if the newest installation will also give Two Lions an opportunity to sell
more carbon credits. However, since the equipment is for another plant
site, we can presume a similar fiscal model will apply. In other words,
this $3 million heat recovery installation should let Two Lions turn right
around and pocket another $2.5 million in carbon credit sales. Adding
in the energy savings for this new system, the equipment could again
pay for itself in a matter of weeks.
As the cost/benefit
news proliferates, we suspect cash-strapped plants and factories will continue
to seek out China Energy Recovery. That's been the message since we began
to follow the company.
|
|
Spicy
Pickle Skips the Steps, Leaps Instead |
|
|
There's little
doubt that 2008 will be deemed a pretty disappointing year, for the economy
and
the stock market. It all started with bad real estate loans, but the infection
eventually slowed down any activity where money changed hands. That
includes
Spicy Pickle's (OTCBB: SPKL) aggressive growth plan we discussed
in late 2007. At the time, opening a store a week seemed very plausible.
As lending deteriorated though - and because real estate owners didn't
budge on prices - acquiring real estate just became a monumental challenge.
 So,
Spicy Pickle's expansion plan was effectively put on hold ... or was
it?
In the shadow
of the United States' recession (and yes, we're in one whether it's
official or not), many investors have overlooked an important fact
- not every country is in a recession. Many equity markets have
traded in tandem with our own lately, but economically, the U.S.
is somewhat self-contained.
So what?
Just because Spicy Pickle has been on hold domestically doesn't mean foreign
opportunities haven't popped up. In fact, by looking outside the border,
Spicy
Pickle just inked a deal that will increase their number of restaurants
by more than 25%.
The deal itself
is an all-stock deal - no cash. Spicy Pickle issued 5.1 million
shares, and 3.0 million warrants, to purchase this new group of restaurants.
It sounds like a lot, but it's only about a 10% to 20% dilution of the
current float. Better still, these 11 new units are already established
(i.e. they have real estate) in a region that's not going through
the same economic downturn the U.S. is. Best of all, the acquired restaurants
will start to generate revenues - and profits - right out of the
gate for Spicy Pickle.
So, the company
most of us thought had been dormant has actually been quite busy. We just
didn't see the baby steps along the way. Instead, we're hearing about the
leap.
Anyway, the
acquisition brought eleven Bread Garden Urban Cafes into the Spicy Pickle
fold. All of the Bread Gardens are located near Vancouver, Canada,
and are very similar to Spicy Pickle in terms of the menu and customer
experience. Though there are no plans for a name change, there's already
talk of melding the menus.
The great part
about a foreign market, as was mentioned earlier, is how those consumers
may not be struggling the way many American consumers are. In fact, the
Vancouver area is booming thanks to the outstanding natural resource
market in the region - a lot of money is still flowing in. It wouldn't
be surprising to see the next few new stores open there rather than
here.
In any case....
Though we don't
know exactly what kind of annual revenue the eleven Bread Gardens were
generating, we can reasonably assume it was something in the low
7-figure area. All of that will now be added to Spicy Pickle's top line.
That's a pretty big deal for an organization that had previously been supported
by franchisees, and was only pulling in annual revenues in the low 7-figure
area anyway.
While royalties
from franchisees are usually high-margin dollars, a royalty payment is
still
a pretty modest cash payment. Though the whole point of any venture is
profits, a strong top line - or cash flow - can give a company lot
of flexibility (even if most of it is ultimately used to pay operating
expenses).
The recent establishment
of eight company-owned restaurants certainly helped on the cash flow front,
but
the addition of 11 more full revenue-bearing units should really
give the company some breathing room. The total revenue probably came
close to doubling, while the float was only impacted around 20% at the
most, and that's if the warrants are exercised. The long-term upside
of the deal is almost certain to favor Spicy Pickle's shareholders.
Here's the press
release.
Spicy Pickle
Franchising, Inc. Acquires Bread Garden Urban Cafes Wednesday
October 1,
6:35 pm ET
DENVER, CO--(MARKET
WIRE)--Oct 1, 2008 -- Spicy Pickle Franchising, Inc. (OTC BB:SPKL.OB) fast
casual restaurants announced today the acquisition of Bread Garden Franchising,
Inc., the franchisor of the Bread Garden Urban Cafes, a chain of franchised
fast casual restaurants located in the greater Vancouver, Canada area.
Currently there are 11 operating restaurants.
Spicy Pickle purchased
substantially all of the assets of Bread Garden Franchising, Inc. including
all of its rights to operate as the franchisor of the Bread Garden Urban
Cafes. As consideration for the acquisition Spicy Pickle issued 5,177,500
shares of its common stock and warrants to purchase up to 3,038,750 shares
of its common stock. Bread Garden Franchising, Inc. is a profitable company
and the transaction is expected to bring additional working revenue from
day one. Spicy Pickle will take over the existing small Bread Garden franchising
office located in downtown Vancouver.
Immediately after
the acquisition, there will be 53 restaurants in 15 states and 2 countries,
including both Spicy Pickle(r) restaurants and Bread Garden Urban Cafes.
At the present time there are no plans to convert the Bread Garden Urban
Cafes to Spicy Pickle(r) restaurants.
Bread Garden Urban
Cafes have been operating for approximately 30 years. Originally started
by local residents in the food industry, the cafes were eventually sold
to a large multi-unit corporation and in 2004 to a family that resides
in the Vancouver area. The cafes serve coffee, pastries and breakfast items
as well as lunch and dinner along with a wide variety of desserts. The
cafes offer Wi-Fi service and are a popular destination throughout the
day and evening. As is typical of European style restaurants, the food
is displayed in refrigerated glass cases giving customers a visual experience
before they choose their menu items.
Marc Geman, CEO
of Spicy Pickle Franchising, Inc., commented: "We are thrilled to add this
terrific chain to our growing portfolio of fast casual restaurants. After
extensive due diligence we saw tremendous opportunities. First, we will
expand our geographical footprint into the booming Western Canada region
which is not suffering from the same credit issues we are witnessing in
the States. Secondly, we now have the opportunity to take a very successful
coffee, breakfast, pastry and dessert program from the Bread Garden Urban
Cafes and import it to the Spicy Pickle(r) model. Additionally, we can
supplement their strong breakfast menu with our expansive and fresh lunch
menu. Bread Garden Urban Cafes are very popular and have a reputation as
an all day coffee house gathering place which adds incremental business
throughout the day."
Mr. Geman further
stated: "The Bread Garden Urban Cafes are extremely well located, many
of them having leased space at a time when great locations were still available
in Vancouver at reasonable rates. We will continue to use the Bread Garden
name as they have developed a loyal following and enjoy great brand recognition
in the region. Bread Garden's branded products are found on the British
Columbia ferries and in gas stations around the city, and while these outlets
are not part of this transaction, they add tremendously to the brand identification
throughout British Columbia."
Zahir Dhanani,
a principal of Bread Garden Franchising, Inc., said: "Over the course of
the past year, we have been searching for successful restaurant operators
with similar concepts and were fortunate enough to meet the management
team at Spicy Pickle. As a smaller chain, we wanted to partner with someone
who can assist us in growing our business at a greater rate. Given the
operational efficiencies and business synergies they offer, we can quickly
expand our menu offerings and benefit from the exposure of being part of
a public company. We are very excited to join the Spicy Pickle(r) organization."
About Spicy
Pickle:
Founded in 1999,
Spicy Pickle Franchising, Inc. (OTC BB:SPKL.OB - News) serves high quality
meats and fine artisan breads, baked fresh daily, along with a wide choice
of eight different cheeses, twenty-two different toppings, and fourteen
proprietary spreads to create healthy and delicious panini and sub sandwiches
with flavors from around the world. As a leading "fast-casual" concept,
Spicy Pickle offers menu items that are far beyond traditional fast food
but without the price point of casual dining. The hallmark of a Spicy Pickle(r)
restaurant is quality, service and an enjoyable atmosphere. The company
is headquartered in Denver, Colorado, with restaurants open or under construction
across 15 states and several more in development nationwide. Spicy Pickle
Franchising, Inc., also operates as franchisor for Bread Garden Urban Cafes,
a concept with 11 restaurants in the metropolitan Vancouver, Canada area.
Bread Garden Urban Cafes serve coffee, pastries and breakfast items as
well as lunch and dinner along with a wide variety of desserts. To find
out more about Spicy Pickle (OTC BB:SPKL.OB - News), visit our website
at www.spicypickle.com/.
Forward-Looking
Statements: Certain statements in this press release, including statements
regarding the number of restaurants we intend to open, are forward-looking
statements. We use words such as "anticipate," "believe," "could," "should,"
"estimate," "expect," "intend," "may," "predict," "project," "target,"
and similar terms and phrases, including references to assumptions, to
identify forward-looking statements. The forward-looking statements in
this press release are based on information available to us as of the date
any such statements are made and we assume no obligation to update these
forward-looking statements. These statements are subject to risks and uncertainties
that could cause actual results to differ materially from those described
in the statements. These risks and uncertainties include, but are not limited
to, the following: factors that could affect our ability to achieve and
manage our planned expansion, such as the availability of a sufficient
number of suitable new restaurant sites and the availability of qualified
franchisees and employees; risks relating to our expansion into new markets;
the risk of food-borne illnesses and other health concerns about our food
products; changes in the availability and costs of food; changes in consumer
preferences, general economic conditions or consumer discretionary spending;
the impact of federal, state or local government regulations relating to
our franchisees and employees, and the sale of food or alcoholic beverages;
the impact of litigation; our ability to protect our name and logo and
other proprietary information; the potential effects of inclement weather;
the effect of competition in the restaurant industry; and other risk factors
described from time to time in our SEC reports.
Contact:
Company Contact:
Marc Geman
Spicy Pickle
Franchising, Inc.
(303) 297-1902
http://www.spicypickle.com
Investor Relations
Contact:
Pamela A. Solly
Cirrus Financial
Communications, LLC
(720) 489-4912
http://www.CirrusFC.com
Source: Spicy
Pickle Franchising, Inc. |
|
Updated: 8:15 pm PDT (03:15 GMT), November 2, 2010
