Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
U.S. Geothermal (HTM:AMEX) is scheduled to
report third quarter 2013 financial results on November 15th, taking
every day allowed to a public company to reveal the fruits and labors of a
quarter.There will be plenty to talk
about in the conference call with analysts and investors.USG closed a loan financing to support the
first phase of its San Emidio geothermal power project in Nevada.The loan valued at $30.7 million bears a fixed
interest burden of 6.75% will replace a $25 million construction loan for the
project and supply working capital for operation of San Emidio.
should be a few dollars left over from the October loan deal to use as seed
capital to begin the second phase of the San Emidio project.In early 2012, the company commissioned a 3.5
megawatt power plant, but intends to replace that with a more efficient 9
megawatt plant.The company has already
started drilling new production and injection wells and will upgrade
transmission capacity as well.Phase II
is to start producing power by 2015.
in alternative energy companies like USG are accustomed to hearing about plans
for the future and power capacity at some time point ahead.However, USG has more to offer investors that
a lot of promises.Sales in the twelve
months ending June 2013 totaled $21.9 million and $2.0 million in operating
cash flow.That is a cash conversion
rate of 9.1% for those who are keeping track.
feat of positive cash generation is an important one.USG has a history of red ink, burning plenty
of cash to bring its three geothermal power plants online.Besides San Emidio the company operates a
plant at Raft River in southeastern Idaho and another at Neal Hot Springs in
Oregon.The company has two more leases
in the San Emidio Desert in Nevada and owns a geothermal concession near
Guatamala City in the Republic of Guatamala.Expect more investments and the potential for operations to burn cash
again in the future.
are no consensus estimates published for U.S. Geothermal, but there are high
hopes for the quarter report.Message
boards are filled with continuous chatter about the company’s progress.Unfortunately, that has not translated to a
higher valuation for HTM.The stock has
traded sideways for the last three months, after setting a 52-week high price
of $0.61 in August and then falling off the June quarter results were
published.The March 2013 and December
2012 quarters had both been profitable and the net loss in the June 2013
quarter was unsettling.I am always more
concerned about operating cash flow in a growing company like Geothermal.Cash flow from operations was likewise lower
sequentially, but still positive.
or losses.Cash use or generation. As far as valuation is concerned it might not
matter.At less than two bits per share the
stock is priced very like at option on the company’s geothermal assets and
management’s ability to turn hot rocks into a power source.With a third geothermal plant now completed
and operating and long-term financing in place, it seems clear management has
got the knack for it.
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of the Small
Cap Strategist web log, Crystal Equity
Research nor its affiliates have a beneficial interest in the companies