Friday, March 07, 2014
Silex Systems: Alternative Energy Downunder
Last week the Aussies invaded New York City, bivouacking at a popular hotel and parading a string of Australia-based companies in front of investors. Of course, there were the usual mining and minerals companies for which resource-rich Australia is so famous. However, the Australia Stock Exchange - one of the event sponsors - has diversified with listings in communications, biotechnology and alternative energy.
One of the presenters, Silex Systems, Inc. (SLX: ASX and SILXY: OTCQX) is a talented little company with technologies for solar and nuclear power generation. Silex has developed a laser for uranium enrichment. The laser alternative presents a lower cost alternative to conventional centrifugal methods. The company landed a sweet deal with GLE, the joint venture of General Electric and Hitachi, and began receiving payments in fiscal year 2013. Silex has stepped into the solar industry with concentrating photovoltaic system for electric power utilities. In June 2013, the company completed construction of Australia’s largest concentrating photovoltaic solar power facility. Silex is also working on a demonstration concentrating solar power station in Saudi Arabia.
Silex is also dabbling in materials development. The company is using rare earths for semiconductor substrates. Applications are diverse: photonics, solar and electronics. A fourth revenue source is ChronoLogic, a producer of test and measurement products in which the Silex has a 90% interest.
In the fiscal year ending June 2013, Silex reported a profit of AU$850,544 on AU$23.7 million. Milestone payments from GLE for laser enrichment technology tipped continuing operations into the black from a deep loss in the previous fiscal year.
Silex is recording revenue, but still has the character of a developmental stage company. Its financial reports are noisy with events as the Silex moves ahead with construction projects and meets milestones in customer relationships. While financial results are choppy, there appear to a number of anticipated events ahead that will serve as catalysts for the stock price. The company expects to begin construction of another concentrating solar power facility in late 2014 and its GLE customer is expected to begin negotiations with the U.S. Department of Energy for enrichment of uranium tailings sometime in 2014. What is more, Silex is able to bandy about the buzz words that get investors’ attention: rare earths, alternative energy.
Investors have a choice between the Silex Systems listing on the ASX or the Over-the-Counter quotation of an ADR in the U.S. The stock is trade in both case near 52-week lows. The ADR trades infrequently and the Australia exchange sees only a little more activity. Thus it seems to me the stock is best suited for a buy-and-hold strategy and makes sense only for those investors with thick enough skins to tolerate some price volatility.
Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.