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.
renewable chemicals and biofuel company Gevo,
is scheduled to report fourth quarter 2013 financial results on March 25th.Analysts have a couple of weeks to prepare questions
for management during the earnings conference call.Top on the list has to be got to be about Gevo’s
recent agreement to license its novel isobutanol technology to Porta Hnos of
Argentina.Porta Hnos is a well
established ethanol producer so if the license is consummated, it is expected
that this partner has the ability to execute on plans to produce isobutanol for
the South America market.
is popular as a solvent, but it has a plethora of applications across several
industries.It is used in paint
solvents, varnish removers and automobile polish.Importantly it is a building block for
plastic bottles and synthetic textiles.It even has a use in food production as a flavoring agent.That all adds up to the kind ‘very large
market opportunity” that generates strong sales and profits.
has already begun production for other markets and the company has several
off-take agreements and supply agreements in place, including Sasol Chemical
Industries and Land O’Lakes Purina Feed.The company has also been diligent in putting together development
agreements with high profile customers like Coca Cola and the U.S. Army to
build the market for its isobutanol made from the fermentation of sorghum,
barley wheat or corn.
December 2013, Gevo announced successful test flights by the U.S. Army with a
Black Hawk helicopter fueled up with a 50/50 blend of Gevo’s alcohol-to-jet
fuel and conventional jet fuel.The test
was part of the Department of Defense program to get all of its craft certified
to operate on alternative fuels.Gevo
already had agreed to supply up to 16,000 gallons to the U.S. Army for test
purposes, but has yet to get a long-term supply contract.Thus another great question for Gevo
management is what visibility they have into the DOD’s plans for USING
alternative jet fuel.
the most recently reported twelve months Gevo claimed $8.5 million in total
sales, resulting in a net loss of $62.6 million.This is well below revenue levels in previous
periods.Indeed Gevo has had a fairly
erratic track record as its isobutanol sales are still at an early stage and
have not yet replaced the sale of ethanol that had previously been produced in
the company’s Luverne, Minnesota plant.The
cash burn was nearly as discouraging.Gevo used $52.5 million in cash in the most recently reported twelve
logic of converting an ethanol plant to isobutanol production is
understood.Unfortunately, while we
appreciate the route Gevo has mapped out, the journey seems to be taking some
time.What we really need to understand is
“ARE WE THERE YET?”In December 2013, the
company raised about $25 million through the sale of common stock and
warrants.Some of the money will be used
to ramp up production at the Luverne plant.
review of recent trading patterns in GEVO has not been encouraging. Many of the
technical formations in recent months point to continued bearish
sentiment.One source of concern for
shareholders has been the suppressive effects of the recent common stock issuance
on near-term trading.Shareholders need
to know if the pain of dilution is going to be worth it.
Neither the author
of the Small
Cap Strategist web log, Crystal Equity
Research nor its affiliates have a beneficial interest in the companies