Eguana Technologies Inc. (EGT.V) designs and manufactures power controls for energy storage applications. The company offers three main products: 1) AC Battery units, 2) power conversion, and 3) battery management system. EGT.V's product suite is fully integrated and UL Certified. The company also has more 13 patents that it generated in over 15 years in business. We consider those strong assets as they can be licensed.
Currently, the EGT.V is focused on three markets - Australia, Hawaii, and California. In August 2016, the company partnered with Itochu Corporation to facilitate access to the Australian market. In November 2016, EGT.V partnered with E-Gear LLC for the Hawaiian market.
The E-Gear partnership is significant. Energy supply is expensive in Hawaii and drives the demand for energy storage. On March 30, EGT.V and E-Gear announced that they qualified for an expedited process for permitting. This is an important milestone as it estimated that a backlog of over 1MWh of utility related to residential battery installations is present. As for the Itochu partnership, EGT.V recently received a volume order for $3M.
In the past year, EGT.V also has expanded to address electric vehicle (EV) charging in both Hawaii and California. In addition, the company reports being in the final stages of user testing acceptance of a customized product for an unnamed German automotive company. The trend of automotive companies moving to EV was strengthen last week when Volvo announced that it was phasing out combustion-only engines by 2019.
Also in March 2017, EGT.V announced its first orders for a commercial AC Battery. However, at the time the company reported that it was still in testing, and in process of submission for certification and regulatory approval.
Yet, despite all the above activities in the past year, the earnings of EGT.V have deteriorated. The company went from Q3 2016 revenues of $284K, to $53K in Q2 2017. However, in the last quarter, the company has reported about $8M in back orders ($5M in the US and $3M in Australia).
Hence, in time these projects will be recognized in their future earnings.
Other key factors in the unfolding of the EGT.V's story are included in a recent McKinsey & Company report: Battery storage: The next disruptive technology in the power sector. McKinsey cites a) declining price. b) increasing demand, and c) the shifting regulatory framework as catalysts for battery storage adoption. Also predicted was partial grid defection, along with mention of Hawaii and Australia as key markets! Coincidence? Probably not.
Last year, Mackie Research set a price target of $0.75 for the company. The last private placement by EGT,V was oversubscribed at $0.22 cents for $6.9M.
As a result, we consider anything around $0.25-$0.27 cents a good entry point given the recent developments.
We believe that EGT.V valuation is set to grow in the next 6-18 months - it's only a matter of time.
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