Eguana Technologies Inc. (EGT.V) designs and manufactures power controls for energy storage applications. We initiated coverage on July 10th.
At the time, we mentioned that the company was focused on three markets - Australia (Itochu Corporation, August 2016), Hawaii (E-Gear LLC, November 2016) and California. Since our last updates, the following releases were issued.
Aug. 16 - Distribution agreement with Technologietransfer & Marketing GmbH ("Tt&M") - (German distributor). EGT.V is planning market roll out through the first half of 2018 in Germany, Austria and Switzerland.
Aug. 28 - Q3 2017 Results - YTD 2017 revenue of $471K ($179K). $8M with receipt of multiple volume orders, However, EGT.V reported $764K in cash, with only $414K in account receivable. The company also had a working capital deficit of $2.1M.
Sep. 21 - Announces proposed $2.5M brokered private placement at $0.20 cents with warrant at $0.25 cents.
Sep. 29 - Completes private placement (Sept 21) oversubscribed $3.0M with same terms. Proceeds reported to be used to fulfill back-ordered AC Batteries in Hawaii, driving near term revenue and recurring orders for the North American market.
Oct. 19 - Announced shipment to E-Gear for $1.0M. Expect another within Q4 and more in 2018.
Oct. 24 - Insiders purchase by the CEO - 250K shares at $0.20 cents; total purchase value of $50,000.
Oct. 24- Stock options issued (1.8M) at a strike price of $0.21 per share.
Nov. 1 - Letter of Intent (LOI) with Sossin Group LLC (SG). SG will be NY State representative for residential/commercial AC batteries.
Dec. 11 - Sossin Group LLC + Swezey to expands home energy services with Eguana based Solar + Storage package in Long Island.
Dec. 20 - US$3M Growth Loan Agreement with Western Technology Investment. Proceeds will allow additional container shipments to Hawaii and provide a smooth transition with contract manufacturer and manage growth in Australia and Europe. 2.9M Warrant at $0.17 cents.
In the last six months, only 1/3 of the value of the E-Gear contract was shipped. The other shipment planned before end of 2017 did not occur. Moreover, there was no news on the Australia and California market. Instead an LOI in NY State, and a distribution agreement in Europe, but no further sales.
In addition, no progress update were provided on the user testing acceptance of the customized product (for an unnamed German automotive company) and the commercial AC Battery (The first order was received on March 2017).
As such, the last earnings reported reflected the company's weak sales activities yielding a small cash position which explained the need for additional financing. Therefore, the stock valuation in the last 6 months is down by more than 38%. The statement below summarized well the situation:
“Low volume, lumpy demand markets present supply chain challenges for all companies.Additional certainty in our sales channels provides an immediate cost reduction opportunity through volume and scale driving better margins.” - Dr. Spyros Gorgogiannis, EGT.v's Director of Operations
However, anticipation of EGT.V's success has built for years and the result delivered to date by the company has not been proportional. The fact is the current climate is still overcast; EGT.V and Investors (and writers) need to manage expectations.
A recent WSJ article (Batteries Are Taking Over the World: The battery industry is surging. But picking investment winners will be exceedingly hard) helps to provide some much needed perspective.
From the above graph we note two observations. First, Stationary storage is a small segment of the market. Second, the Automotive segment (which will be a major catalyst to Stationary) is still in relatively early days.
Another factor instrumental to EGT.V's revenue is the growth of Solar. Again, a major shift is expected in the next 3-4 years. As noted in EGT.V's investor presentation (p.8), Solar will be a key catalyst for driving demand of residential and commercial battery storage.
As per forecast, we would argue that it is still early days but despite the current climate and time horizon, we still believe that EGT.V is well positioned.
The current climate is one where mostly early adopters are present - and we certainly don't believe that the market has reached critical mass yet. On the time horizon, one has to remember that this company has been in operation for almost 20 years (circa 1999) and has managed to adapt and survive in numerous market conditions. With multiple patents and industry connections, we're confident that EGT.V will be successful.
At the current price, EGT.V represents an opportunity for new and existing investors. Below is the forecast for the week - The 52 week low is $0.16 cents.
DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.
