CVX.V - Fluid.


Cematrix Corp. (CVX.V) manufactures and supplies technologically advanced cellular concrete products developed from proprietary formulations across North America. This unique cement-based material with superior thermal protection delivers cost-effective, innovative solutions to a broad range of problems facing the infrastructure, industrial (including oil and gas) and commercial markets.


Through recent acquisitions of Chicago based MixOnSite (MOS) and Bellingham based Pacific International Grout (PIGCO), CEMATRIX is now North America’s largest Cellular Concrete company.


News Releases


Feb. 14 - Announces $5.7M In New Infrastructure Contracts; Provides Guidance Update. Approximately $3.8 million of these infrastructure contracts were converted from verbally awarded to signed agreements.The company’s contracted and verbally awarded (mainly contracts in process) projects total $57.8 million (CDN) of which approximately $20.8 million is currently scheduled to carry over into 2021/22.


As a result of these scheduling changes and project delays, CEMATRIX is updating its sales guidance for 2019 to approximately $22.6 million (CDN). Management wishes to reiterate that these projects were not lost; only delayed. Even though these projects are expected to be completed in 2020, CEMATRIX has not increased its guided sales forecast for 2020 in order to compensate for other potential scheduling changes that could occur at the end of 2020.”


Feb. 20 - Announces Major Infrastructure Project Valued at Over $15.7M. The gross margin generated by this project will be consistent with margins achieved on the Company’s larger projects in the past.


As a result, the company’s contracted and verbally awarded (mainly contracts in process) projects now total $73.5 million (CDN) of which approximately $36.5 million is currently scheduled to carry over into 2021/22.


The $15.7 million project requires CEMATRIX to provide load reducing fill for a large fifteen bridge/overpass project located in the Eastern United States. It is the largest project that CEMATRIX has been awarded to date and it is a clear indication of the growth of the cellular concrete market in North America,” - Jeff Kendrick, CVX.V President and CEO.


Apr. 8 - Provides Business Update; Addresses Changes to COVID-19 Impact. While the situation continues to be extremely fluid, CEMATRIX projects, including those of its subsidiaries, CEMATRIX (Canada) Inc. (“CCI”), MixOnSite USA Inc. (“MOS”) and Pacific International Grout Company ("PIGCO") continue to move forward as scheduled.


The COVID-19 virus could still impact CEMATRIX or its operating subsidiaries in some way, but as of today, the Corporation has rectified its short-term cash flow needs and is pouring product in several locations daily in accordance with its current forecast.


Apr. 8 - Announces $3,000,000 Brokered Private Placement Co-led by Gravitas Securities and Clarus Securities. Up to 3,000 unsecured convertible debentures of the Company at a price of $1,000 (paying 8% for three years) for gross proceeds of up to $3,000,000. A conversion price of $0.40 per unit, with each Debenture Unit comprised of one common share and one-half of one common share purchase warrant. Each warrant will be exercisable into one common share for a period of 36 months from the date of issuance at an exercise price of $0.45 per common share.


CVX.V intends to use the proceeds for strategic acquisition opportunities and for general working capital purposes.


Apr. 14 - Announces $2.1M in Contracts and Increases Total Backlog to $78.5M CDN. As a result of the strengthening U.S. dollar versus the Canadian dollar, the company is increasing its forecasted project value by $2.9M CDN. In addition, CVX.V’s contracted and verbally awarded (mainly contracts in process) projects now total $78.5M (CDN) of which approximately $40.1M is currently scheduled to carry over into 2021/22.


Apr. 15 - Increases Oversubscribed Private Placement to $5,500,000 Co-led by Gravitas Securities and Clarus Securities. The Company’s brokered $3,000,000 private placement of 3,000 unsecured convertible debentures is oversubscribed.


Consequently, CVX.V has increased the Offering by 83% to issue up to 5,500 Convertible Debentures, and to raise gross proceeds of $5,500,000 for strategic acquisition opportunities and general working capital purposes.


Apr. 22 - Closes Oversubscribed $5,500,000 Private Placement of Convertible Debentures.


Apr. 28 - Announces Year Ended Results.


May 19 - Announces $3.0M in Contracts and Increases Total Backlog to $80.4M CDN. CVX.V(Canada) Inc. (“CCI”), MixOnSite USA Inc. (“MOS”) and Pacific International Grout Company (“PIGCO”) have contracted several new infrastructure projects with a total contract value of $3.0M CDN.


The Group of Companies also increased its total contracted and verbally awarded (mainly contracts in process) projects to $80.4M CDN from $78.5M CDN of which approximately $40.0M CDN is currently scheduled to carry over into 2021/22.


"Aging infrastructure coupled with the need for additional economic stimulus has CEMATRIX well positioned in the near term and the future continues to look bright for CEMATRIX and our shareholders.”- CVX.V President and CEO.


May 21 - Announces First Quarter Results. PIGCO contributed $2.9 million or approximately 74% of the revenues recognized in the first quarter of 2020 for the CEMATRIX Group of companies. Factoring COVID-19 into our estimates, the Company still expects to generate between $40- $45 million in revenue in 2020.


July 9 - Announces $6.9M CDN in New Contracts; Provides COVID 19 Update: Total contracted and verbally awarded (mainly contracts in process) projects now sit at $80.2 million CDN. $42.3 million CDN of this $80.2 million CDN total backlog is currently scheduled to be completed in 2021/22.


While the Corporation continues to add to its contracted sales and total backlog (before exchange difference), CVX.V has experienced some delays as a result of the ongoing COVID-19 pandemic,” stated CVX.V's President and CEO. “Most of the project delays were typically a few weeks but a handful of projects have been delayed by a few months or more.


Aug. 7 - Announces Second Quarter Results and Guidance Update: “Given the current Covid-19 environment and taking a conservative position that some contracts may never materialize, we are revising our revenue estimates for 2020 to between $32.0-$38.7 million. Sales pipeline, which now exceeds $336.0 million and our current backlog (including current years sales), which now exceeds $80.0 million. - Jeff Kendrick, CVX.V President and CEO.


Summary


Background

CVX.V's value proposition entails saving customers significant time and money by providing a lighter, stronger, faster and better environmentally friendly product than the competition. The merits of cellular concrete is well researched and many references on the matter can be found in this civil engineering Masters dissertation.


To date CVX.V has grown by leveraging a strategic partnership with Lafarge (Circa 2016) and through acquisitions. The company bought Pacific International Grout Co (PIGCO) in 2019, following the buy out of MixOnSite (MOS) in 2018. These enabled CVX.V to increase its revenue through greater product offerings and expand its geographical reach.


Financing

CVX.V completed a brokered private placement for $5.5M consisting of Convertible Debenture ($0.40 cents with warrant at 0.45 cents). The initial amount ($3M) was oversubscribed within a week; financing closed in two weeks.


Earnings

CVX.V had records revenues for the last two consecutive quarters, including FY 2019, a record revenue year.









Backlog and Guidance

In the last six months, CVX.V has grown its backlog from $57.8M to $80.0M. The awarded of a major infrastructure project in late February ($15.7M) accounts for the bulk of the increase. However, in the last reported earnings, the company revised its revenue estimate down to $32.0-$38.7 million due to the impact of Covid-19.


In short

CVX.V has grown significantly in the past few quarters (and years). Even with the lower end revenue estimate provided by the company of $32M for 2020, CVX.V would significantly exceed 2019 results ($22.5M).


However, for the first six months of 2020 CVX.V sits at roughly at half of 2019 revenue ($11M). This means that in order to achieve the 2020 objective, the company needs to generate in the next two quarters what it did for the whole of 2019. A tall order but certainly possible given large contract(s). Nonetheless, potential additional impacts from Covid-19 on business and government infrastructure budgeting and priorities for 2020 are also at play.


Despite recent coverage (and price targets) by Clarus ($1.25) and M Partners ($1.20), CVX.V closed at $0.46 cents on Friday. This also happens to coincide with S1 ($0.46 cents) with an RSI approaching an oversold status. As a result, in light of record revenues in Q2 2020, the market still downgraded valuation on revised guidance.


Assuming CVX.V replicates 2019 revenues in 2020 (no growth), infrastructure projects are still expected to be trending upward in 2021 and beyond. Hence, CVX.V's valuation is appealing despite an economic situation that is still very fluid.


For more details see most recent investor presentation.


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.

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