TMG.V - Turning point.


Thermal Energy Group (TMG.V) is a global supplier of proprietary, proven energy efficiency and emissions reduction solutions to the industrial and institutional sectors. TMG.V is a fully accredited professional engineering firm, and provides a unique mix of proprietary products along with process, energy, and environmental engineering expertise.


TMG.V's proprietary products include: GEM™ - Steam Traps, FLU-ACE® - heat recovery, HEATSPONGE – Indirect contact condensing heat recovery systems, and DRY-REX™ - Low temperature biomass drying systems.


TMG.V helps industrial customers who predominantly use natural gas improve their bottom line through the reduction of fuel usage and carbon emissions. The company has a number of Fortune 500 and other leading multinational companies across various industrial sectors. For a sample customer list see bottom of GEM Brochure,


Thesis

Most industrial and commercial clients generate a disproportional large amount of rejected energy across processes.

According to a recent presentation, US industry has a 49% energy efficiency rate (51% is actually rejected). Moreover, 88% of Industry client uses thermal energy for which TMG.V reports a global addressable market of $250 billion.


News Releases


Apr. 29 - Announces Interim Financial Statement Filing Extension and Preliminary Guidance on Third Quarter Results


May 27 - Announces Record Revenue and Profit


June 10 - Secures Energy Efficient Equipment Order from Leading Consumer Protein Company: Commissioned by a leading consumer protein company to supply energy efficient equipment and engineering for a plant upgrade project.


This equipment, valued at approximately $950,000, will be used to heat process water for the plant operation producing up to 2,700 US gallons per minute of water heated from 85°F to 140°F.


The project is expected to be completed and revenue earned within six months.


Aug. 18 - Bolt-on” CHP Heat Recovery Solution to Optimize Leading Food Group’s Efficiency and Cut Emissions: Commissioned by one of Europe’s largest food and drink groups to supply a turnkey heat recovery system designed to reduce fuel use and carbon emissions, while also minimizing particulate matter, and NOX emissions.


The project, valued at approximately $920,000, will be installed at a canning and pouch packaging facility in the UK. At the heart of the system will be Thermal Energy’s proprietary direct contact heat recovery technology, FLU-ACE®.


The project is expected to be completed and revenue earned within nine months.


Sep. 23 - Announces Record Revenue, EBITDA, and Cash Flow for the Year


Sep. 28 - Listed as one of Canada’s Top Growing Companies for second time in ranking from The Globe and Mail.


Canada’s Top Growing Companies assesses Canadian companies on three-year revenue growth. Thermal Energy earned its spot with three-year growth of 70% from 2016 to 2019


Oct. 6 -Builds on Continued Success with Global Nutrition Company: Commissioned to install a second turn-key, energy-saving heat recovery system. Building on the results from the first heat recovery unit installed last year on the manufacturer’s boilers, this second FLU-ACE® heat recovery system, valued at approximately $840 thousand, is designed to increase the efficiency of the site’s dryer.


Recovering and re-purposing energy currently lost through the dryer exhaust, the solution will provide heat for the makeup air to the dryer, as well as contribute to building heating. Delivering its estimated annual energy savings of over $310 thousand, the new dryer efficiency solution will provide a payback on investment of just under 3 years.


Oct. 28 - Secures Emission Reduction and Improved Efficiency Project with Leading European Hospital Group: The projects, collectively valued at $1,530,000, will be installed at two of the facilities that the healthcare provider manages.


These are the latest in several projects Thermal Energy has delivered for this customer. These most recent projects include a newly designed turnkey heat recovery system for one hospital and an extension of an existing heat recovery system previously installed by Thermal Energy at a second hospital.


The project is expected to be completed and revenue earned within nine months.


Oct. 29 - Announces Promising Increase in Order Intake in First Quarter Results.


Jan. 19 - Supports Canadian Hospital’s Energy Efficiency Goals: Commissioned to supply a heat recovery project. This equipment order for $770,000, was secured following a competitive tender process. Once commissioned, is expected to deliver annual fuel savings of approximately $198,000, and reduce CO2 emissions by about 1,115 metric tonnes per year.


Jan. 26 - Announces Strong Second Quarter Results.


Feb. 24 - International Helps Prominent Beer Company Brew Up More Emissions Reduction: Commissioned to supply a turn-key heat recovery system.The system, valued at over $1,000,000, will feature two of Thermal Energy’s proprietary heat recovery technologies, working in tandem to reduce fuel use and minimize carbon emissions.


Both the FLU-ACE® condensing heat recovery unit and HeatSponge indirect heat recovery unit will recover waste heat exhausted from the site’s boilers. The energy will then be repurposed to heat the water required for three separate applications; reverse osmosis which removes contaminants, deaeration which protects the steam system from the effects of corrosive gases, and boiler makeup water.


By reducing the steam load, the project is expected to increase energy efficiency, reduce fuel use, and save an estimated 8 million litres of water annually, as well as reduce CO2 emissions by over 1,800 metric tonnes per year.


The project provides a payback for the customer of just under 4 years.


Summary

In the past three months, TMG.V valuation jumped from about $0.08 to closing today at $0.215 cents.

Note that TMG.V's valuation has been relatively static for the past two years.


Earnings

Aside from Covid-19 related period, TMG.V has delivered roughly $5M in revenues per quarter in the past 7 quarters.

In addition, net income has been for the most part positive with a stable quarterly cash position roughly above $4.5M!

FY 2020 and FY 2019 were flat but Q4 2020 was impacted by Covid-19 lock-downs and would have probably delivered better results. Also even with Q2 2021 being lower than Q2 2020, TMG.V's latest MD&A specified the following:


While the Company ended the quarter with an order backlog of $5.5 million, compared to $8.2 million for the same quarter in previous year, order intake continues to be strong. Orders received during the second quarter this year are more than double the orders received during the same time last year and during the first six months of this fiscal year we received 66% more orders than the same period last year.


The Company defines its order backlog as the value of projects for which purchase orders have been received, but that have not yet been fully reflected as revenue in the Company’s published quarterly financial statements.


Commissions

As listed above. total of six major commissions (above $0.75M) were announced via releases in the last 10 months. However, as articulated in the Q2 2021 Earning release ten smaller orders (Mostly GEM) were listed.


• $115,689 GEM™ steam traps order for a gas processing plant in United Arab Emirates

• $307,298 heat recovery equipment order for a Canadian Hospital

• $146,555 heat recovery equipment order for a family-owned American lumber company

• $112,981 order for GEM™ steam traps from a international Tires producer

• $129,531 site survey and failed steam trap GEM™ replacement project for a multinational bio/pharmaceutical

• $101,000 GEM™ steam trap order from leading supplier of yarns

• $236,000 GEM™ steam trap order from a major fruit products processor

• $242,000 order for low maintenance GEM™ steam traps from a major grain and cereal processor

• $118,000 follow up GEM™ steam trap order from a globally recognized Tire Manufacturer

• $262,000 GEM™ steam trap order from a multi-national pharmaceutical company


In Short

In the last three months, TMG.V underwent a fundamental change in valuation. The catalyst of a strong Q2 2021 earning report with positive outlook followed by a large commission (over $1M) received the market's attention.


As economies resume their activities, climate change will be addressed by many governments. A recent Bloomberg article based on a Wood Mackenzie report suggests that drastic change are needed in carbon pricing.


Higher CO2 prices could encourage companies to reduce their footprint through capturing the carbon, where it could then be recycled into new products, potentially a “trillion-dollar industry,” the report said.


TMG.V appears to be very well positioned in this scenario. However, the key will be to scale up growth. TMG.V's CEO mentioned that the focus is to sell more to existing customers and gain a deeper share of wallet. This is precisely, what the last announced commission entailed combining both the FLU-ACE® and HeatSponge indirect heat recovery unit.


Even with the recent rise of the stock price, the current valuation premium received are still relatively low. At $0.22 cents, market capitalization is roughly $35M for a company that generate revenue north of $20M per annum.


Potential reasons are: a. TMG.V's addressable market is relatively undefined. For instance, with existing clients, how many more projects/installs could be generated by the company? Though "hundreds" were cited per customers, backlog number only reflect a small percentage and, the sales pipeline is relatively unknown. b.Fast-growing entities on the TSX Venture tend to grow via acquisitions. TMG.V has made only one acquisition in the past three years.


Nonetheless, earning performance in the last two years is commendable and the latest shareholder information deck suggests an awareness of potential valuation barriers. As such, TMG.V definitely appears to be at a turning point.


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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