Update: Capstone slechts $35 mln waard

Jullie weten dat Captone mijn toppick voor 2018 is maar tot nu toe valt het aandeel tegen. We sloten 2017 af op 0.77 en we staan nu op 0.76. Natuurlijk teleurstellend, vooral als je ziet dat de brede markt met bijna 5% gestegen is. De marktwaarde is nu slechts 35 mln. In mijn  ogen echt een koopje. Maar niet getreurd, gewoon wat geduld betrachten en we zullen worden beloond. Daar ben ik van overtuigd. Alle seinen staan op groen. Wat zijn die seinen dan?

– stijging van de olieprijs
– dollar wordt steeds zwakker
– steeds meer focus op efficiënt energiegebruik

Ik heb de laatste paar conference calls erop nagelezen de belangrijkste punten eruit gepikt:

However, we also benefit greatly with this bundled sales approach as we receive all the money upfront, including the five and nine year FPP, and securing the associated product accessories and the long-term service business. Thus, increasing revenue received and cash received from each microturbine project we sale on a quarterly basis.

I hope that investors can see that this is a much more robust revenue stream where we’ve had traditionally with our oil and gas centric business. Oil and gas customers want discounts but don’t purchase accessories typically or long-term FPP service contracts. The key to driving our future revenue growth is outlined in slide five as its anchored by our new Signature service CHP product line-up and our new Sell-to-Win bundled solutions program. Both of these are heavily concentrated towards the energy efficiency market.

But really the answer is it’s important to remember that we have a very long sales cycle, microturbines are a capital purchase, our typical sales cycle is over a year and it often takes six to nine months from receiving the distributors order to Capstone actually building and shipping the subsequent product and revenue recognition. Therefore, that lag associated with this can be as long as 18 to 24 months to show results updating new initiatives.

How the weak dollar helping sales in Europe? Weak dollar helps us everywhere. It doesn’t matter if it’s Europe or if it’s the Peso, or if it’s the Ruble. Any place in the globe where we do business, the strong dollar has impacted us over the last couple of years. So weakening dollar is definitely good news for our business as is returning oil prices, or higher oil prices. So typically in Europe, we’re seeing strong pipeline in UK. We’ve got some new distributors in the UK that are putting up some nice business. We’ve got Pure World who is doing leisure centers. We had a nice order for 50 units out of them recently and they are doing great deal, I think there is 1,200 leisure centers in Europe and/or in the UK in surrounding area.

I think more importantly, our conversations with Fortune 500 companies or Fortune 100 companies are increasing. I think it’s important that as our business strengthens our balance sheet strengthens. We’re seeing those customers come to us and be more comfortable doing business with us, because we’re more viable long-term business, epecially because our value prop is really driven around not first cost but life cycle cost.

Why does Capstone only have 15% institutional investors? I think that’s pretty self-explanatory. We are 80% 85% institutionally held before the macroeconomic headwinds. Our market cap was $400 million roughly, it was spiking to 700, and maybe 200 to 300 on low end. So we had a much better market cap before the trio of macroeconomic headwinds for Russia, oil, the strong U.S. dollar. And so we’re working hard to get those institutional owners back, a lot of them sold at very nice returns. And so we’re trying to get them instant going back into the stock. Today, we’re 85% retail unfortunately.

What we’re doing to get the investment community back? I am assuming that means non-retail shareholders or institutional holders. Obviously, batter results is also job one. And I think the more we could improve results, the more we get those folks to come back. The more strategic level though, I would say, we’re maintaining our very good relations with the analyst communities. We’re maintaining relationships with the best banking community. We’re doing investor road shows in Europe and in U.S. with Oppenheimer, Rodman, Cowen, Ross, Craig Hallun, we’re presenting at five and sometimes seven Fintech or high tech growth conferences every year.

I mean, typically, Capstone historically has created 2 to 4 times annual revenue similar to other companies in Fintech space again go back to slide 12 and what the market caps versus performance. It’s hard to say why the price of share is where it is. But I think again it’s related to our exposure to Russia oil and gas, a lot of misconception on the institutionals on what our market is and what we’re doing with the business. So I think time will well. I believe the stock market is sufficient, maybe not be timely, but it is efficient. And if we continue to perform, the markets will realize that we’ve diversified our business, we’ve got a better more robust service business we’ll get a better business model. And we’re on the Capstone profitability. So it should adjust.