China is a big opportunity, but that's all it is for SunOpta right now. Securing business in China will be a tough challenge for a small company even if they offer a great technology.
It was apparent on the call that the company is disappointed that Abengoa is outsourcing several pieces of the US ethanol plant instead of giving it all to SunOpta like they did in Spain. Kendall almost seemed to not want to talk about it. Quite a swing from last quarter when he was talking up the pending second order from Abengoa for the US plant.
Baring any surprise announcements this stock will be stuck between $4-$5 until Q1 earnings report in early May.
Sure China is "only" an "opportunity" at this point but the probabilities are very good:
SunOpta is not just offering "a great technology" - They are offering the only PROVEN COMMERICIALLY VIABLE pre-treatment process for biomass to ethanol conversion. The hard sell was convincing the Chinese to go with BIOMASS ethanol (they probably figured this out for themselves). Now that they are committed to BIOMASS ethanol, they will execute their commitment using PROVEN technology, and this means steam explosion pre-treatment. All of the other pre-treatment methods are way too flaky.
The Chinese are desperate to supply their fuel needs. Didn't they just make an unsolicited bid for Exxon?
As for Abengoa outsourcing parts of the York plant. That's fine - steam explosion is the high margin part. The other equipment is low-margin off-the-shelf commodity stuff (as JK explained).
Just one contract (even if financially insignificant) in China would send STKL through the roof - the "surprise announcement" you have mentioned.
I certainly hope you are right about China. However, I've heard that doing business in China is a long and complex process. Perhaps China's relatively urgent need for more fuel will accelerate the process in SunOpta's favor. However, even if SunOpta lands a deal in China for an ethanol plant it won't happen in Q4 or Q1, that's just too fast.
You don't need to guess at Stake's ability to sell steamers to China...there is a long track record.
Reminds me of this poster I've seen. It shows about 5 or 6 racers jumping hurdles. They are all about equal, except one is way behind and you can see every hurdle behind him is knocked over. I don't know why that flashes in my mind when I think of the steamer's track record.