In general, what does a pound of AC cost and what is a resonable profit margin?
Not know a lot about AC, I assume the plant will do 125 to 150 million pounds per year. Is $1/pound for AC and a 10% to 15% profit margin a resonable expectation?
Any thoughts would be appreciated.
"buying in 10% of the shares would be very do able"
True enough. Of course, that would likely be followed up with stock grants to insiders, amounting to 10% of shares-out, to reward the clowns for their unbroken string of "Epic Failures"
a few problems MD841. First is that you "assume...the refined coal plants start to work"
Never assume that anything ADA-ES ever plans or says or touts will ever be realized or "work", otherwise dissapointment awaits.
Second is that you assume there will be "revenue" even if they can get to "to work". Revenue is a foreign concept to the academics at ADA-ES, so even if they can get the plant "to work", don't hold your breath for any revenue.
Finally you assume that revenues, if there are any, will lead to earnings. LOL! ADA-ES is run by academics. They do not know the definition of earnings, as capitalism, commerce and academics do not mix.
Its a joke. I see on Yahoo that the salaries of the entire management group are listed as "na". Are they so embarrassed of what they are taking for pay for what value they deliver that they won't publicly disclose salaries?
ADA-ES will never replace Dr Durham. Nominees to the board of directors are hand picked by the good doctor and would likely support him even if he took the stock to the pink sheets. nobody is going to wage a proxy fight over this situation as it is too small.
Until the good Doctor has an epiphany of self awareness -- that he is not a capable CEO or businessman, and is only a capable technologist and engineer -- then outside shareholders are stuck with his "leadership" as CEO.
The company has said that operating margins are about 50% with AC selling for about $1 a pound. The first line capacity is 150 million pounds. I think it will likely be a couple of years until capacity is sold out. Assuming sales are 150 million pounds at YE 2011, the plant would generate about $75 million a year EBITDA, of which ADES share would be about 30% or $25 million. Assign any EBITDA multiple you want, but I am using a conservative multiple of 5, which would value the ADES share of the plant at about $125 million. Discount it back, but I think the AC plant stake alone is worth multiples of ADES's market cap.
ADA-ES' stake in the plant is worth about $4 per ades share, in my view, based on its expected ROIC/WACC ratio.
So, refined coal, cyclean, optionality on AC plant expansion, and the core ACI systems business are near-free at this point. I don't include carbon capture in this list since its option value is not worth much, in my view, given its low probability and long duration.
AC is about $1.25/pound
Most capitalists would expect a fair margin is one that yields a return on invested capital greater than the cost of capital. If an AC plant costs $300 mm to build, and the cost of capital is, let's say, 12%, then after tax operating profits (NOPAT)need be at least $36 million. If the plant is producing 200 MM lbs, that means revenue of $250 MM, which means NOPAT margin must be minimum 36/250 or 14%. And if my tax rate is 35%, that means EBIT margin must be 14%/0.65% = 22%. And if average depreciating schedule for the plant is say 20 years, then we've got another 6-points depreciation or an EBITDA margin of 22+6 = 28%.
Now, that is a healthy EBITDA margin. But Dr Durham has claimed in the past that the EBITDA margin for this plant approaches 40%, so that would certainly meet the roic >= wacc hurdle.
in my earlier post I said "Most capitalists would expect a fair margin is one that yields a return on invested capital greater than the cost of capital"
Contrast that with a corrupt Socialist, e.g. Barrack Obama, Nancy Pelosi or Barney Frank. A corrupt socialist believes that the fair after tax margin is about zero, since they believe that the fair tax rate is approaching 100% for "the rich" or for "evil corporations"