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  • ahrranbee ahrranbee Apr 17, 2012 9:36 AM Flag

    Oil Up, Nat Gas Down Again

    This familiar scenario continues, making FSYS more attractive as the alternative to oil.

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    • I agree great discussion,keep in
      mind,major cites like L.A.Denver,
      New York,and others already have
      there school district,and metro
      bus system on nat gas.

      jake

    • Really like the discussion, because similar thoughts have fleeted thru my thinking. Thanks for the interesting comments. Main problem with boards is lack of civility for opinions. You guys did great!

    • "I guess in a few months time one of us will be able to look back on these posts with some satisfaction...."

      Or possibly (probably?) it'll just bounce around in the same range for longer than that.

    • That's the beauty of a market... You talk about, "a compelling enough arguement for buying in at the currently high valuation" whereas I see this as your last chance to buy in at the currently low valuation. Take a look at what an SP can do when it becomes the story stock in a perceived paradigm shift - WPRT over the last year in this space is a prime example.
      It will just take one major announcement and FSYS will head through $30. Likewise, on the global front, I think the Iran situation is likely to blow up this summer and if oil runs up to $150, FSYS will go through the roof.
      Also, I don't share your view that PE is the be all and end all of investing. I'm interested in FSYS because of huge, long-term growth potential where current matrix like PE aren't particularly relevant.

      I guess in a few months time one of us will be able to look back on these posts with some satisfaction....

    • Not short, just seeing if there is a compelling enough arguement for buying in at the currently high valuation.

      Trading at like 70 times 2012 earnings leaves little room for error, especially given lack of visibility into when this transition to nat gas vehicles really takes hold in the US and the risk Europe could significantly hurt FSYS revenue and margins. Near term, given the high valuation, the probability of the stock falling below $20 is higher than getting close to $30. Euro continues to depreciate, so dont be surprised if earnings actually miss expectations in the coming quarter. There will be opportunities to buy FSYS at lower prices, no need to rush in at these risky valuation levels.

    • Hey buyacramer,
      I'm starting to think that you might be from the dark side of the force (ie short) when it comes to FSYS. The market for a stock is obviously based on opinion and yours would suggest that you should be betting against FSYS (and probably are).
      It's senseless arguing on points like, "I think the infrastructure for nat gas will need to be built out before the ramp up in nat gas engine cars. As such, it will take FSYS a lot longer to benefit from a potential nat gas boom in the US." It's a basic chicken/egg situation but do you honestly think there will be hundreds of CNG/LNG filling stations built with no concurrent growth in the vehicles they are being built to service??? Furthermore, one of the answers to the infrastructure issue is a product called PHILL, produced by FSYS - look it up.
      Margins in the OEM business are good and FSYS is targeting that area - they are the world leader in this space for car manufacturers and their list of partners is expanding rapidly. They also operate in the industrial power generation field and will be seeing huge growth and good margins there.
      At the end of the day, if you want a piece of this space you will have to pay a premium - if you want to talk about astronomic PE valuations, take a look at WPRT. For my money, we are experiencing a worldwide paradigm shift towards nat gas replacing oil based products in combustion engines - and I want to be in this game early on. That's my honest opinion.

    • In addition, I think the infrastructure for nat gas will need to be built out before the ramp up in nat gas engine cars. As such, it will take FSYS a lot longer to benefit from a potential nat gas boom in the US.

      Rev and earnings growth are really at least several years away. Nat gas fuel station and storage will see a nearer term benefit.

      Why buy now when you can wait a year or so to get a better handle on what is going on in Europe and the state of nat gas infrastructure development in the US? FSYS will not see explosive growth in the next couple of quarters.

    • 2012 EPS estimated to be $0.31 (PE of > 70)
      2013 EPS estimated to be $0.80 (PE close to 30)

      This is trading at close to a PE of 30 close to two years out. Not to mention the risk of the Euro collapsing and Euro zone entering adeep recession, which may happen. A third of revenue is tied to the Eurozone. Prospects look good in the US for nat gas and FSYS will probably benefit, but valuation is still very rich, especially with Europe overhang. Euro devalues, and earnings (measured in $s) also drops.

      Plus FSYS technology is not that distinguished, which is why you see the razor thin margins.

    • World's economy is improving, which will continue to pressure oil prices higher. Demand for nat gas vehicles will increase as the price differential becomes more and more favorable to the nat gas providers/equipment makers (See my previous post on today's IMF report).

      • 2 Replies to ahrranbee
      • FSYS trades at like 80 times earnings so some revenue growth is baked into growing nat gas vehicle use.

        At such a high valuation in a razor thin nat gas engine space, FSYS does not appear to be a good buy at these levels. Especially given that Europe will continue to put downward pressure on earnings as Euro is falling and revenue will likely decline given the recession.

        Im not convinced FSYS is cheap and one of the best ways to play the natural gas boom.

        I also believe in the nat gas boom coming to the US in the near term and am looking at the various companies out there. Please try to convince me why FSYS and their low margin nat gas engine business is the best positioned to benefit, especially given the already 80x PE ratio.

      • That differential is mighty big right now. Based on today's commodity prices, the energy in a gallon of gasoline is contained in 22 cents worth of nat gas. RBOB gasoline is $3.24/gal, so more than 14 times as expensive to get the same energy.

    • How will FSYS see significant revenue and most importantly, earnings growth operating in a razor thin margin nat gas engine space?

      Revenues growth has been and are expected (less than 5%) to be very low. Good chunk of their biz is in Europe, where they are in a midst of a recession. The Euro keeps falling, further hurting margins.

      I dont see where the explosive growth is for FSYS. Please shed light.

      • 1 Reply to buyacramer
      • Hey buyacramer,
        Some good questions if you're thinking of investing in FSYS (or not, as it sounds in your case). Think it might be helpful for you to listen to the last CC on Y2011/Q4:
        http://edge.media-server.com/m/p/kcwna2in/lan/en

        At about the ten minute mark they start to discuss the geographical breakdown of the business. You'll find that they have large operations in South America (Venezuela will do 5,000 units per month this year), Asia and that Europe isn't doing too bad either. I think the US will likely see astronomical growth.

        "The Company expects full year 2012 revenue to be between $420 million and $440 million, 2012 gross margin of 23% to 25%, and 2012 operating margin of 3% to 5%. This outlook is based upon the following:
        Incremental 2012 revenue derived from: continued growth in European aftermarket products; growth from India, Thailand, China, and certain Latin American automotive markets, particularly in the second half of the year as OEM programs currently being planned roll out; continued growth from industrial markets; and revenue expected to be derived from IMPCO's North American automotive business, particularly in the second half of the year."
        I think you'll find that the company's projection is very conservative, and we'll see at least a 10% revenue growth - and likely a whole lot more.

        But the real growth comes from looking at the bigger picture. The price differential of oil to nat gas means that powering any type of engine with nat gas is now a hell of a lot cheaper than diesel/gasoline. As the world starts to shift towards nat gas, FSYS is one of the foremost companies worldwide to benefit from this. Thats my opinion anyway....

 
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