" I think my comments hardly suggest there are no doubts or risks."
Ahh, so you do have doubts about REG? Your original statement was:
" The only way you can be afraid for amsc's future is if you doubt the future of the REG solution."
... which mistakenly led me to believe that you had no doubts about REG and therefore had no fear for amsc's future. Sorry if I misunderstood you.
Affordable and workable fusion energy would change the world, but that doesn't mean it's coming in our lifetime. The Navy's work on hts degaussing is best described as research and development at this point, and while I'm hopeful the technology will take hold, I also appreciate that this is something that will take years to unfold. In the meantime, more cash burn.
It's very easy to get enthusiastic about hts. I'm enthusiastic myself, but I've been following hts developments for 15 years and I've seen a lot of promising applications come and go. It's typical when I make negative comments about hts that someone criticizes me for having a "short horizon". But if your horizon for amsc is years and years away, then you realistically need to look at how they are going to get there from here, given continued cash burn.
Best of luck
"The company has cash for at least another year, and revenue is definitely up at present."
Agree, but cash burn will still be considerable. And having more than a year's worth of cash does not mean you won't see any dilution for more than a year. Company's like this don't like to let their cash balance get too close to zero. That sounds alarms to investors and is usually a drag on the stock price, thus meaning their next equity raise will be even more dilutive. So they tend to offer shares opportunistically ahead of time, sometimes following good news.
Also, revenue may not be up as much as you think. What they anticipate gaining from Inox's growth is pretty much lost from an anticipated complete loss of revenues from JCNE for the foreseeable future. If you paid any attention, you may have noticed they actually guided for a sequential DECREASE in revenue for the qrt ending Sept 30.
"The only way you can be afraid for amsc's future is if you doubt the future of the REG solution"
Then count me among the "afraid". There have been many hyped applications for hts over the years that have ended in failure. REG is already way behind schedule compared to the timeframe we were originally told to expect.
I'm not predicting a failure for REG, but show me someone who is doubt-free of its success and I'll show you someone who hasn't done his homework on hts.
Nice post, uwbadger. I agree with most of your take on the situation, and it's nice to see a fellow long who does more than just cheerlead all the time. I've been in and out of here with mixed results in the last few years, but I would be ahead (overall) if it were not for my last foray here. Ave is $7.30
The offering at $6 when the stock was at $10 was a huge blow. It's going to be hard to regain that $10, but not impossible. Like you say, the fear of future dilution has to go away. The way you do that is you demonstrate reduced cash burn with a clear path to cash flow positive. Inox alone will not achieve that.
According to the last 10q:
"The Company’s original investment was for $8.0 million in cash. As of June 30, 2015, the Company holds a 12% ownership interest in Blade Dynamics."
So amsc's original 25% interest, cut in half to 12%, would be worth $4 million if GE paid no more for Blade Dynamics than amsc did. I predict amsc will get no more than $6 million for this.
Just my guess. glta
To be fair, you can google and find a lot of "buy" recommendations for Inox Wind. But I always look for the contrary opinions to see what I might be missing, and here's one (cut and pasted):
All the wind sites for future development in Rajasthan, Gujarat and Kerala are held by GF. IBAS – Lack of spending on innovation; lack of strategic assets Inox stands out as a weak player on our IBAS framework due to lack of in-house innovation, dependence on AMSC (a financially fragile company) for technology, a weak brand (due to a limited third-party execution track record), weak architecture (due to lack of decentralisation) and high dependence on vendors for critical wind turbine generator (WTG) components.
Attractive valuations, but what after FY17? Inox’s valuation of 13.2x FY17E P/E looks attractive given its strong EPS CAGR of 40% in FY15-17E and impressive 36% RoE in FY17E. However, Inox’s revenue growth seems likely to plateau beyond FY17E, as we believe wind power will go out of favour with the Government withdrawing incentives such as generation based incentives (GBI) and feed-in-tariff (FIT) post FY17-end. Poor YTD poor order inflow at 310MW (vs our estimate of 913MW) imply a likely cut in revenue and PAT by 8%-10% for FY17 making the current multiple expensive
are trading at a significant discount and are currently yielding about 9.25% and 10.5% respectively. DSXN and DSX PB. If you believe this company is a survivor and you like dividends, it might be worth looking at, although not without risk, given the dismal outlook for dry bulk.
yank, at this point, we have no idea if the Navy degaussing market will actually be a reality.
As an observer of HTS developments over the last 15 years, I've seen too many promises turn to flops to get my hopes up. It's fine to throw out numbers like 300 surface ships, but it's only a potential market. Next year we might be able to talk about one or two ships be a reality.
Hopefully, REG and degaussing will not join the list of over-promised, unfulfilled HTS hopefuls. But REG is still in an endless planning stage and has already gone past the date we were told to expect for the project to begin. So while I'm hopeful that something will come of this, experience tells me not to be surprised if it doesn't materialize.
Forget. Another criteria to get to cash flow positive was growth in DVAR sales. That has seen some progress lately, but I don't know if it's enough
"$13 Million a quarter for three quarters is nice but still only one paying wind customer"
lafeet, I think it will come out to a bit more than that. The pr stated that shipments under the $40 million follow-on would begin fy 2q and that the "vast majority" would be delivered by the end of the fiscal year. There is only month of the second fiscal quarter remaining (ends Sep 30), leaving two more full quarters before the "vast majority" of the $40M is delivered.
So most of the contract covers a period of only 2 1/3 quarters. If you interpret "vast majority" to be about $38M of the $40M (just to have a number to calculate), then $38m / 2.33 = $16.3 million per quarter revenue coming from Inox.
For comparison, according to the last annual report, Sinovel accounted for 56% of amsc's annual revenue of $70,530m last fy. I calculated that to be $39,496m from Inox last year, or about $9.9 million per quarter, on ave. And during amsc's last reported quarter ending June 30, 47% of their $23,723m revenue came from Inox, which I calculate to be $11.1 million.
So it could be about 50% increase in rev from Inox, yoy
But they have to get JCNE back to a paying customer. Last quarter, JCNE accounted for 25% of their revenue, which I calculate to be $5.9m. If I heard the conf call correctly, they do not expect any revenue whatsoever from JCNE. Thus, the guidance for a sequential drop in overall revenue
One of the company's criteria for what they need to accomplish to get to cash-flow positive is to have two wind customers in "meaningful production."
It's only Inox right now.
The other criteria was to start getting revenue from REG and Navy. REG revenue will not amount to squat unless they actually go ahead with the project, and the amount of the Navy contract was disappointing to most of us.
zep, I'm keenly aware of Inox's growth, as I've been posting details about it on this msg board for some time now. One reality to consider is that Inox's capacity is sold out, so they won't be delivering significant growth on their current backlog until they expand their manufacturing. They are in that process, but I don't believe they've disclosed a time frame.
There are also risks of a political change in India, or the risk that the Modi govt will find obstacles to their plans for growth in renewables.
If the momo here can be maintained by good news in other areas (REG, Navy, Dvar, perhaps JCNE), then we might see some more strong upside to the stock.
The contract was no surprise, least of all to me. The reason I'm in here in the first place has more to do with amsc's Inox business than with anything else. Problem for me is, I was buying in anticipation of good news from Inox way back before the reverse, then I averaged down too soon and too agressively.
Sometimes selling the news is not a bad move, although so far it looks like I would have done better holding off. Still holding 3/4 of my position.
Selling a portion was sort of a compromise for me.
I'm guessing there will be another Inox order of similar size or a larger early next calender year. Most likely it still will not be enough to go cash-flow positive.
"Your HH 2 sides to every question post off putting since that website run by bent expat couple of standard deviations off the bubble."
... that according to CFO in his presentation. Ah, well.
CFO stated in presentation about $1 million value per MW wind turbine, and 5% to 10% of that goes to ECS. Doing the math, with Inox's 1200mw backlog, that's $1.2B, and Inox would need anywhere from $60 to $120 million worth of ECS from AMSC to support that. Henry stated Inox says they expect to convert that backlog to revenue in the next 12-15 months.
Didn't hear Henry use the word "actually" until he responded to a question about Sinovel litigation late in the presentation. I detected anger and frustration. (Understandable). I think the company is sick of the topic.
Actually, so are many of us.
Sinovel reported a six-month net loss of 865 million CNY. According to Financial Times, Sinovel's cash balance after 1q (March 31 2015) was 942M CNY. At 0.16 CNY to US dollar, the cash balance at that time was $151M.
According to the FT website: Sinovel's net loss for 1Q was 248M CNY, with negative operating cash flow of 201M CNY. Subtracting the 1q loss from the 6-month loss, Sinovel's net loss for 2Q would be 670M CNY.
Look at that 670 loss for the qrt vs. their cash balance of 942 at the end of 1q, and it would appear their cash is probably rapidly dwindling. For instance, if Sinovel's cash balance is now 300 to 400 million CNY, that would be just $48 million to $64 million. Even if it's as high as 600M CNY, we are still looking at only $96 million, and most likely going down at a good clip.
What's your average now, yank?
Mine is $7.30
I'm patient like you, but unlike you I'm not inclined to sink any more in this thing. Their revenue guidance was a disappointment. I miscalculated and believed Inox growth would mean $100m or more per year, but apparently it will fall short of that. JCNE revenue was significant last quarter, but they say it will fall to none. If they continue to try to claim that JCNE will be their second wind licensee to enter "meaningful production" they will have to prove that with a return to sales in the future.
Your hope in Blade Dynamics is misplaced - a long shot. The Navy business and REG will role out agonizingly slowly, but more announcements could boost stock price somewhat. Not much, and short lived.
That and the next Inox contract might be viewed as a good exit point. But I'll keep my mind open and maybe hang in here for better or worse.
Just my opinion. Good luck.