star_hominid, infn444, shelly_showman etc.
I found their posts are extremely negative which might ruin my fun on investing on XIN.
I would suggest any longs ignore these people.
You picked a wrong stock to short.
I will give you two other options if you are living on shorting:
TSLA and NETFLIX.
REGI is a stock with very low volume of total shares and floating shares.
Total share is only 33.50M and floating shares is only 18.51M.
Until now, the institutions are holding 16.73M, more than 90% of the float.
Most of these institutions have a average cost of $13 - $15 so they are in for the long-term(say $20 - $30).
There are only less than 2M floating shares not in the hands of the institutions.
Thanks shorts for shorting 1M shares to create more supply of the shares for trading.
Insiders seems to be another source of shares supply but they have almost stopped selling after Q2.
I don't think they are going to sell more under $15 or even higher.
Sven Eenmaa has questions in below areas:
1. Feedstock price - We are seeing some seasonality
2. Capital expenditure - $30M in next 12 to 15 months.
3. Blender credits expiration - Sven Eenmaa assuming it's expiring but it's not a sure thing yet.
Sven Eenmaa sure didn't expect the rising of cash level to $4.2 per share($5.5 at the end of this year) and book value to $16 - 17.18 level and the $4.04 EPS.
REGI IPO price was $10, even without blender credits, this company has proven its ability to grow well.
The fair value for REGI should be above $15.
Not to mention his assumption might be proved wrong.
If 2014 and 2015 blender credits are passed, it's going to add $250M cash($8 per share) to the company
and makes its cash level to $13.50 level(book value would be $24). But that's my assumption too.
Sven Eenmaa - Stifel
Okay. And second question, I wanted to ask in terms of feedstock across seasonality, particularly when it comes to fatty assets, animal fat feedstocks. Are you guys seeing any seasonality in that kind of pricing there or do you expect it to just remain steady where it is currently?
We are seeing some seasonality, it's challenging right now to understand what the main driver is. As you get into deeper, colder weather you tend to see more of a price impact. There are other factors that involve right now, remembering that many of the co-products we use have other substitutes in other crops. So these crops are growing quite well and are predicted to be bumper if not already they’re also putting downward pressure on our raw materials. So I think we're seeing two good effects the industry is not very hard right now.
In my opinion, Sven Eenmaa from Stifel is most likely the analyst who gave REGI the downgrade to sell and
$8.50 - $10 target before the report, below is the conversation between him and REGI CEO.
Thank you. Our next question comes from Sven Eenmaa from Stifel. Your line is open.
Sven Eenmaa - Stifel
Yes, hi. Thank you for taking my question. Just a couple of them. First wanted to ask about with regard to demand pulling with the tax credit expiration; are you guys actually seeing that from clients or do you see them already waiting for the next year RVO, before deciding on a purchase decisions?
This is Dan. Yeah, we're able to manage a large part. And I think the entire industry is likely that have volume pulled forward in the fourth quarter from first quarter. Today, predicting whether we as a company have had a lot of that, I'm not sure. We are competitively priced to get product which will place and it’s easy for people to have access these. So we'll know that answer better in the first quarter, but at the industry level, what the expectation of vendors laps in as the quarter goes on I think you are like, let us see, if more pulled in.
Craig Irwin - Wedbush Securities
So that’s actually a pleasant surprise I know that you would obviously want it to be renewed given that it does benefit your industry, but when you speak with your industry representation what did they have to say about the regulatory appetite for continued support of Blenders Credit?
Our first conversation is usually around is very small with respect to the overall budget. It is quite valuable when you think about how it reinforces not only agriculture, but the development of the petroleum distribution industry and the biodiesel industry. And it is something that when it’s been hard to get predictable RVO numbers out is a balancing and smoothing item makes it easier for people to make near-term investments. But practically it’s a small piece legislation attach or something else is not we are going to drive about in terms of what Congress is going to pick up and do. And there is the -- to your election cycles. So I don’t know what is going to happen, but I think if there is an opportunity to get it attached to something at some point that is an uncontroversial bill.
Craig Irwin - Wedbush Securities
Thanks. That’s very encouraging. Thanks for taking my follow-up.
More CEO comment on blender credits:
Craig Irwin - Wedbush Securities
Thank you. So just to clarify or maybe ask a question another way that was asked earlier in the call, Dan is it any surprise to you that there is a probable expiry of the Blenders Credit at the end of ‘13? Is it something that you have non-interest slated since January 2nd or is this something we’ve all known about basically all year?
This is not something that we’ve known about all year however as business starts we’ve seen it last a couple of times in the past. So one has to think in conservative ways and this is personal thing I don’t think there is an objection to the Blenders Credit. The Blenders Credit is a small item the government consider by itself. So to the extent that there is support for any kind of an extenders package it normally has to find ability to attach too and in the politics of our federal government it’s hard to get anything passed at all. So there is still time, it could still happen. There are many things to occur this year. We are prudently giving guidance that if it’s going to elapse it’s certainly not, but we think is the right course.
I think that it’s not appropriate to simply look at government incentives and evaluate those as the profitability of the business understand if you don’t know how a bio refinery in an RFS2 environment might be modeled or how the markets can act that that would be the first read and a very understandable first read. But practically what happens is we have few supply-demand situations, we have a supply-demand situation at around energy and have one around compliance. The biofuel that we create is sold at roughly the price of heating oil or ultimately sold for diesel and the RIN value goes up or down where the supply and demand is in or not balance, it will go up if you need more; it will get down in terms of price if you need less. So that is much like basis on commodities and that RIN price doesn’t go up unless all other incentives that are being considered are not sufficient.
The RIN price goes up on negotiated basis to ensure that the fuel is made, it’s distributed, it is consumed, it’s allocated and the tracked and complied through these in a proper way. So the reduction or the increase in incentive is more or less like basis, if the market has the natural margin at the large volume that might be demanded, RINs will go down, if the government’s desire for increasing volumes of biofuel requires RIN value go up, so the entire support industry has profit to take a risk that will occur too.
What I often see which is not appropriate is people assume that when RIN price is going up the company is more profitable and when it is going down at west. We have to look first at the underlying spread between cost of goods sold and energy and take into account equivalent basis which is RIN price.
We have to similar times speaking about that and other venues public available. So we are happy to spend more time speaking about that and other venues. It’s public unavailable info and would be happy to speak with you.
What we should do is open the conference line because I think Stifel’s on here too, and we can have an open conversation, but we won’t. Well, first of all I don’t want to get into the activity of commenting on analysis from analysts. The analysts have a job, they have got opinions, they are going to write them, we try to have the same interaction with everybody else we do across the board and I’m not going to confirm and deny what they said.
I am disappointed that you called them and you tried to email and we didn’t connect with you and we will connect with you. So apologize for that and what I want to reiterate, are few things that you said earlier which is, we've got a great balance sheet, biodiesel is at least to my personal opinion an excellent business to be in.
Our business is in a lower cost production status, we've got great spread and breadth and stand across the market and we have many ways we can grow the business. And to the extend, that the market does become more negative than it is today I hope that we are in the future example of a good company, we’ve got stronger when the market go a little weaker. And if the market does what it should do there is really think that EPA the ORV should have a very robust increase and if not in other categories, in biomass-based diesel. If it does grow that way, we should be in a very good position to take advantage of that. So I am not going to comment on Stifel, but I think we are in a solid and growing and strengthening position which you can see by the evidence in this report.
We certainly think it(blender credits) should come back, we don’t know if it will come back, but from a legislative perspective we think it’s important.
That said I would look to the last time blender’s credit lapsed, we have the expectation based on what we are hearing that it will last at the end of this year and we certainly think it should come back, we don’t know if it will come back, but from a legislative perspective we think it’s important.
During the quarter, we added more terminal capacity at New York Harbor, this capacity is useful to meet growing demand in the region.
New York City has a requirement for heating oil included 2% biodiesel blend. The New York Legislature recently approved the similar requirement that will be implemented statewide over two years beginning with the 2014 and 15 heating oil seasons.
Furthermore, next summer, New York City will start implementing a law requiring the City's fleets to use a 5% biodiesel blend that is scheduled to grow to 20% blend overtime.
In addition, the State of Minnesota has published it’s intend to move to a [B-10]summertime blend beginning July 1, 2014.
With that fact along with future production assets infrastructure, feet stock availability and the economic and environmental benefits biodiesel, we believe robust growth in the biomass-based diesel RVO is a proper course of action for our country.
However it could be inappropriate to comment on rumors, speculation for what is not an official final proposal by the EPA.
We continue to execute our strategy and are optimistic by the prospects. We have proven to be a durable and reliable company under a variety of industry and economic conditions.