Seeds of this Stepping Stone Contract Were Sown Long Ago

Zacks

Ken Nagy, CFA

Seeds of this Stepping Stone Contract Were Sown Long Ago

Sierra Monitor Corporation (SRMC) designs and develops hazardous gas monitoring devices for the protection of personnel and facilities in industrial work places. Through its subsidiary FieldServer Technologies the firm has branched into protocol translation technology, which enables machine to machine (M2M) communication in energy and building automation applications. This high growth business should complement the gas detection business, while not sacrificing market or margins. FieldServer should see a tailwind as a result of the push toward zero net energy building designs.

With their primary gas detection products Sierra Monitor Corporation [SRMC] has established a reputation of supplying high quality instrumentation and control systems for domestic industrial markets.  Several years ago the company began releasing new products that further satisfy domestic requirements while also meeting specifications for international projects including the Middle East.   With the products released and various third party approvals underway SMC ventured to open a sales office in Dubai beginning the sometimes arduous task of obtaining specific approvals from the key Middle East Companies including Aramco, ADCO (Abu Dhabi Oil), Kuwait Oil and others.  

The strategy began paying off in 2010 when several project sales were complete, each in the area of $150K to $250K.  Yesterday’s announcement that the company has now received an order for delivery in 2011 of $2.5 million of gas and fire detection equipment certainly reinforces that the company has established itself as a player in the large scale project market.  The company has the strength of products, size of facility and the strength of balance sheet to undertake this order and continue the Middle East successes. We feel this will become a stepping stone contract.
The World Onshore Pipelines Report 2011-2015 forecasted US$193 billion will be spent on onshore pipeline projects worldwide through to 2015.  Many countries, especially in Asia and the Middle East, have specific national priorities for pursuing refining projects. China is going ahead with its refining projects to meet its surging domestic demand for refined products and to reduce dependence on imports. The Middle East is investing heavily to become a major petroleum products export hub by utilizing its domestic heavy and sour crude as well as satisfying its increasing domestic light distillate demand. (Oil and Gas Chronicle) 

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