Any one wanting to look at the last three income reports have everything laid out...
Today new was in the report as the first step...
Table 6 - Neah Power Annual Income Statements are improving but the value going forward is in the potential...the first step todays news as mentioned in the report in now in place..
The ongoing losses shown in Table 6 reflect the primary research focus of the company to date. Importantly, the company carries little debt and the convertible preferred shares recently issued can be paid in equity at the choosing of the company. With the recent injection of capital and over $1.2 million in cash on the books (June quarter closing), the company has the breathing room necessary to implement its commercialization strategy.
Valuation Based on Potential Revenues If one looks at the above table, the median value multiple for enterprise value to revenues is 4.5. A 3x multiple in general is not unusual for a risk oriented situation such as Neah Power where scalability potential is extremely high. With projected revenues for Neah Power of $14.5 million in two years’ time, a 3x multiple would produce a market valuation of $50.7 million. Discount that result over a 12 month time frame at an annualized 15% rate and one calculates a value of $32.9 million, well above the company’s current market capitalization of $14.4 million. This valuation metric does not fully take into consideration the enormously promising potential of the company’s new technology in utilizing formic acid to create hydrogen on site and in substantial quantities. Tax Loss Carryforwards Neah Power has over $50 million in tax loss carry-forwards. Given the complicated rules governing tax loss-carry-forwards and the circumstances by which those accumulated losses can be applied, we would nonetheless suggest that there is meaningful value in the company’s NOLs should a merger or acquisition with another company take place. Certainly, if the company’s commercial initiatives gain traction, these NOLs will be valuable in protecting the company’s cash generation for some time
Valuation Summary Neah Power still has to prove to investors that its commercialization efforts are actually gaining traction. Management has indicated that its efforts along these lines are bearing fruit and that it is only a matter of time before a genuine flow of revenues unfolds. Shipments have already been made to the DRDO in India which will lead to payments within the next few months, and other situations cited are very close to kicking in. We offer the following summary of the company’s IP in combination with some other value elements as a reasonable compendium to measure the company’s latent value.
This sum of the parts approach produces a present value of all of the company’s intellectual assets and tax loss carry-forwards of $117.7 million. In our second, more practical approach, we estimated the company’s likely revenue progression over the next two years and calculated a revenue achievement of $14.5 million which, when a 3x revenue multiple is applied, produces a value of approximately $43.5 million which, discounted at a 15% annual discount rate over two years produces a base value of $32.9 million. Add in the tax loss carry-forwards estimated value of $14 million and a total value of $46.9 million can be calculated. Currently the company is trading with an enterprise value of about $14.4 million. The steep discount from our valuation calculations is almost certainly attributed to the enduring inability of the company to generate revenues and the generally disappointing history of fuel cell investments. Investing at this time before real commercial corroboration takes place has its obvious risks, but it will not take long to respond positively if any of the pending customer discussions translate to real material engagements. It is understandable, however, why the market is taking a “show me” attitude towards this company and its stock. ___________
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