Value Microcaps Motherboard

[zenvesting]

EUO.v earned $0.006 EPS last quarter and is trading for less than the $16 million cash SIPCA is going to pay up front for EUO's Global Fluids International (GFI) subsidiary (if the shareholders vote for approval on December 18th). SIPCA is also going to pay a 5% royalty for 6 years, with a guaranteed minimum of $1.5 million annually. Given all of the above, I would have to think the downside is pretty limited from here.

For those who haven't looked into GFI, they've got industry leading patented technology for the use of Energy dispersive X-ray fluorescence (EDXRF) taggants for fuel marking. SIPCA is an industry leader in providing authentication, security, and traceability solutions to central banks and governments. SIPCA already has offices in 15 of the 20 largest oil consuming countries in the world. Here is a post with more demographics information if interested: http://www.stockhouse.com/companies/bullboard/v.euo/eurocontrol-technics-group-inc?postid=24077657

I called Bruce Rowlands last week and Bruce said he has already begun working with SIPCA on marketing because "the opportunity is NOW, SIPCA isn't worried about waiting for the shareholder vote because there are opportunities they want to go after now". Bruce said that he was in Switzerland last week and was going back next week, primarily to work on marketing activities with SIPCA.

Doing some more research I found The Philippines is currently looking for a fuel marking system that it estimates would be a $25 Million US contract: http://www.rappler.com/business/industries/173-power-and-energy/100552-fuel-marking-scheme-boc-smuggling

This paper by the Asian Development Bank explains the need in othr markets and refers to programs being implemented by Authentix, GFI"s leading competitor, who's technology is actually inferior because it requires laboratory confirmation, where as EDXRF produces legally defensible results in the field: http://www.adb.org/sites/default/files/publication/174773/governance-brief-24-fuel-marking-programs.pdf

So I understand Bruce has had a history of over promising and under delivering and have to believe that's part of why the stock is being punished now, but believe a large part of his failing to deliver may have been tied to the inability of his small company to provide the support staff for implementation and logistics for fuel marking contracts for large governments. Now with SIPCA they have staffed administrative offices in 15 of the 20 largest oil markets in the world and SIPCA is in the business of providing authentication technology to central banks and governments, so getting in front of the right people shouldn't be a problem.

While it's true that Eurocontrols interest has been reduced to a 5% royalty and sales of the XRF instruments, 5% on that Phillipines contract alone, estimated at $25M would equal $1.25 million and bring SIPCA up to near that $1.5 minimum royalty with one contract with a government ranked #41 in the list of the world's largest oil consumers, so I am of the opinion that the royalty stream could quickly exceed the minimums established in the sales agreement.

I am long on Eurocontrol and see the potential for this stock to double or more over the next year when the market wakes up to the potential of this royalty stream....as well as the potential of the other technology it's subsidiary XwinSys is developing.