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Margin boost:
I looked into more. For the 10kw generator, POLA uses a Yanmar 3TNV74 engine 18HP. For a 15kw generator, they use a Yanmar 3TNV88 engine 24HP. You can see this yourself on page of the following: https://twinergysolution.com/wp-content/uploads/2018/03/8220-100_-HRZTL_1217.pdf
I researched the pricing of a Yanmar 3TNV88 24HP engine. On engine trader it sells new for $3784 https://www.machinerytrader.com/listings/construction-attachment/for-sale/list?catid=26000&manu=yanmar&mdltxt=3tnv88
Even if they were buying engines before at $2500 or $2000 each, saving $625 to $500 per engine now takes 2Q margins of 35.4% to the upper 30s nicely.
They just need to get their manufacturing efficiency back to 2Q levels and then add in the new engine discount to make shareholders smile.
ebase22...from 10Q:
We have established relationships with a third-party engine supplier and other key suppliers from which we source components for our power systems. We purchase standard configurations of engines for our DC power systems and are substantially dependent on timely supply from our key engine supplier, Yanmar Engines Company. Purchases from Yanmar represented approximately 76% of our total raw materials in cost of sales for the nine months ended September 30, 2018"
A 25% discount from that (I describe from my other post) will help margins.
The 3Q 10Q is out:
https://www.sec.gov/Archives/edgar/data/1622345/000161577418012734/s114019_10q.htm
An interesting note in it is:
"Due to an increase in production in the second quarter of 2018, we negotiated a long term supply agreement with our Yanmar engine supplier. This engine is currently used in more than 50% of the generators we ship and is the single most expensive component of our DC power systems bill of materials. The negotiated cost reduction of 25% will effect shipments beginning October 2018. We believe the price reduction for the engines will significantly decrease our cost of overall sales and improve our gross margins as sales volumes increase"
That should help margins. I'm sure this is the order they expected in 2Q that was delayed
I wonder what the stock would have done today if they had done $9M in Q3 and finished the quarter with $7.5M in backlog (rather than $11.5M---assuming there was no component shortage and had delivered a potential $4M more in revenue). They then turned around and delivered orders for the month of October + the first week of November and announced that backlog had continued to grow on top of it all to $11M now (vs the $15M they actually had announced). I think the stock would have gone up as people could easily infer the direction that the company is going forward.
Listened to cc call. Q3 was disappointing in execution. The supply problem is past. They wouldn't give specific guidance, but it was clear Q4 should come in over $10M or more. They were bullish on 2019. It sounds like that will be the new norm or higher for quarters going forward. The company is going where we desire it to. It's just a bit frustrating that it won't become obvious yet to everyone else till the next quarterly report.
At least "potential" will turn into "actual" next report (finally).
Wadirum1....I will be honest----I'm hoping the stock runs away from you and you don't get a chance to buy any under $6 (ever) :)
It will be interesting to see/hear what the quarter brings and what they say about the future. I see on Linkedin that they renewed their adds for Generator Assembler, Tig Welder & CNC Metal Fabricator. I'm wondering how many employees they are up to now.
Above $6 ---first time since Sept 5th. They need to come out with some good earnings and comments for Q4 to get this stock to break new highs.
ebase22....they always announce the date before. Usually a week before. Imo, earnings won't be until sometime between Mon, Nov 12 - Th, Nov 15th.
Another contract mentioned on Linkedin--for Air Force in Q1
https://www.linkedin.com/feed/update/urn:li:activity:6463272600150867968
@Pavel Yankovich, Government Sales Manager, Polar Power, successfully closed a US Air Force contract last week in which Polar will deliver a power system for a Mobile Communications Trailer. We will install our low maintenance, high reliability DC Diesel generator & incorporate our newest generation Lithium Ion battery, available in Q1 2019 which can operate the trailer's electronics silently and without vibration for many hours, kicking in the generator for recharge upon depletion. Unique to this system: compact size, light weight & high fuel efficiency.
We see this project as a great opportunity to provide our DC power systems for mobile & fixed trailers for: disaster relief, surveillance & command, US Borders communication, military, mining & oil field operations. Most do not explore new systems that provide lower CAPEX/OPEX and improve reliability, focussing instead on software & electronics and neglecting advances in power & energy storage technologies. Polar will continue to provide technology education and product orientation to system designers and end users.
This award further manifests the advantages of Polar’s latest generation of mobile power systems. The newer Lithium Ion storage should further tip the technology scales in Polar’s favor.
Worthylion...that's the way I saw it. Back in Sept I posted an update on the MTC order and the expectation that 85 towers would be constructed by early Nov. https://economist.com.na/38254/technology/mtc-awarded-environmental-clearance-to-roll-out-081every1-project/
From a July article " Documents and people briefed on this matter say Chinese mobile technology firm Huawei won the contract to supply MTC with the telecommunications equipment for the towers, with around 18 Namibian companies either involved in constructing the towers, or supplying materials. "
https://www.namibian.com.na/178873/archive-read/Politics-red-tape-hamper-MTC-tower-roll-out
=== Imo, POLA just got the contract to put the radio and telecom equipment on all the new 85 towers + a few others in the country. This bodes well as it means Huwaei may have gone with them exclusively and could get them contracts for the rest of the 571 towers in time. Also, it opens the doors to more work with Hawaei around the world.
Now if POLA could get generator contracts for all those towers.............
New orders in Nimibia:
Ne?w PO?s in Namibia via Huawei: https://www.linkedin.com/feed/update/activity:6462193319412883456/
91 Radio and Microwave Installations for Chinese company Huwaei.
Latest Short # through mid Sept:
10/15/2018 89,961
9/28/2018 90,796
9/14/2018 103,956
8/31/2018 119,624
8/15/2018 147,978
7/31/2018 130,299
7/13/2018 160,943
6/29/2018 167,593
6/15/2018 172,922
5/31/2018 187,146
5/15/2018 180,312
4/30/2018 170,570
4/13/2018 141,059
3/29/2018 191,644
3/15/2018 189,171
2/28/2018 205,368
2/15/2018 215,808
Jobs listed this quarter:
I went through the website, Linkedin & online advertisements. In the last 3 months they have advertised for:
TIG ?welders
welder assemblers
generator assemblers
wire harness assemblers
electronic solderers
inventory control clerk
metrology lab technician (for keeping ?equipment ?calibrated)
cnc press brake ?operator
quality control director
accounts receivable representative
hybrid/solar engineer
application engineer??
plus the team they hired in Africa.
No doubt expenses will be up. I'm sure some of them are replacements, but others are new. The real question is what is revenue and backlog to justify all these hires? I'm hoping it's exciting.
POLA's potential ace-in-the-hole =
=Army SMET contract. If they got that (now projected to be awarded in early 2020) it would cause the stock to go up huge above and beyond the already (hopefully big) gains from telecom generators. This contract alone would be $50M+ for sure (spread out over time obviously) with the Army looking to buy up to 5000 transporters.
They have two of the 4 finalists listed as customers on their webpage, HDT and General Dynamics. Their generator is in one of them. IMO, it's the HDT Hunter Wolf machine. It's also my opinion that they are also the strongest candidate for winning based on their 6 wheel flexible, bullet-proof wheels system.
Here is a video of them at the military conference in early October. In the video he talks of them having a 20kw generator. Hmmm....sound familiar?!?
https://breakingdefense.com/2018/10/hunter-wolf-robot-killer-golfcart/
Wadirum1...imo someone is using an algorithm/computer to try and slowly accumulate shares. If you watch it closely, the trend has definitely turned recently to trades hitting the ask more and vs the bid. In comparison with that downtrend to the low $5s, everything hit the bid endlessly for days.
It'll be interesting for the earnings report. If you look at the job postings for the last month, they are hiring TIG welders, welding fitters, generator assemblers, inventory assistants, etc. Some of them specifically say first or second shift. I'm worried a bit that expenses will be up proportionately higher than revenue (for now). However, in the long run, we want them to hire a boatload of people if it means that they can do $15M/qtr in revenue sometime in 2019. I still think their limiting factor right now is producing generators to fulfill orders in a reasonable time vs demand. They can't afford to lose orders (esp large ones) for lack of ability to fill them timely.
Africa orders--on their Linkedin page, they are announcing two generators for Africa.
https://www.linkedin.com/company/polar-power-inc/
Not sure if this is for Namibia or elsewhere in Africa. Even then, it's a new contract for sure. The contract (phase 1) for Namibia was only for tower construction. Phase 2 was for generator install.
https://globenewswire.com/news-release/2018/07/12/1536550/0/en/Polar-Power-Enters-Wireless-Infrastructure-Market-in-Namibia-Africa-Receives-Initial-0-8-Million-Purchase-Order-from-Mobile-Telecommunications-Limited-to-Construct-New-Cell-Sites-A.html
ebase22....I had thought the same thing. How many shares traded above $5.90 in the last hour and the it drops to $5.67 at exactly the closing second? Please.
Latest Short # through end of Sept. Going lower still.
9/28/2018 90,796
9/14/2018 103,956
8/31/2018 119,624
8/15/2018 147,978
7/31/2018 130,299
7/13/2018 160,943
6/29/2018 167,593
6/15/2018 172,922
5/31/2018 187,146
5/15/2018 180,312
4/30/2018 170,570
4/13/2018 141,059
3/29/2018 191,644
3/15/2018 189,171
2/28/2018 205,368
2/15/2018 215,808
POLA & LPG:
From one of their Linkedin posts:
https://www.linkedin.com/company/polar-power-inc/
(included with picture of multiple executives in a forum discussion): "Arthur D. Sams, CEO & President of Polar Power Inc., at the World LPG Forum in Houston Texas, discussing LPG opportunities in telecommunications using Solar Hybrid Technologies.
In many regions of the world LPG (Propane and Butane) offers a lower cost alternative to Diesel Fuel and at the same time significantly reduces generator maintenance. The Solar Hybrid technology reduces the dependency and the amount of fuel consumed. And the combination of LPG and Solar offers a cleaner environmental solution.
Most tower operators are not familiar with LPG and distribution services. The LPG industry is not knowledgeable of the huge energy needs of tower operators and therefore does not offer their fuel services.
One missing factor to the marriage of LPG into Solar Hybrid systems is a long life, low maintenance and very fuel efficient engine. Polar will offer this new LPG / DC generator in the first quarter of 2019."
MrT11...DAIO I will say I'm surprised it's dropped so much on nothing for the most part. Just lack of buyers and price breakdown momentum? They have $2 in cash and no debt so it's not like it's going to zero. I haven't bought back in yet, though. I will wait for Q3 earnings. If they are disappointing then it may put one last downswing on the price and set a floor. I think you would need to be willing to hold for awhile to get huge gains. I still like their positioning long term for microchips in cars (maybe less so for IoT without more details on the Sentrex system succeeding), but both may take years to play out.
Some insider buying would be nice to see. If they can cash out from $12-15, then can't they buy back in cheap?? I don't hold my breath though. More likely they will just load themselves up with free options some more.
POLA events for October:
They were just at the World LPG forum in Texas:
https://www.worldlpgforum2018.com/medias/content/files/BAT_FINAL-PROGRAMME-BD.pdf
The CEO, Mr Arthur Sams, gave a presentation on October 2nd titled:
“LPG opportunities in Solar Hybrid applications,
a 10-year worldwide marketing experience”
Next is the big Africa Meetup Tower show October 9th and 10th. They are booth #308 near the entrance (total of 53 booths). If you look through the prospectus, there are some big name presenters and important topics that cover all of Africa.
https://www.towerxchange.com/wp-content/uploads/2018/09/TX_MeetupAfrica2018_Prospectus.pdf
ebase22... I think the most conservative way to put it is that backlog is probably now $10-$11M or higher starting Q4 with all orders being delivered by Jan 30th. This does not include additional orders for the quarter. Verizon and AT&T are good at continuous small orders.
Of the $7.5M, I'd say $4.5M of it could easily be T-mobile. Since they already did $1.8M for October alone, we could conservatively say that they are doing $1.5M for the next 3 months after that. Perhaps the rest of the orders are larger ones for AT&T or VZ related to the hurricane? The absolute best scenario is that ALL of it came from T-mobile. We won't really know till earnings. I've never had any luck getting an ounce of clarification from POLA's IR group.
What they need now is for the Africa show to go really well.
Yeah, but the $7.5M additional order is proof enough that the large growth we are looking for is coming for certain and not just potential. The manipulated price now is less frustrating (for me anyways) and gives those wanting in an opportunity.
I've always thought if they could do $10M/qtr in revenue with 40%+ margins and reasonable expenses, then this stock is worth $10 at least. This order makes Q4 that (almost) for certain. They just need U.S. sales to keep strong for 2019 while international starts to build up big.
ebase22....I think so. They said AT&T and Verizon are mostly small orders that come in continuously. T-mobile is large bulk orders. That would makes sens too since it adds to existing backlog. If it is just T-mobile, then Q4 will be huge.
Latest Short # through mid Sept: It went down again
9/14/2018 103,956
8/31/2018 119,624
8/15/2018 147,978
7/31/2018 130,299
7/13/2018 160,943
6/29/2018 167,593
6/15/2018 172,922
5/31/2018 187,146
5/15/2018 180,312
4/30/2018 170,570
4/13/2018 141,059
3/29/2018 191,644
3/15/2018 189,171
2/28/2018 205,368
2/15/2018 215,808
The plan was written Sept 5th. The closing price that day was $6.10. If he thinks good news is coming, then he's putting sell orders in way above that. We'll know when the first Form 4 comes for sure.
ebase22. When 1500 shares went off on the ask at $5.85 this morning, I thought the downtrend was finally over. When there was no follow through and the bid stayed low, then the door opened up the other way. I'm surprised, but, then again, in the stock market nothing is really that surprising.
POLA needs news of some kind to bring in new buyers to force a reversal.
If you look at the job listings, they have/are hiring in the last 30 days (through local online ads) for engine assembler, wire harness assembler, inventory clerk, generator testing technician. This is above/beyond their normal ads for engineers and other higher up spots. Either they have a lot of turnover or are hiring for growth or expected. The catch is until there is news it's just a guessing game on what is happening.
wadirum1...They pushed it down towards the bid on 400 shares in the last minute of trading, but overall it was a decent start to a rebound. Hopefully next week builds on it.
Today's trading showed some of the manipulation that is happening. When the stock was in the $5.60's this morning there was an ask of 13.5K shares showing at $5.75 on Level 2 quotes. It sure made it look like there was strong sell pressure. All of a sudden in 20 seconds the shares took out all the $5.60 range and jumped to $5.78. Where did the 13.5K shares go? They were pulled away instantly as it moved.
If there is one thing I've learned from low float companies----larger players and their computer programs play every stock there is no matter what size. I know investors who say "it's too small, too low of volume", but imo nothing is anymore. The plus to it is it opens up opportunities when they play the game too much one direction. I'm hoping in time that this happens with POLA on the upside if rev/net income picks up and momentum moves it higher.
India---diesel costs for cell towers generators are 7-8% of telecom revenue. This tells you internationally there is a need for a more energy efficient generator.
Read more at:
https://economictimes.indiatimes.com/articleshow/65762189.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
On page 35 of POLA's IR presentation they like to compare the fuel consumption of their unit to an A/C generator:
https://s21.q4cdn.com/772584186/files/doc_presentations/2018/06/Polar-Power-Investor-Presentation-June-2018-FINAL.pdf
Update on Nimibia MTC tower builds:
POLA is just one of several building the towers. I'm hoping they can get more of the power supply contract for their hybrid systems.
It sounds like the overall project will start to expand going forward:
https://economist.com.na/38254/technology/mtc-awarded-environmental-clearance-to-roll-out-081every1-project/
thoughts on short #s.....
The date given (i.e. August 30th) is "closing date" which, assuming 3 days to close trades, means that the actual last trading date was August 27th. As such, we can relate this then to the q2 earnings report---which was on August 9th. The stock went to $6.42 on 65K shares the day after August 10th. It went to $6.60 on the August 13th. Monday's trading would have a closing date of August 16th then. As such, that last stock move upward to $6.60 would be part of this latest short #. ie. The push up was most likely short covering.
If you think of it that way, a lot of the price movement the last month makes sense. Worried shorts panicked and covered a bit and pushed the stock up, maybe drawing in a few momentum traders with them. However, the quarter wasn't really good enough to draw in many new investors looking long term. It was ok, and showed that things were improving, but not so much that there was urgency to buy. As such, once the shorts stopped buying there wasn't much in underlying buying support and the price has slowly dropped. Even them covering 27K shares makes a big difference in this stock. Then whatever traders were in stepped out too giving it a bit of momentum the other way.
The next short number will be for Sept 15th. I wouldn't doubt it goes up again a bit as new shorts saw some blood in the water and jumped in as it went towards and under $6. Gave it that "extra push". The reality is doesn't take much to move this low float stock one way or the other.
All of this is moot if the company performs and shows that revenue is driving towards $10M/qtr.
Latest short # through end of August:
Lowest it's been all year (actually last 52 weeks)
8/31/2018 119,624
8/15/2018 147,978
7/31/2018 130,299
7/13/2018 160,943
6/29/2018 167,593
6/15/2018 172,922
5/31/2018 187,146
5/15/2018 180,312
4/30/2018 170,570
4/13/2018 141,059
3/29/2018 191,644
3/15/2018 189,171
2/28/2018 205,368
2/15/2018 215,808
https://www.nasdaq.com/symbol/pola/short-interest
POLA hired two people this month to deal with growth, employees, & future. They must be doing something right to appeal to others to come work for them:
New Human Resource Manager & Director of Quality Control.
https://www.linkedin.com/company/polar-power-inc/
Victor Masias, HR. He seems to have a solid resume & stays with companies for awhile.
https://www.linkedin.com/in/victorjamacias/
Thomas Sutherland, Quality Control. He appears to be well versed in helping companies get ISO certified.
https://www.linkedin.com/in/thomassutherland/
Wadirum1.... I don't think any of us were super surprised by the price drop. When the daily volume faded and the price inched down slowly and finally broke below $6, I know I started to wonder if/when it might do a drop. It was ripe for a short seller or Market Maker or computer or whatever to play with it. I was actually looking today in the last few hours at the 1500 shares bid at $5.90 wondering what would happen if it got taken out. When it did, there wasn't anything behind it for the moment.
Hopefully this week the volume churns a bit on this move down and at least brings buyers in off the sidelines.
New short #s through the end of August will be out after the close tomorrow. We can get an idea of what's there too.
Lack of buyer support caught up to it today. It's pretty obvious when it went from $5.90 to $5.62 in one trade. Market makers and others can see it....give it a little push and down she went. It's disappointing though after having buying support for so long. Will shorts pile on or will they start to cover instead?
Perhaps an argument could be made that the Hurricane hitting N. Carolina will slow sales for 3Q or 4Q due to telecom's response to it short-term. Long-term I think it benefits POLA as it shows they need back up power all the way above NY on the East Coast going forward.
Wadirum1.....someone else had made a comment to me about Japan. They got hit with a typhoon last week. Not that that is a good thing, but perhaps it helps the Japanese telecom company that has been demoing POLA's generators for awhile to move forward with an order.
It's frustrating to see the stock below $6. Imo, it's just lack of buyers which then makes it easy for the price to be manipulated a bit by market makers, computers, short sellers, etc. One good pr and it will push back up, but until then we just need to just be patient.
Hurricane Florence----the chances of it hitting the east coast next week are ramping up. I'm not sure how it affects POLA's sales short-term, but it's a good reminder to telecom's in the U.S. that they need to harden all their towers on the entire east coast and Gulf of Mexico area----that should bode well for the future.
Same with what is playing out in Hawaii with a second hurricane/tropical storm in the last few weeks coming that way too.
Two more are brewing off the Africa coast and heading west.....tropical depression #9 and Tropical Storm Helene.
ebase22....as far as a pr goes that can help the price pre Q3 earnings:
from the cc call "So as far as the relationship with Verizon, AT&T, they are direct relationships. We have our contracts and purchase orders directly from them. With T-Mobile, we receive purchase orders from their integration partner which is Delta Electronics. So our purchase orders are a channeled through them."
AT&T and Verizon orders come in continuous batches, however, T-mobile is a bulk order through Delta. It means if there is a follow up order for T-mobile in Sept or early Oct for the month of Nov, then there will be a pr on it most likely. That event alone would show the investment community that Q4 is coming in stronger than Q3.
ebase22....here are my thoughts on 3Q and 4Q:
Q3 Revenue: In Q1 cc call they talk about AT&T building up orders and then it staying constant. They did $4.0M in Q2 from AT&T. That's only around 200 generators at the price they are paying. I have a hard time seeing AT&T fortifying FirstNet at 200 generators a quarter when FirstNet is said to be dealing with up to 60K towers. I think that number goes up. However, I'd rather be conservative and say it stays the same in Q3. As such, AT&T = $4.0M for Q3.
Verizon----I know they did the national RFP bid for them, but who knows what is happening there. I wouldn't put it at more than $800K for Q3, same as Q2.
T-mobile----This one is easy. They need to have the initial $1.8M in orders shipped by end of Sept.
Military---from what they said in the amount of military % of the backlog and the amount they expect to ship, it came out to me that about $1M in orders here will happen.
Overseas---They have $800K in tower builds in Nimibia. I'd expect that is slower than we'd like and will end up $400K for the quarter.
Total revenue that I'm comfortable prediction for Q3 = $7.2M. There is upside potential, but I will leave that as a surprise. Another thing that works here is the engine deal with Japan. At 20% of total costs in Q2, that means they did $750K in purchases from the manufacturer. Is that worth a wholesale deal? Not sure. However, I'd say $1M/qtr is. If we said in Q3 that engines were 20% of total costs again and they did $1M worth, that back calculates to low to mid $7M range assuming margins are upper 30%.
Q3 expenses and margins:Total costs for material are based on when it goes into inventory and when it comes out. If an engine costs $1000 in April from a 3rd party and $800 from the manufacturer in June, then you have to use the $1000 ones up first before you start to use the $800 ones. As such, 3Q should have all cheaper engines for the quarter vs Q2.
Total costs for each unit for labor is the same approach I'm sure the July & August generators will have more overtime and labor per unit vs the ones in Sept when the new equipment is up and running. I do think it lowers costs per unit down from Q2, but not sure how much. The CEO alluded to this in the cc call when he said lower labor costs could help margins a lot more in the future than lower material costs.
Margins: Margins were 35.5% in Q2. I think it's safe to figure they are 37.5% in Q3. I think they go up more in Q4 when everything is running smoother.
Operating expenses: they were $1.81M in Q2. I'd assume they are $2.0M in Q3. I think that is way too much actually, but I'm trying to be conservative.
So $7.2M x 37.5% margins = $2.7M Gross - $2.0M OP expenses = $700K before interest and taxes. They have a smidgeon of tax loss carry forward still from Q1. I figure they come in at 4.5 cents/share for the quarter. I know the analyst dropped his number from 3 c/share to 2 c/share on Yahoo. I don't understand why though.
IMO for Q3, I predict $7.2M and 4 cents/share with upside potential.
Obviously this isn't good enough. However, I think T-mobile is coming in at $4.0M+ in Q4 also along with AT&T. You can see this already with a $1.9M follow up order for October only from T-mobile! I think Verizon and military are $1.0M combine at least if not more. (Note: They really need Verizon back at higher level in 2019). I think Nimibia gets follow up orders at some level. They finish the 2nd half of the $800K order for sure. That's $9.4M right there with lots of upside potential all around. I think Q4 margins start to get back to 40%. Even if expenses are $2.2M in Q4 (too high imo) they are breaking 10-12 cents/share still. I think that is where POLA gets priced for the future.
One positive is that part of this will get priced in if the story starts to fully emerge in Q4 with more international orders and it becomes clear that T-mobile is $4.0M or more per quarter also. We don't even need it to happen, just that it's coming for sure.
Remember in the cc call----they ask about % of revenue for international in 2019 vs U.S. The impression I got was U.S. could be very strong. AT&T and T-mobile aren't dragging out tower hardening for 5 years. It's a get it done now type of thing. I'm sure POLA's been giving estimates of potential orders. The big thing is they are being asked if they can deliver quickly. It's why they ramped up manufacturing long before it's really needed. They can see what can come if they can produce.
As far as the stock price......it's a now vs then thing. It's expensive now, but could be cheap in the future if things play out strong. Not 1 year from now imo, but 6 months or less.