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It is interesting to me that when a stock heats up, these message boards always go quiet.
The Fastest Way To The Front Is To Acquire The Leader 1 comment
Apr 14, 2015 1:19 PM | about stocks: WTER
Small public companies have increasingly become the incubators of disruptive technologies and products. Venture Capital in the form of equity and its derivatives traded Over-the-Counter have increasingly provided capital for technology which has been VC financed for the past couple decades. Increasingly, as investors have become savvy and VC has become more selective and oppressive, young entrepreneurs are utilizing efficient and well-regulated OTC markets.
Most VC financed companies do not exit through IPOs, but rather through acquisition, usually by a non-arms-length transaction by a firm either affiliated with or a direct investor into the target. This is how large technology firms such as Google, Inc.(NASDAQ: GOOG), Apple, Inc.(NASDAQ: AAPL), etc. or biotechs/pharmas avoid disruptive technologies potentially adverse effects on their existing business. Microsoft Corporation(NASDAQ: MSFT) spent 2 decades acquiring, mostly with the purpose of eliminating, any potentially threatening technology.
Below are 3 OTC issuers that have disruptive product potential at or near an inflection point. Because they have not been VC, institutionally, or large firm financed, we believe they represent, by nature of their publicly traded equity, an opportunity for the average investor to participate in the benefits of a takeover.
The Alkaline Water Company Inc. (OTCQB:WTER) is from Scottsdale, Arizona and sells Alkaline88 a "high PH" bottled water product for a fraction of its competitors' price per ounce based on a more efficient technology and a better packaging/bottling strategy. Undercapitalized and independent they are eating up shelf space on major retailers throughout the Southwestern United States. A recent announcement puts them near a critical break-through point with Costco, a tipping point for any retail consumable business. The company was started only several years ago, and their growth has been remarkable. In the first 6 months of 2014, they had sales of ~$800,000, and in the second half of the year, they had sales of $1.9M, an increase of 138%. In 2014, WTER focused on establishing new retail partnerships, and are now selling their product in over 8,500 stores (primarily on the West Coast), in places like Kroger, Albertson's and Sprouts. 2015 is all about selling within this larger footprint, which means that their numbers should continue this fast trajectory.
There are two potential buyers of WTER that come to mind and they are both large soft drink makers that are struggling with growth. Of the two, only Monster Beverage Corporation (NASDAQ:MNST) showed any meaningful sales growth, growing 20% over the last two years. The Coca-Cola Company (NYSE:KO) actually had sales decline 4% over the last two years. Both companies sell sugary carbonated beverages, a category which is on the decline as consumers habits change to healthier alternatives. Either of them may look to buy a company for their beverage portfolio that is experiencing hyper-growth and caters to a healthier demographic.
If you were to take the Q4-2014 WTER revenue of $858,000 and use it as a run rate to get to sales of $3.4M, and use the current Monster Beverage Corporation sales multiple of 9.0x, one could easily make the case that WTER could be bought at a $31M equity value, which is almost 4x where they are valued today. This doesn't even factor in that they are likely to far exceed $3.4M in sales in 2015. A recent press release estimate their next fiscal year will triple that number, pushing the value to nearly $100 million or 10x current share levels
Kraig Biocraft Laboratories, Inc. (OTCQB:KBLB) is from Lansing, Michigan and is a new materials company focused on commercializing genetically engineered, protein-based silk fiber for use in the specialty fiber and technical textile industries. They produce a product called Monster Silk™, which has remarkable mechanical properties in terms of strength, resilience and flexibility, and can be used in several different applications, including those for the military and police protective gear, high-performance sportswear and apparel, and as part of light-weight structural composite materials. Spider Silk ™ is a tougher, lighter, thinner, and more flexible material similar to Kevlar® with a wider range of possible applications.
The material has been made, but it is probably several year away from commercial viability. New materials such as graphene, conductive plastics, and technical textiles will have as large an impact on the lives of humans in the century as automated communications had on the last.
Spider Silk has been utilized by a domestic provider of unique industrial wearables to create at least one set of protective gloves, but as the material establish commercial production quantities we expect to see its use widespread.
There are two potential buyers of KBLB that come to mind, the first is E. I. du Pont de Nemours and Company (NYSE:DD), the maker of Kevlar®, whose monopoly on this important fabric could be threatened by KBLB's superior material. The second would be Under Armour, Inc. (NYSE:UA), perhaps looking to buy the next-generation high performance cloth for their sports apparel.
Integral Technologies, Inc. (OTCQB:ITKG) is from Bellingham, Washington and is a new materials company engaged in the commercialization of electrically conductive hybrid plastics. Their product, ElectriPlast®, is a non-corrosive, electrically-conductive, resin-based material that replaces the metallic component currently used in electromagnetic interference ("EMI") shielding and conductive devices. Their materials can be used to dramatically reduce the weight of cars, planes, and boats, replacing the electronic components that were once made of metal.
While many auto companies would be smart to purchase ITKG, the most likely buyer of the Company would be BASF Corporation, whose parent company is BASF SE (NYSE:BAS), the global chemicals company based in Germany. The two firms signed an agreement in August 2013 to Jointly Explore the North American Market for ElectriPlast Conductive Thermoplastics. In March 2015, the two companies were seen NPE Expo 2015 - The International Plastics Showcase, held in Orlando, Florida, where ElectriPlast products were present and on display in the BASF booth, as if they were made by BASF. Perhaps this is a pre-cursor of the two companies becoming closer. In 2014 there were 69 plastics M&A transactions in the US and Canada, with many of targets having considerably less than $100M in revenues. But two typical examples of specialty plastics companies being bought for their core technology (vs. a sales multiple) would be the $231M purchase of privately held DelStar Technologies by Schweitzer-Mauduit International Inc. (NYSE:SWM), or the $438M purchase of privately held SunTek Holding Co. by Eastman Chemical Co. (NYSE:EMN).
All three of these companies are innovators in their space, and are potential acquisition targets for bigger firms who recognize their growth or game-changing technology.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
They are in the game, the verdict is out. And I was there, I spoke to the people... it is the same stuff I saw in Canton, MI last year.
Perhaps BASF tries to do something tricky, perhaps it never commercializes.
The idea that it is a fraud I think is a reach.
Will they be wildly successful and justify a billion dollar market cap? We will need to wait and see about that one.
PS thank you for your help on posting pics... I will do that this afternoon
BASF collateral
https://www.app-kits.com/Content/PublicDownload?identifier=951a995b-54cf-4fcc-a45f-663e9e3d3324
this is what BASF is handing out. It is all ITKG product
I am standing at the BASF display of electriplast products at the NPE conference. You are dead wrong. I have pictures.
I have spoken to their reps here. You are completely wrong.
If you tell me how to post the pics I can prove it.
At NPE.
Went to BASF exhibit.
They are displaying itkg product as their own.
Somebody said I can post pictures here?
Z,
I feel you.
The income statement will not reflect its value.
The technology's acceptance is the key.
NPE 2015 is in Orlando in one week. I will attend to find out the relevance of electrically conductive plastics and Integral's participation to major multi-nationals that are actually in the business of generating billions in revenue from technology such as ITKG's.
Look forward to sharing my findings.
Squeeze
The overwhelmingly positive sentiment of this stock was illustrated by a simple introduction of a new audience today.
Market makers sold short into the early buying, had to close flat... take that haters!
Z, I am long the stock since last summer. I have done quite a bit of homework on the technology and the technical aspects of the stock.
Right now is a very interesting time to be long the stock.
They have nothing toxic to oppress the stock(the convertibles have been retired, no cashless warrants, no typical OTC bad guys are attached.
This is a potentially disruptive technology. If it does commercialize, through the pending partnerships the return will be extraordinary.
The broadening shareholder base, new market makers, and more robust bids above 50 cents is pretty compelling from a technical standpoint.
This is a real company, trading at a deep discount to its market metric based on its proven growth.
Management is solid.
The numbers are real and growing.
I am long the stock.
I have done my diligence.
Visited their operation, know the CEO
Knocking the Cover Off the Ball
The Company is performing on every fundamental metric.
They have not diluted their investors with toxic derivatives.
I do not understand the hate?
Drinking from the Fountain of Growth in the Beverage Space
There are many changes occurring in the beverage industry, with consumers moving away from sugary soft-drinks towards healthier substitutes and “functional drinks”. Which companies are benefiting from these trends, and which companies are getting left behind?
Worst Performers – below are three companies that are not delivering growth in revenues.
The Coca-Cola Company (NYSE:KO) has been the company with the least amount of revenue growth over the last 4 quarters, with revenue down 0.4%. The iconic beverage company with a market capitalization of $182 Billion is one of the most widely held stocks in the world. They are seeking revenue by purchasing it where they can, and have announced two transactions within the last 6 months. In November 2014, they announced that they were buying 19 non-alcoholic ready-to-drink brands in Africa and Latin America from SABMiller plc (LSE:SAB) for $260 million. In August 2014, they announced a deal to buy a 16% of Monster Beverage Corporation (NASDAQ:MNST), and the purchase of many of their non-energy drink business including Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade and Hansen’s Juice Products. These transactions are meant to off-set the decline in their core business, the sugary sodas.
National Beverage Corp. (NASDAQ:FIZZ) has been another poor performer, with revenue growth over the last 4 quarters of only 1.3%. FIZZ has a market capitalization of $1.2 Billion, and a diversified portfolio of carbonated soft drinks, sparkling and flavored water products, energy drinks, juice-based products, functional beverages, sports drinks, lemonades and teas. They blamed an especially harsh winter for last year’s performance disappointments, but have high hopes for its La Croix brands of lightly flavored sparkling water which seems to be the only major bright spot in its portfolio of slow-growing brands.
Dr Pepper Snapple Group, Inc. (NYSE:DPS) is another beverage behemoth that has not been delivering revenue growth with revenue growth over the last 4 quarters of only 2.6%. DPS has a market capitalization of $13.8 Billion and has one of the most diversified portfolio of beverages in the industry, with over 50 brands, including 7UP, Snapple and Motts Apple Juice. When you break out their Q3-2014 numbers, you can see that Dr. Pepper declined 2%, Hawaiian Punch declined 2%, Snapple increased 2%, and only a very small innovative brand in Latin America called Penafiel increased 23%. Again, their core business of sugary drinks is the laggard.
Best Performers – So who is delivering rapid growth in the beverage space? Revenue growth is coming from a handful of small companies with a focused portfolio, and usually in a new product category. Here are three winners.
The Alkaline Water Company Inc. (OTCQB:WTER) is a small public company from Scottsdale, Arizona, with only a $12M market capitalization focused on a new water category, called Alkaline Water. While they did start from a small revenue base, their revenue growth over the last 4 quarters is a staggering 688%, and they are now selling over $1M as of their last quarter. Alkaline Water is being billed as a major anti-oxidant that helps regulate PH in your body and make you healthier. The company is doing significant business in California, and is starting its march across the country, having recently partnered with major distributors. It only trades at 4.9x sales, which is about the same as The Coca-Cola Company (NYSE:KO), which has negative growth. As more consumers hear about this product and investors take notice, that could change quickly.
REEDS, Inc. (NYSE MKT:REED) is also a small-cap company, with only an $73M market capitalization, based out of Los Angeles, California that makes natural sodas, non-alcoholic Ginger Brews, root-beer, and Kombucha based teas. They have had revenue growth over the last 4 quarters of 22%, with major growth coming their ginger brews (their Extra Ginger Brew grew 31% over the last year), and some savvy marketing with commercial buys on the Food Network and HGTV, and as of earlier this year, their brews have been deemed kosher.
Monster Beverage Corporation (NASDAQ:MNST) is the only large-cap company on this list, with a market capitalization of $17.6 Billion, which makes it even more impressive. The company started off with their very well-known Monster Energy Drink and became the category leader in this space. They have since expanded into other beverage categories, including teas, sodas, and juices. They have had revenue growth over the last 4 quarters of 7.7%, with LTM revenue of $2.4 Billion. They have been doing so well, that The Coca-Cola Company (NYSE:KO) has purchased a minority stake.
In looking at the beverage space, the more interesting companies are those that are emerging leaders in new product categories. This is where the growth is coming from and are the acquisition candidates of tomorrow. Huge companies saddled with sugary drink portfolios will have no choice but to eventually buy them as consumer habits move away from their product offerings.
Long since summer 2014
New CEO has a plan, cleaned up cap table, executing commercialization partnerships, credible auditor, real CFO
Dramatic reduction in cost of carbon fiber, now makes it a cost savings proposition.
Do some homework, the stock makes sense.