The Chinese word for crisis is composed of two characters: one representing danger, and the other, opportunity. In other words, as a basic linguistic feature, a “Crisis” is part “Danger” and part “Opportunity”.
Financially speaking, this is one of the more insightful ideas one is likely to come across. Today’s alert is an archetypal example of this insight, we believe. The ticker is GASE.
The company is in the Nat Gas business… in Ukraine. Prices are at a 3x premium for distribution because of geopolitical factors: Russia and their ideologically aggressive leader, Vladimir Putin, are putting major pressure on Ukraine to stoke destabilization, state failure, and an opportunity for potential resorption back into Mother Russia.
There is of course no telling where that situation will head from here. But one must remain focused on the fundamentals because a good crisis is a terrible thing to waste!
So take a quick peak at the report below to find out how we think the risks and opportunities lie in this potential monster trade.
Our Newest Multi-Million Dollar Natural Gas Alert: Great East Energy, Inc. (OTCMKTS: GASE)
This one is about as interesting as it gets.
GASE owns operating and distributing gas producers in the Drieper-Donets Basin of Ukraine, which, as you are no doubt aware from recent headlines in the major press, is currently tearing itself apart in a struggle that will likely end in one of two ways:
1. A re-birth as the newest edition to the tradition of Western democratic capitalism, or 2. That of being resorbed as part of the newly re-expansionist Russian federation. The process of late has been fraught with geo-political peril along the way, particularly with respect to Russia, which has ostensibly coopted or overtaken the Ukrainian region known as Crimea.
But GASE is still, despite all this, taking a constructive and even aggressive bearing, looking to use the situation as an opportunity to grow market share! That is a HUGE SIGNAL.
Imagine if you realized this principle in the 2008 bank collapse, when you saw JPMorgan getting aggressive in early 2009 while other banks were folding. That stock was ticking $15.XX orders for a week or two during the worst of it. But they were actually levering up. The thing is ticking $55-60s now. With a penny stock acting right in a crisis, multiply that nuggetry by a mint and add a vault.
Why do we take this view with GASE? Because of what the company just announced today. After seeing Friday’s attempted Geneva de-escalation quadra-lateral deal with EU, US, Russia, and Ukraine fall apart over the past 24 hours, GASE goes out and JVs with a new distributor in a new market segment (compressed natural gas – CNG).
The tact here is actually very forward looking: The world is struggling to find the next vehicular energy model. We have electrics, Hydrogens, hybrids, diesels, and old fashioned gasoline engines. But we also have an emerging contestant: NGVs (nat gas powered engines).
The fuel there is CNG, which is very popular in Ukraine.
Getting down to brass tacks: This stock has been in utter freefall while Putin has his way. But Putin’s tactics are stretched out and he will shore up where he needs to. That means solidifying the breach with Crimea and maintaining his hold in the territories to the south. It’s just too much to juggle to keep this Eastern Ukraine front running full time.
That suggests this crisis has a limited remaining life. With this stock getting murdered into the abyss on the turmoil, we see signs of an aggressive bearing as THE signal to go charging into the breach!
About GASE
GASE (Great East Energy, Inc.) is a producing, development-stage company targeting the growing independent natural gas production industry of Ukraine.
GASE focuses on the acquisition and development of natural gas properties, and currently holds an option agreement to acquire producing natural gas properties located in Ukraine.
GASE is based in Warrenton, Virginia.
Top Investor Highlights
• GASE appears to be the baby tossed out with the bathwater of geopolitical turmoil. The stock has been MURDERED. But the company is cooly moving into the future. We see the bounce here.
• GASE is perhaps the single most dramatic benefactor of the strife in Ukraine, as geopolitical chaos is creating major opportunities for investors in the natural resources department, and this company is expanding market share, rather than folding.
• GASE is, along with Chevron and Royal Dutch Shell, part of the possible solution to Gazprom’s aggressive gas price hikes in Ukraine. The company provides a viable domestic-production alternative to the imported gouging from their neighbor to the East. This rising price environment is almost certainly going to increase investor expectations for future top line growth for GASE.
GASE Signs Letter of Intent to Enter CNG Distribution and Sales
NEW YORK, NY and KIEV, UKRAINE--(Marketwired - Apr 22, 2014) - Great East Energy, Inc. (OTCQB: GASE) (the "Company") which controls over 160 square miles of producing, clean energy, natural gas holdings through two local operating companies, today announced the Company has signed a letter of intent ("LOI") to joint venture with a leading compressed natural gas ("CNG") distributor and retailer in Ukraine, GASE's home market. The JV is expected to be formally agreed and launch in June 2014 and meaningfully contribute to GASE revenues, higher margins, and earnings.
"Few investors in GASE realize that the Ukraine is the 8th largest natural gas vehicle ("NGV") market in the world and the 2nd in Europe behind Italy," began Timur Kkromaev, CEO of GASE. "As we continue our natural gas exploration and expand production, entering the CNG distribution and sales segment is a logical step to diversify our customer base, increase our revenues, boost our margins and increase returns to our shareholders."
According to Company statistics, the vast majority of the Ukraine NGV fleet is composed of retrofitted CNG-powered vehicles. Since there remains a low percentage of factory-built models distributed by major automotive brands in Ukraine, most retrofitted NGVs in Ukraine are fleet and heavy duty vehicles such as buses and trucks. Interest in CNG-fuelled vehicles is prevalent in large cities in Ukraine, where station and filling infrastructure is quickly developing and where there is strong municipal support. Ukraine now counts 332 CNG filling stations nationwide and is considered an important component of the country's fuel market. In 2013 the consumption of CNG in Ukraine was approximately 6.4 billion cubic feet, an increase of 15% year over year. The cost advantage for fuelling NGVs compared to traditional diesel or gasoline-fuelled models is the market driver behind wider use of natural gas as a transportation fuel in the country.
GASE's intended JV is with a renowned CNG station operator with currently 10 stations in major cities in Ukraine. In 2013, the private company sold approximately USD $6.8 million of CNG, which equated to approximately 307 million cubic feet of gas. Based on 2013 average selling prices, the private company's gross margins were approximately 30%. After the successful completion of addition operational and financial due diligence by GASE, Great East Energy and the private company are expected to cooperate on a project to expand CNG distribution and filling stations in Ukraine and penetrate high-volume cities with growing fleets of buses, municipal vehicles and transportation companies converting gas and diesel vehicles to clean and efficient natural gas-powered engines.
"Though our core business will remain the exploration and distribution of natural gas, CNG distribution and retail sales has been a focal point of our long-term strategy. We believe we have found an excellent partner in this regard. We look forward to the development of our plan with our partner, refining the economics and financial model of our JV and adding CNG sales to our revenue and earnings streams beginning in 2014," CEO Timur Khromaev concluded.
In Summary, as is so often the case, right at the heart of crisis is where you find the best opportunities. In today’s case, it’s a tiny micro-cap stock trading at 20 cents a share – in on the ground floor of the Ukrainian domestic natural gas market at a time when 50% of the country’s forward market is set to be price-hiked by an enormous amount by Russian state-run supplier, and bodies are floating everywhere.
This puts GASE in an incomparable position as an investment opportunity right now considering the company is showing the sand to lever up into the bullets. That’s why we are putting it in front of you for tomorrow’s field of battle.
Until next time, Mighty Michael Weeks www.equityobserver.com
Michael Weeks
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