Ludlow Capital Adds GiraSolar (GRSR) to Watch List, Adjusts Price Target to $5.13 a Share
NEW YORK--Aug. 01, 2006--Ludlow Capital maintained their rating on GiraSolar (OTC: GRSR, Frankfurt: L2I) at A-, but has adjusted their price target to $5.13 a share based on a 'price to sales' ratio of 7 and their $22 million revenue projection for fiscal year 2006.
AUDITED FINANCIALS
On July 24, 2006, GiraSolar released US GAAP and PCAOB audited financials for the year ending Sept. 30, 2005. In the report, GiraSolar reported $12.7 million in revenue for the fiscal year, and net income of $21,801. This compared to $1.5 million in revenue for year ending Sept. 2004. All be it small, as of Sept. 30, 2005, GiraSolar is one of the only few publicly traded solar companies reporting a positive net income.
The company is still delinquent in their Q4 (Sept. to Dec. 2005) and Q1 (Jan. to Mar. 2006) quarterly reports, but according to the company they are expected to release said reports to become fully reporting before their Q2 deadline. GiraSolar's Q2 report (Apr. to Jun. 2006) is not due till Aug. 15, 2006, but should reflect the first full quarter of operations of GiraSolar within that report.
REVENUE PROJECTIONS
On March 10, 2006, GiraSolar revised its revenue projections upward to exceed $22 million for the fiscal year calendar Sept. 30, 2006. Ludlow Capital now projects revenues for fiscal year ending Sept. 2006 in the range of $22 million on the low end to $30 million on the high end. GiraSolar also expects to maintain profitability in fiscal 2006.
VALUATION RATING
The average price to sales ratio within the solar sector is now around 14, but for our valuation we are giving GiraSolar a price/sales ratio of only 7 for the time being, or 50% the sector average. If we calculate a p/s ratio of 7 to their projected sale revenues of $22 million (low end) we come up with a market cap valuation of around $154 million.
($22 million x 7 time sales = $154 million market cap valuation)
For our report we are calculating GiraSolar with 30,000,000 shares issued and outstanding, rounded up from their 27,188,700 shares reported in their last report. If you divide $154 million by 30 million shares outstanding you come out with a new price valuation target of $5.13 per share.
($154 million market cap / 30 million shares outstanding = $5.13 per share)
Thus, Ludlow Capital is maintaining its current rating on GRSR at A-, but is readjusting its price target valuation to $5.13 a share on an 7 times price to sales ratio.
PRICE TO SALES RATIO IN SOLAR SECTOR
As a comparison we are reflecting the price/sales ratios of the 6 leaders within the solar energy sector. These companies are SunTech Power (STP), SunPower Corp (SPWR), Evergreen Solar (ESLR), Daystar Technologies (DSTI), XSunX, Inc. (XSNX), and WorldWater & Power (WWAT).
Since our last update back in May 2006, price to sales ratios for the solar sector have dropped around 50%, with the new price/sales ratio industry average at around 14.
Currently, GRSR is still only trading at a price/sales ratio of 2, or two times projected revenue sales for fiscal year ending Sept. 2006.
XSunsX (XSNX) = 12,900 DayStar Technologies (DSTI) = 85 Sunpower Corp (SPWR) = 22 SunTech Power (STP) = 13 Evergreen Solar (ESLR) = 11 WorldWater & Power (WWAT) = 8
GiraSolar (GRSR) = 2
The current price to sales ratios for the above solar power companies are based on Aug. 01, 2006 statistics.
* For our valuation report we are giving GRSR a current price to sales ratio of just 7, which is still more than one half the industry norm of 14 just to be conservative in our valuation results. We feel we may be able to increase GRSR p/s ratio in the future as the company possibly lists on a larger exchange and achieves new milestones and institutional interest.
CAPACITY & SILICON REQUIREMENTS
For anyone that follows the solar industry they know one of the greatest challenges for most solar power companies is manufacturing capacity and silicon supplies to meet production needs. On March 08, 2006, GiraSolar announced a silicon supply contract with a German supplier worth up to $30 million.
It's one thing to receive a contract for $30 million in solar panels, but its another to actually have the material and capacity to fulfill that order. This supply contract positions GiraSolar with the ability to fulfill up to $30 million is solar panel sales revenue if need be, and is a major advantage above most other smaller solar companies trading today.
GiraSolar production capacity (how many panels can they mass produce) is relatively unknown at the time of this report, but we would expect to see additional information from the company on this respect going forward.
RISK FACTORS
Some risk factors that may effect the valuation calculations in this report are the companies inability to meet fiscal 2005/2006 revenue projections, an increase in shares issued and outstanding, decrease in interest or price/sales ratios of solar power stocks, industry competition, technological advances, decrease in energy prices, geopolitical events, accounting changes and restatements, and legal issues. GiraSolar is currently converting their audited financials from European to GAAP accounting standards, and investors should be aware that full transparency has yet to be established with GiraSolar through independent audits with the SEC.
* Ludlow Capital is adding GRSR to its watch list in anticipation of their Q3 earnings report due Aug. 15, 2006, which should reflect the first full quarter of operations for the company.
Ludlow Capital began coverage on GiraSolar (GRSR) on Feb. 15, 2006 at a price of $0.22 a share.
ABOUT LUDLOW ENERGY
Ludlow Energy, is a subsidiary of Ludlow Capital, and was created for the purpose of creating an index of renewable and alternative energy stocks. The fund plans to take public an alternative energy ETF (electronic traded fund). Our fund is designed for investors who have a long-term bullish outlook on alternative and renewable energy as a potential investment.
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