Replies to post #69676 on FAT CATS

[MikeDDKing]

AYSI last traded at $2.49 and I think it will run to $10. Here is a DD summary:

AYSI Board
http://investorshub.advfn.com/boards/board.aspx?board_id=9225

Overview
Alloy Steel International, Inc., together with its subsidiary, Alloy Steel Australia (Int.) Pty Ltd., engages in the manufacture and distribution of Arcoplate, a wear-resistant alloy overlay wear plate. It offers fused-alloy steel plates for installation and use in structures and machinery that suffer wear and hang-up problems. Alloy Steel International's customer base primarily consists of companies involved in the mining and dredging industries in Australia, the United States, South America, India, Indonesia, Singapore, South Africa, Japan, China, Canada, and Malaysia. Some companies that have used Arcoplate include Caterpillar, Komatsu, Arch Coal of the United States, Krupp Engineering, Anglo Gold, OneSteel Ltd, BHP Billiton of Australia, Rio Tinto of Australia, Alcoa of Australia, Terrex International, P&H Minepro, & Fortescue Metals Group. The company was founded in 2000 and is based in Malaga, Australia.

Website
http://www.alloysteel.net

Product Pictures


Contact Information
Production facilities are located in Western Australia ('WA' for short), with company headquarters at Address:
42 Mercantile Way
Malaga Perth WA Australia 6090
Postal Address:
P.O. Box 3087
Malaga Perth WA Australia 6945

Telephone:
[phone]
Facsimile:
[phone]

Share Count Data
Gene Kostecki 10,598,000 62.5 %
Alan C. Winduss 1,893,250 11.2 %
All officers and directors as a group (two persons) 12,491,250 74.0 %

As of November 30, 2007, the issuer had a total of 16,950,000 shares of common stock outstanding.
Approximate Float: 4.46M

The company has not issued more shares since going public on the OTCBB over 6 years ago. Rare to find a growing public microcap with zero historical dilution.

Employees
Full time employee count has increased from 15 in November 2004, to 18 in November 2005, to 25 in November 2006, to 30 employees in 2007. A second shift was started in 2007 and a second mill will be started in mid 2008. The second shift will further increase employees.

Patents
Here are some links to patent applications to give some detail addressing how the manufacturing process addresses some problems with traditional overlay and how Arcoplate production looks to address and help resolve some of these problems (thanks to ambulance blues for the links):

http://www.google.com/patents?id=yCEdAAAAEBAJ&printsec=abstract&zoom=4&dq=Gene+kostecki

http://www.google.com/patents?id=PRoUAAAAEBAJ&printsec=abstract&zoom=4&dq=Gene+kostecki

http://www.google.com/patents?id=u903AAAAEBAJ&printsec=abstract&zoom=4&dq=Gene+kostecki

Research Links
General Investor info (some information dated):
http://www.investormarketplace.com/profile.asp?ticker=AYSI&source=IMP&ed=20060915

Financial Information

Fiscal 
 Quarter       Revenue     EPS   GM 
 Q2'08(Mar)    $4.206M   $0.068 58.1% 
  
 Q1'08(Dec)    $3.180M   $0.026 43.4% + 
 Q4'07(Sep)    $3.434M   $0.043 54.7% 
 Q3'07(Jun)    $1.884M   $0.013 44.4% 
 Q2'07(Mar)    $1.754M  -$0.002 40.3% * 
 Q1'07(Dec)    $1.658M   $0.023 55.5% 
  
 Q4'06(Sep)    $0.928M  -$0.003 47.1% 
 Q3'06(Jun)    $0.796M  -$0.003 47.6% 
 Q2'06(Mar)    $0.682M  -$0.009 34.0% 
 Q1'06(Dec)    $0.980M  -$0.007 28.7% 
  
 + Q1'08 revenue was impacted by down time due to the holidays and maintenance.  Also, Q1 EPS was impacted by lower GM. 
 * Q2'07 had income before tax of $148,937 but had taxes that exceeded income before tax. 
 - The earnings above do not include the currency gains due to the weakening US dollar vs the (mainly) Australian dollar. 
 - Currency gains add over 3 cents more to the 2007 EPS (above and beyond the $0.077 EPS). 
 - Comprehensive income (EPS + currency gains) in Q4 2007 was about 5.6 cents per share (for the year 2007 almost 11 cents).

Investment Thesis
1. Growth - Revenue has been growing rapidly and is expected to continue to grow. Fiscal 2007 revenue grew 158%!
2. Second Mill - A second mill is being engineered/constructed in their current Malaga facility. The mill is expected to be ready for trials in June 2008 and is expected to being producing commercial product prior to the end of August 2008.
http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=5755602-781-4144&type=sect&dcn=0001140361-08-004991
3. New Extra Long Life Wear Plate - AYSI is introducing a new wear plate called "Super Arcoplate." It will be introduced in the second half of 2008 and will be built in the new mill. AYSI believes that with the single pass technology the new “Super Arcoplate” will outlast the plate presently being used by consumers by up to 10 times even though it is less than half the thickness of the current plate used.
http://investorshub.advfn.com/boards/read_msg.asp?Message_id=27015848
4. Joint Venture with Geomandal in Mongolia - AYSI has announced that they are negotiating a joint venture with Geomandal to commence commercial operations in early 2009. The joint venture will be 60% owned by AYSI and is for sales in Mongolia.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=29928961
5. Mining Industry Growth - The mining industry has been growing tremendously due to the growth of China and India. Metal prices remain quite strong which should continue to fuel growth of the mining industry and thus the market for AYSI's products.
6. Growing Australian Mining Industry - AYSI's main market is Australia. Some exciting potential prospects exist going into 2008 and beyond with very large iron ore producers/prospectors having aggressive expansion plans in the Pilbara of WA. A lot of wear plate will be needed for new equipment (truck and train transfer/loading chutes at mines and at ship loading facilities, as well as in other places), at places like the Hope Downs project of Rio Tinto JV and the Cloud Break project of Fortescue Metals Group. Hopefully, AYSI will be able to catch some of this business.
7. Expansion Outside of Australia - A very large portion of AYSI growth has come from only Australia. With the company's 'word of mouth' sales strategy, the customers closest to the product are apparently really increasing their appetite for the product and are probably the ones that would know it best. This speaks to the quality of the product. As traction for Arcoplate establishes itself more worldwide, they could grow rather rapidly. The JV with Geomandal is the first step in this process.
8. No Dilution - The company has a history of no dilution.
9. Insider Ownership - The CEO and CFO have a big stake in the company's common shares and thus have been fiscally responsible as they have a large stake in the company.

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