The Energy Report - Tue, Jan 16, 2018

'Revenue Build' in 2018 Anticipated for Energy Firm

Mackie Research Capital Corp. analyst Nikhil Thadani explained how a recent milestone may signify the start of a revenue growth spurt for this supplier of power electronics for energy storage systems.

Energy transmission

Nikhil Thadani, an analyst with Mackie Research Capital Corp., reported in his Jan. 11, research note that on the previous day, the stock price of Eguana Technologies Inc. (EGT:TSX.V; EGTYF:OTCQB) jumped ~25% and closed at CA$0.21 per share following the company's announcement it will make a second volume shipment of approximately CA$1 million to Hawaii in January. This subsequent delivery is "an important milestone," for Eguana, Thadani added.

The corporation expects additional Hawaii business this year will drive revenue. "Hawaii's need for advanced power controls to manage power flow, which will be rolled out in calendar year 2018, should lead to additional orders in this market," Thadani indicated.

This year, 2018, could also "provide [the] much anticipated revenue build," Thadani speculated. "With Eguana's last reported order backlog of ~CA$8M, recent volume shipments in the past roughly two months and our positive expectations in Australia and Europe, we believe 2018 revenue could approach ~CA$8-10M, which would mark a meaningful inflection point in the company's revenue growth."

In fact, Mackie anticipates Eguana's per-quarter revenue for Q1 FY18 (December) and Q2 FY18 (March) to be in the ~CA$1-2 million range, based on the CA$2 million in recent volume shipments. "We believe Eguana exceeding quarterly revenue of ~CA$1.5M (about three years ago) could be a meaningful catalyst for the stock," Thadani said.

The company's December 2017 US$3 million loan agreement with Western Technology Investment should also foster revenue growth in 2018. It should help Eguana "secure battery container shipments (Hawaii) and provide a smooth transition to its contract manufacturer (Australia and Europe)," Thadani explained. Additionally, "Eguana will, therefore, be in position to replace the balance of prior participating debentures with a lower effective interest rate, which should save cash costs going forward."

Following the debt raise, Eguana is expected to have "~CA$2-3M in cash, ~CA$1M in receivables and inventory and ~CA$1.5M in debt with room for ~CA$2M more," Thadani noted. Cash burn as of Q1 FY18 and going forward is estimated to be lower than the previous roughly CA$1 million per quarter.

Another potential near-term share price catalyst is "positive news" from Eguana's automotive partner, which is believed to be Daimler, wrote Thadani. Such an announcement should provide "additional revenue growth visibility/conviction."

Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. Click below for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Eguana Technologies.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
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5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Eguana Technologies, a company mentioned in this article.

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