CG1 - Carbonxt Group

[System]

Carbonxt is a provider of Activated Carbon (AC) products for emissions control applications, with the primary focus being the removal of mercury from flue gas and wastewater emitted by coal fired power stations and other industrial facilities in the United States.

It is anticipated that CG1 will list on the ASX during December 2017.

http://www.carbonxt.com

 

[Dona Ferentes]

nothing on this one for the last 3 years; but then, CG1 has not really done anything. Pricewise, still trading below issue price of 70c a share, while the last few months it has risen off lows and volume does seem to be increasing, to an extent.

Carbonxt Group Limited (CG1) is a cleantech company that develops and markets specialised Activated Carbon products, primarily focused on the capture of mercury and sulphur in industrial processes that emit substantial amounts of harmful air pollutants. The Company produces and manufactures Powdered Activated Carbon and Activated Carbon pellets for use in industrial air purification, waste water treatment and other liquid and gas phase markets.

Market cap all of $30 million, the Convertible Note is out of the way and 1:4 equity raise & SPP at 40c was successful. Sales were up at $18mill for last year, order book is growing but contracts are not materialising at any rapid rate. After scaling up and investing in production of pellets, the company claims gross margins are returning to low 20s/ improving and expects to be cash flow positive in FY20.

Is US based and, with the only domestic production facilities, faces pressure from imported pellets (though the tariff on Chines imports rose from 10% to 25% in May 2019)

 

[galumay]

I did a pretty deep dive into CG1 recently, but I was unable to develop enough conviction to take a position. I think its got potential but a couple of things put me off, one its such a new listing so there is no financial history, I usually avoid these businesses. Secondly its debt is basically 100% of equity, and thats a hard no for me.

Happy to look at it again if it can develop a profitable track record and get rid of the debt.

EDIT - I dug up this report when i was looking at it, https://www.livewiremarkets.com/wires/carbonxt-rapid-growth-inflection-point

 

[Dona Ferentes]

Saw that about the debt (but wasn't sure and didn't include as it was last FY numbers). Will report soon, so there may be clarity.

A few things I didn't like.
- USA company but ASX listed (through Shaws, with Lang Walker and Soul Patts on the registry).
- escrow.... will keep dribbling 'em in
- kept talking about contracts in the pipeline, but any announcements few and far between.
- active trials -> implies they're giving it away
- and they're not the cheapest product out there.

 

[galumay]

Agree with all of that, none the less, worth keeping an eye on I reckon. I wouldn't mind paying up if they can build an investible business.

 

[Dona Ferentes]

galumay, the report you appended does paint a good story

A business with regulatory tailwinds driving revenue, rising gross margins, a flat fixed cost base, operating leverage, competitive differentiation, scale benefits, sticky clients and large competitors that need to adjust to incoming regulations, quickly.

and I was pushing back on the 'contracts story' but willing to change when put in terms of legislation introduced in 2016 and maybe, 3-4 years on, those customers might just need to revisit what they're doing.

It's just that scaling up will come at a cost.

 

[mangojoe]

The latest numbers, while the stock is down YTD from 0.52 to 0.32. -5.9% today.

28 February 2020
Carbonxt Group Limited – 1H20 Results
Carbonxt Group Ltd (ASX:CG1) has released its half year results for the period ending
December 31, 2019 - all numbers are in A$.
Overview
1H20 % Change on 1H19
Revenues ($) $8.40m -3%
Gross Margin ($) $2.84m +391%
Operating Expenses $3.49m -27%
Underlying EBITDA ($0.66m) +87%
• Revenue of $8.4 million was broadly in line with 1H19.
• Strong growth in higher margin activated carbon Pellet sales (+18.8% on 1H19), a market
segment offering significant future growth opportunities.
• Powdered activated carbon sales were down -22.3% on 1H19, reflecting temporarily
depressed power plant operations for certain customers.
• Gross Profit improved by 391%, reflecting the benefits gained from operating from our own
facilities now economies of scale are being achieved.
• Cash operating expenses decreased by 27% on 1H19, primarily reflecting significant
operating efficiencies within the activated carbon pellet segment, and led to an underlying
EBITDA improved of 87%, with 2Q20 reaching breakeven.
• The Company has continued to experience sustained YoY improvements in Operating
Cash Flow (+45% on 1H19), and is focused on executing a growth strategy centred on the
activated carbon Pellet market.

 

[Dona Ferentes]

Agree with all of that, none the less, worth keeping an eye on I reckon. I wouldn't mind paying up if they can build an investible business.

one year later to the day. .... well, this has gone nowhere
July raise $2M
Nov raise $3M

 

[frugal.rock]

A few things I didn't like.
- USA company but ASX listed (through Shaws, with Lang Walker and Soul Patts on the registry).

Forgive my ignorance, but I was hoping for an explanation on this.
What is it about that point that you don't like?

I don't have enough experience to make an assessment like that, so am wondering what it is that forms that dislike, in this instance.

 

[galumay]

one year later to the day. .... well, this has gone nowhere

Interesting, I didn't look at it again as it was a hard no for me on the debt alone. Its good I guess when I see my decisions not to invest vindicated in this way, not so good for those who did invest though.

 

[Dona Ferentes]

Forgive my ignorance, but I was hoping for an explanation on this.
What is it about that point that you don't like?

Specifically, ASX was allowing marginal companies to list here, especially 2019-20, that may not have made it to US and other bourses. Which was a red flag. Then there was a real doozy (forget its name) that bombed and did reputational damage. So, it isn't a quantitative evaluation, just a subjective screen that I apply.

(incidentally, I would like to think everything is an investible opportunity, then I use a mental scorecard to discard (unlike, unfriend) companies that don't cut it. <nice to be vidicated on this one >
Arbitrary, capricious, but tends to work for me.)

 

[Dona Ferentes]

Maybe the sun has come out again:

Further US$2 million order received for Activated Carbon Pellets

• Wisconsin power station has ordered further Activated Carbon Pellets to be supplied by end December 2021
• Contract takes customer’s total annual order value to +US$5m with this revenue to be recognised in FY22

• In order to fulfill the order, Carbonxt’s Arden Hills plant will return to full manufacturing capacity
• Order pipeline for AC pellets and powder is experiencing significant growth; permit for Kentucky plant construction is pending

 

[aus_trader]

Maybe the sun has come out again:

Further US$2 million order received for Activated Carbon Pellets

• Wisconsin power station has ordered further Activated Carbon Pellets to be supplied by end December 2021
• Contract takes customer’s total annual order value to +US$5m with this revenue to be recognised in FY22

• In order to fulfill the order, Carbonxt’s Arden Hills plant will return to full manufacturing capacity
• Order pipeline for AC pellets and powder is experiencing significant growth; permit for Kentucky plant construction is pending

Interesting product.
They are having 1m, 2m orders coming through lately for their Activated Carbon Pellets.

 

[aus_trader]

Technology advancing...

 

[Dona Ferentes]

Technology advancing...

Ever the lay person, I would be interested as to whether there is a winner in this sector.

Yes, there's a need, but with EPA and other regulations, it could quite well be that the best solution is not the chosen one; usually the offending waste water need only be improved to a certain level, and any contamination reduced not removed.

As per the CXL slides today:

Challenge : Wastewater is normally discharged to the environment, requiring treatment and proper management to protect public health and the environment.

Municipal : Sewer systems collect and transport waste-water to treatment plants, but those sewer systems themselves need treatment.
Industrial : Ever tightening restrictions on industrial waste-water discharge limits

To manage wastewater requires infrastructure and chemical dosing and with discharge limits continuing to tighten globally (nitrogen & phosphorus in US, the EU and new environmental limits emerging in China)
LIMITS ON WASTEWATER DISCHARGE WILL CONTINUE TO TIGHTEN.

There would be a half dozen or more aspirants on the ASX, so world wide, how many companies, big and small? (and no-one ever got fired buying IBM !)

 

[Dona Ferentes]

CG1 is reporting success, Those interested in charts may have it as a Potential Breakout ?

Test Results Confirm Novel AC Pellets Successfully Destroy Florida Red Tide Algae

• New Activated Carbon Pellet technology demonstrates superior performance killing 100% of algae within two hours at low dosages of added algaecide
• Florida red tide algal blooms cause severe environmental, economic, and public health issues and there is considerable government support to fund environmentally friendly treatments
• Carbonxt provides the following link which details the economic and health impacts caused by red tide algal blooms in Florida - https://bit.ly/2YwTB7t
• These pellets build on our nutrient pellet research and commercialisation work. Freshwater eutrophication (water becoming progressively enriched causing excessive algal growth) has been estimated to cost the US economy US$2.2 billion annually

 

[aus_trader]

CG1 is reporting success, Those interested in charts may have it as a Potential Breakout ?

Certainly looks like carving out a nice round bottom for a potential breakout...

 

[Dona Ferentes]

Certainly looks like carving out a nice round bottom for a potential breakout...

and CG1 pushed through the 30c level today. As high as 34c and closed at 31.5c.

Secures New Powdered Activated Carbon Orders Valued at $5m Annually

• Total value of powdered activated carbon have almost doubled and now exceed ~$11m annually
• Revenue from new orders materialises from January 2022 and deliver a forecast gross margin of 40%
• Demand for PAC continues to grow as customer activity returns to normal levels
• Longer term revenue streams from PAC product underpinned by two existing contracts with power utilities being extended for a further two years
• Pipeline of new orders now increasing substantially for Activated Carbon Pellets with opportunities in new sectors

 

[Dona Ferentes]

and CG1 pushed through the 30c level today. As high as 34c and closed at 31.5c.

but couldn't hold and has slipped to 24c level

Currently in a Trading Halt, looking to raise some more , up to $2.5 million at 24c a share with 1 for 3 oppies attached, that would go towards general working capital and balance sheet improvement.

All sounds rather ambitious. The company has three facilities in the United States producing activated carbon products, and has planned to build a fourth one.

 

[Dona Ferentes]

got $4.5million in the door (before costs) at 24c

Managing Director Warren Murphy commented: “After two cash flow positive quarters, Carbonxt is exceptionally well-positioned to continue its strong growth trajectory and these new funds raised will help us to accelerate this growth. We are witnessing considerable demand for our products in the United Sates, and we plan to ramp up manufacturing capacity to meet demand. New potential customers in some large sectors are also materialising and a stronger balance sheet will help us capture these opportunities. We are grateful to our investors for their support and will report on some more positive operational progress shortly."

Bouncing off the selldown, now up to 27c