QIS Update #19 2014 - June 18th 2014
Included in this update:
- California Nanotechnologies reports significant Q1 revenue increase of 182%
- Three Stocks to Watch!
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California Nanotechnologies Corp. (CNO:TSX-V)
Current Price: $0.155 (coverage commenced May 5/14 - $0.15)
California Nanotechnologies Corp. has announced that revenues in the first quarter of the current fiscal year (March 1st to May 31st) increased to US$159,575 ($172,959 CAD) from approximately US$56,535 ($58,446 CAD) in the prior year. In US dollar terms, this represents an increase in revenues of approximately 182% over the same period last year.
Over the last two quarters, total revenue was approximately US$334,748, an increase of 248% over the same six months a year ago, stated David F. Grant, Chairman of the Board. This represents two consecutive quarters of markedly improved financial performance mainly due to increased sales in the Oil and Gas Division. This improved performance would have the Company approaching the cash flow break even position over this six month period.
QIS Capital: Cal Nano has shown a significant increase in revenues over the past two quarters as the company moves towards the commercialization of its products and technologies. We expect to see full financials for the year ended February 28, 2014 prior to the end of June with Q1 financials around the middle of July. As stated in the press release, the company is approaching cash flow break even which reduces the financial risk of the company while still providing Cal Nano with huge upside when and if they can sign a significant commercial contract. Cal Nano has gross margins in the 80%-90% range so any major contracts should also have a very significant impact on the bottom line.
Several investors have been calling in lately asking what we are watching so we have put together a brief summary of three stocks we are currently watching closely.
3 Stocks To Watch
Newlox Gold Ventures Corp. (LUX:CSE): $0.04
Many investors have likely overlooked Newlox Gold due to its relatively small size and start-up operations. This is not your typical mining company. Newlox has access to inventories of historical gold-bearing waste dumps in Costa Rica and has installed a small processing facility to remove the remaining gold while being environmentally responsible by reclaiming the tailings. A second phase of the circuit has now been purchased and, when operational, it is expected to recover the fine gold and increase recovery by 10 times the current amounts. The pilot plant is rated for throughput of 48 tonnes per day and is targeted to be fully operational by month-end.
Assuming that the plant can run at around 40 tpd and using an average head grade of 22 g/t gold, Newlox should be able to cash flow around $3 million annually based on initial operations. The company has also targeted additional waste dumps and, subject to financing, is looking to expand its operations.
Newlox is further seeking to diversify its revenue base by engaging in a gold trading platform in Latin America, whereby the company purchases gold from various sources in the field before reselling the metal through established networks. Newlox has reported that its gold trading program is progressing well, margins are within expectations, and volumes are increasing satisfactorily at 20% monthly.
While still in the very early stages, Newlox should be reporting its first meaningful financial quarter for the period Jul 1- Sep 30, 2014. These numbers will be released by the end of November. The company currently has 45 million shares outstanding and has a market capitalization of just $1.8 million at the current share price of $0.04. If cash flow numbers prove to be accurate, the company would be trading at less than 1X annual cash flow. Given that this is a “show-me” market, we’ll have to wait to see if the company can deliver. With the majority of investors turning away from mining companies over the past few years, this is an interesting alternative.
NTG Clarity Networks Inc. (NCI:TSX-V) : $0.29
We’ve been following NTG Clarity for a number of years so everyone should know the story very well. What we can’t figure out is why the stock has been pushed back below $0.30 when the company delivered more than a 100% improvement in financials during 2013 (revenues $10 million, $0.06 eps) and has already booked more than $9 million in revenues to be delivered during 2014 with additional contracts pending. NTG Clarity has forecasted revenues of $14 million for 2014.
During the first quarter, which is historically the slowest and least profitable for NTG Clarity, the company achieved revenues of $2.9 million with net income of $200K or $0.01 per share. The second quarter ending June 30 is expected to be released in mid-to-late July.
NTG Clarity has a stable balance sheet with no long-term debt and positive working capital of $4.7 million or $0.13 per share. The company is currently trading at approximately 4.8X trailing 12 month earnings and at only 2.7X trailing earnings when adjusted for working capital.
Quattro Exploration and Production Ltd. (QXP:TSX-V): $0.59
Up until yesterday this stock was trading as low as $0.50. We commenced coverage of this company back in March 2014 at $0.32 before anyone really knew what the November 2013 acquisition would mean for the company. The stock subsequently ran to $0.93 before settling back down to current levels.
Quattro generated cash flow from operations for Q1 of $1,814,509 or $0.054 per share. This puts the company on track to meet its previous guidance of $10 million in cash flow for 2014. During the first quarter production averaged 1,298 boe/d with an exit rate of 1,513 boe/d (not including the Donalda acquisition which will add another 100 boe/d once completed). Production is expected to reach 2,000 boe/d in July 2014. Based on projected cash flow of $0.28 - $0.30 per share for 2014, Quattro is presently trading at a price to forward cash flow multiple of under 2 times.
Disclaimer: This article is for informational purposes only. The information contained within this article should not be construed as offering investment advice. Those seeking direct investment advice should consult a qualified, registered, investment professional. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The company profiled assumes no liability for the information presented. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock. The author(s) owns directly or indirectly 299,500 shares and 100,000 warrants of California Nanotechnologies Corp., 684,000 shares of Newlox Gold Ventures Corp., 1,607,000 shares and 100,000 options of NTG Clarity Networks Inc., and 85,500 shares of Quattro Exploration and Production Ltd. QIS Capital may have a financial relationship with these companies and may trade in the stocks mentioned. No stock exchange has approved or disapproved of the information contained herein. Copyright © 2003 - 2014 QIS Capital Corporation.