Thursday's report on UK-Analyst is from GE&CR: Cinpart (to be renamed Active Energy Group)
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Forecasts Table
Source: Company and Growth Equities & Company Research *Active Energy Group is a corporate client of RSH the ultimate owner of this website. The SF t1ps Smaller Companies Growth fund which is managed by another RSH subsidiary owns shares in Active Energy Group as does RSH.
Active Energy was acquired by the small AIM listed Cinpart in March 2009 and designs, manufactures and sells a range of voltage optimisation equipment, which can significantly reduce energy consumption when installed in commercial buildings. Active Energy owns a 72.2% stake in VoltageMaster the owner of the product. This market is being driven by environmental and legislative pressure to reduce energy consumption as well as by increasing energy costs. In order to tackle the perceived threat of global warming Governments across the world are providing soft loans to encourage take-up of equipment which reduces energy consumption. The key to growth in the UK is partnership with Southern Electric Contracting (SEC), a wholly owned subsidiary of Scottish and Southern Energy which makes Active Energy the preferred supplier of voltage optimisation technology to SEC one of the largest mechanical and electrical contractors in the UK. The voltage optimisation technology gives the user the ability to optimise electricity supply. A robust piece of equipment available in around 12 sizes costing an average of £25,000 is installed to ensure that the building constantly uses its lowest possible voltage. There is a universal supply problem of ‘over-voltage’, which causes increased energy consumption. The over-voltage problem would not exist if electricity companies were able to supply electricity at a voltage matching that needed by the electrical equipment. The 253 voltage used to transport electricity from power stations is higher than that needed by customers in their buildings which require 220 volts. The higher transactional level allows for voltage drops across the supply network so the average voltage on delivery to the premises is 242 volts. This gives a significant margin of wastage and the technology used in the VoltageMaster electrical optimisation equipment controls the incoming voltage so maximising energy savings without compromising reliability. Voltage optimisation equipment can deliver a 10% - 15% reduction in corporate electricity bills and payback periods can range from 18 to 36 months. Expected rises in the cost of electricity will shorten the payback period, while carbon reduction initiatives also boost demand. Current market penetration is estimated at just 0.5% in the UK and the growth potential in overseas markets seems just as compelling. There is some competition from unlisted companies and Active Energy’s recent funding should help it to establish a market leading position. Results for the year to December 31st 2009 showed a 42% increase in turnover to £2.9 million and Active Energy contributed £1 million of that with gross margins around 20 % - 30% on each unit supplied. The mature legacy businesses within Cinpart (Gasignition), a supplier of electrical components to small and medium-sized European gas appliance manufacturers, and Derlite, an international manufacturer of electrical and non-electrical components, contributed the balance. The roll out in the UK is targeted at 400,000 large buildings that Active Energy believes have the potential to reduce their energy consumption significantly using VoltageMaster. A recent example is £375,000 worth of orders for the supply of VoltageMaster units to five prisons across the UK. The units are being made in Scotland and the installation is set to be completed in October 2010 by SEC. The SEC link-up has already generated orders worth around £150,000 and given the size of its client base more can be anticipated. The pace of the UK rollout and the size of each contract is hard to judge For example if a major retail chain required 200 buildings to be fitted at say £25,000 (net to Active Energy) this would make a £5m contract. Our 2010 and 2011 forecast do not discount major contracts of that scale or any real international inroads being made and thus the risks to numbers are on the upside. We initiate our coverage at 7.25p with a target price of 16.1p and a stance of strong speculative buy. Forecasts Table
Source: Company and Growth Equities & Company Research *Active Energy Group is a corporate client of RSH the ultimate owner of this website. The SF t1ps Smaller Companies Growth fund which is managed by another RSH subsidiary owns shares in Active Energy Group as does RSH.
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