Hi,
IMHO the recent and ever increasing Trump turmoil, which has already severely taken its toll on the EDE SP, is likely to accompany us for quite some time. Therefore due to this special and for many investor’s, very unsettling situation, I thought it might be helpful if I offer some possible answers to how we got here, where I believe we are now and where we are likely to be by year end.
WTF! or how did we get back to 21 cents! IMHO, the EDE SP surged earlier this year not only the back of EdenCrete reaching a number of significant company milestones (which I call micro sentiment), but was also fuelled by the hype and expectations for increased infrastructure spending under Donald Trump (which I call macro sentiment). I believe that the latter caused a major bubble in the EDE SP which has now well and truly burst and sent the EDE SP back below, what I have always called “pre-production” fair value at 25 cents. To make matters worse GS also hitched his wagon to the Trump hype in an official announcement, although to be fair, just about everyone else made the same mistake, including myself!
What a lot of investors are forgetting, however, is that EdenCrete will blossom with or without Donald Trump due to the gigantic size of the US infrastructure and concrete market. Eventually this fact will become apparent again, probably right after EdenCrete has been awarded some major contracts from the GDOT or one of the other DOT’s! When this happens the SP will benefit, however, the Trump based damage has been done, so the recovery will be fairly moderate (this is a good thing!).
What did not help halt the Trump turmoil SP slide was the unfortunate fact that GS could not deliver on his promise that CS2 would be commissioned within the first 2 weeks of May. Here the old German proverb “When nothing is going your way then bad luck comes along as well” springs to mind! Thus investors who were already on the verge of selling had a second reason to sell, although I would call this decision very short sighted!
Strong hands versus weak hands (like poker): those holding strong hands are those who bought EDE at under 5 cents. Weak hands are those that bought at over 30 cents. There is of course a world in between, however, hopefully you get my drift. The weak hands are the first to capitulate and thus exacerbate any fall in a SP. This is what has happened to EDE since around the middle of April of this year. Such investors, after reading all the good things about EdenCrete, invested their hard earned, only to see the value of their investment drop 20% within a few days. Rather than hold, they sold! Whether this was a wise move depends on whether they are now buying back at a significantly lower price or whether they have turned their back on EDE & and thus EdenCrete forever (understandable under the “one bitten twice shy” rule). Strong hands of course are still sitting on profits in excess of 300% and have the luxury of being able to hold through a long period of weakness and perhaps even top up during such times (like me). Such investors are far more optimistic in their overall view (like me). The old adage of buy low sell high has never been more apparent than it is today with EDE!
Investors who have strong hands are quite possibly the worst people to ask for advice as they are speaking from a position of supreme strength and usually have a medium to long term view. One should always ask them the question “when should I buy, at what price and how long should I hold?”. Whilst I may have been guilty of being overly optimistic about EdenCrete in the past, I have never told anyone to buy EDE at over 25 cents. Whilst I would not consider an investment under 25 cents in EDE a really strong hand (yet!) it is far from a weak hand!
CS2 and the EdenCrete pudding: the CS2 commissioning process is well underway and is approaching final completion. If this was not the case GS would have already made an announcement informing the market that there was going to be a significant delay. I am therefore very confident that we will receive an announcement before the end of this month that final commissioning has been duly completed.
Although I am also very impatient and critical of the non adherence to production timetables, it must be said that this is a “green field project” where EDE has built its EdenCrete plant and operations from the ground up and in the US to boot! It is not plug and play! There is also no instruction manual and there are no engineers with years of experience in installing this type of facility to ask for help if something goes wrong. This is entirely new “cutting edge” technology, which, when it is finished, will receive attention from all over the world, not only in the concrete industry but also in the wide world of CNT’s and their ever expanding range of exciting applications.
Sales and distribution: this will be the real proof of the aforementioned EdenCrete pudding. The EdenCrete sales team has been presenting EdenCrete for nearly 6 months now and although the concrete industry is notoriously slow in taking on new products, there has already been significant progress made as can be seen by the precast concrete order from Valley etc. as well as the inclusion of EdenCrete on an ever increasing number of US DOT’s QPL lists. All of these very positive milestones/developments will continue unabated and probably at an even greater pace. There is plenty of momentum out there which will only accelerate when CS2 is up and running. This will lead to a recurring and ever increasing flow of significant orders from the private and public sector for a steadily growing number of applications.
Institutional investors: there is no shortage of interest being shown in EdenCrete by major institutional investors and funds in Europe and the US. However, just like everyone else they are all waiting for CS2 to be commissioned, but far more importantly, for EdenCrete to at last get some runs/sales on the board. I believe that after Q3 i.e. once EdenCrete has completed its first full quarter of sales, we should see the first few major funds appear on EDE’s share register.
Another CR? According to my research EDE has sufficient cash without any really significant sales for the next 12 months. Therefore a CR this year IMHO is completely out of the question, unless it was to fund CS3 and fast track G1A. If there was announcement in this regard you can bet that it would be based on the fact that there have been a huge flood of orders and that GS has decided that there is no other choice other than to dramatically increase production at Colorado. Having said, the profits from CS2 will cover much of the costs of any CS3 expansion. Don’t forget that a lot of the capital expenditure (capex) for CS3 has already been undertaken, therefore in the event of a CR this would be more likely to be entirely for G1A. Please note: the commissioning process for CS2 will be time very well spent when it comes time to commission CS3 and G1A!
Where will the SP from now until the end of this year? Firstly: there are no experts, not a single one, not even Warren Buffett! I have always maintained that EDE’s current fair value i.e. “pre-production” is 25 cents. As a result when the SP is under 25 cents I consider it a buy. As previously mentioned the macro situation is not nearly as rosy as it was in February/March/April hence the slide in the SP. The micro situation or the EdenCrete Express, however, remains well and truly on track. Even the aforementioned delay in commissioning of CS2 is, in the overall scheme of things, understandable and relatively miniscule.
Once GS announces that the commissioning of CS2 has been fully completed, which is a huge milestone in EdenCrete’s history, I expect the SP to rally back towards 25 cents, if not slightly above. After this milestone has been reached it will be all about sales i.e. the SP will become entirely sales and earnings driven. News of significant and recurring sales during June & July should see the SP test the 30 cent level again. Should sales continue to grow at a steady rate throughout Q3 I see a retest of the 52 week high and a possible new high in the vicinity of 40 to 45 cents. I am sticking with my forecast of an SP of 66 cents on 31.12.2017. Please note that in Australia the end of the financial year brings with it increased volatility for just about all stocks. The effect on EDE is almost entirely impossible to predict. Perhaps the recent sell off in EDE will have taken some downward pressure off the SP before the end of June comes around.
Thank you for taking the time to read this. I will posting again in this forum when I feel there is a need to do so, probably in a couple of months time.
Cheers and GLTAH!
MB
P.S. This post is my own personal opinion, therefore each and every reader must do their own research before undertaking any investment decision. The Information herein is based on factual information obtained personally by me, or given personally to me by totally reliable and vetted sources.
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