MissionIR Small-Cap Investor Blog

Wednesday, January 29, 2014

Dakota Plains Holdings, Inc. (DAKP) Well-Positioned to Exploit Bakken Activity with Expanded Transloading Capacity and Frac Sand Terminal

Dakota Plains Holdings, the MN-headquartered provider of broad-spectrum crude oil offtake services spanning marketing, transloading, and trucking of crude and related products, is squarely focused on growing their Williston Basin (Bakken and Three Forks) centric operations through judicious capacity expansion of their optimally located New Town facility in Mountrail County, North Dakota.

With a sizeable and proprietary fleet of trucks, as well as over 1k railroad tank cars at their disposal (directly and indirectly) through existing JVs, it is little wonder DAKP pushed record volumes in their marketing/transloading figures for November 2013, with multiple daily gross rates exceeding 36k barrels per day. Direct connection to partner Canadian Pacific’s Class 1 Railway ensures a bright future for DAKP as they continue to serve Bakken/Three Forks interests well on into the future and their now culminating Pioneer Terminal JV expansion project should improve overall throughput/profitability handsomely.

Markets should be getting an update from the company any day now on the Pioneer Terminal commissioning, which adds two 8.3k foot loop tracks, each capable of handling a 120 car unit train, as well as two crude storage tanks totaling 180k bbls in capacity. The rapidly developing inbound oilfield products activity at the Pioneer Terminal is also key for DAKP here, with the New Town facility’s four existing 2.5k foot tracks to be used in support of inbound oilfield supplies like frac sand, something for which the company is currently constructing a $15M terminal that (slated for completion in May of this year). The 750k tons per year frac sand terminal, announced earlier in 2013 and fully funded by top North American non-metallic industrial minerals producer, UNIMIN Corp., will carry some 8k tons of fixed sand storage, as well as featuring enclosed transloading.

The Pioneer Terminal expansion incorporates a high-speed loading facility capable of handling 10 rail cars at the same time, in addition to transfer stations for organizing crude coming in from trucks and local gathering pipelines, with one such pipeline already in service and a projected 8k BOPD feed rate. The fact that they executed this new expansion via JV, incurring only half the$50M price tag and are now in the final stages of completing a transition whereby DAKP will assume management of the Pioneer Terminal, with over 11k work-hours and zero lost time due to safety incidents, while also bringing the project in under budget, speaks volumes about the project’s development team. President and COO of DAKP, Gabe Claypool, who helped spearhead the company’s initial doubling of on-site capacity and creation of their key marketing/trucking JVs, was instrumental as the Pioneer Terminal expansion project team leader in achieving such success.

For more information, visit www.DakotaPlains.com

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Iteris, Inc. (ITI) and Tinga Enter Global Distribution Agreement

Iteris, a prominent supplier of intelligent traffic management information solutions, has entered into an agreement with Tinga to make Iteris’ products available on Tinga’s AIR Exchange™ (AIREX™). The deal gives Iteris the opportunity to have a presence on the first and only cloud-based independent marketplace that provides access to financially actionable information and reports to investors.

The agreement stipulates that Iteris’ traffic and weather information products and services will be offered on the AIREX online marketplace for use by asset managers, hedge funds, registered investment advisors, corporate buyers, and other investment professionals.

“Our partnership with Tinga demonstrates the need for our traffic and weather solutions in markets outside of transportation,” said Tom Blair, Senior Vice President, iPerform at Iteris. “Soon, global investors who seek relevant information to make important investment decisions will have direct access to purchase Iteris products and services through the Tinga AIR Exchange online marketplace. We look forward to working with Tinga and being the first in the traffic and weather management market to leverage their services.”

Stephen Kuhn, CEO of Tinga, commented: “For many investors, traffic and weather information is a key component of investment analysis and decision making. Using Tinga’s AIR Exchange, Iteris is now able to offer timely, accurate and actionable weather and traffic information that our customers need to be competitive in today’s investor environment. We’re excited to partner with Iteris, and look forward to offering its industry-leading products and solutions through the AIR Exchange.”

Iteris is known for developing the next generation of intelligent traffic and weather-related information solutions. These breakthrough solutions should usher in the power of big data to the prediction of traffic and weather conditions, and the delivery of actionable information to public and commercial marketplaces.

For further information, please visit www.tingatech.com and www.iteris.com

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Chanticleer Holdings, Inc. (HOTR): Lots of Exciting Developments

Chanticleer Holdings is an operating holding company that owns and operates several restaurant brands across the world. The company is well-known for its ownership stake in Hooters of America but has also been acquiring other brands with the intention of expanding its entire suite of brands both internationally and domestically.

In addition to Hooters of America, Chanticleer Holdings is also the owner and operator of American Roadside Burgers which currently has 5 restaurant locations along the eastern coast of the United States. The company also owns a majority interest in Just Fresh Restaurants which is a fresh food-focused casual dining brand that has 5 restaurant locations in Charlotte, NC.

Last week, Chanticleer Holdings announced a new distribution deal with Appalachian Mountain Brewery. Mike Pruitt, the CEO of Chanticleer Holdings, has agreed to assist AMB with distribution of its unique, craft beer into the restaurants it manages. Given the fact that U.S. consumers drink roughly $200 billion worth of beer each year, this distribution deal could draw in additional customers to the restaurants owned and managed by Chanticleer Holdings.

This deal follows the company’s earlier announcement to acquire Spoon Bar & Kitchen, a fine dining seafood restaurant. Chanticleer plans to expand the Spoon brand into a new, fast-casual dining concept. Given the developments at Chanticleer, it’s easy to understand how the company has managed to significantly improve its revenue stream over the past 3 years. Last year, the company generated $6.9 million in revenue, compared to just $1.5 million in 2011. Because of this impressive growth, shares have surged by 79% over the past 52 weeks. This is likely only the beginning.

For more information about Chanticleer Holdings and its subsidiaries, visit the website at http://www.chanticleerholdings.com

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Clean Energy Fuels Corp. (CLNE): Natural Gas Highway Driving Future Success

The number of natural gas vehicles (NGVs) in the North American region is expected to increase at a compounded annual growth rate of 17% through 2020. Buses will lead this growth followed by medium and heavy duty trucks, which are expected to grow at 22% and 19%, respectively. These numbers look promising for natural gas suppliers, and Clean Energy Fuels Corp. is in a good position to benefit from this opportunity. Apart from directly selling natural gas in compressed and liquefied forms, the company builds and sells natural gas filling stations to its customers. Last month, Clean Energy reported that its customers ordered 70% more natural gas vehicles in the first nine months of 2013, than in the same period in 2012. This will drive Clean Energy’s revenue growth in the coming quarters.

In the longer term, Clean Energy will benefit more as natural gas gains wider acceptance as an alternative fuel. This is bound to happen, as natural gas is a better option compared to gasoline and diesel. On average, natural gas is cheaper by almost $1.50 per gallon compared to gasoline and diesel, and the use of natural gas reduces emissions by almost 30%. Even though an NGV costs up to 20%-30% more than a comparable gasoline vehicle, the fuel benefits help recover the higher cost over the course of 2.5 years to six years, depending on the type of vehicle. As more people opt for NGVs, the selling price of NGVs should decrease as companies improve production efficiency.

For medium and heavy duty trucks, the higher cost of NGVs is not stopping transport companies from converting their fleet to natural gas. Clean Energy signed a multi-year agreement with United Parcel Service (UPS), wherein Clean Energy will supply liquefied natural gas (LNG) to UPS’s private stations in Houston and Mesquite. The regular supply to these two stations will ensure better revenue for Clean Energy in the upcoming quarters and beyond. In a separate agreement, the company will assist UPS’s natural gas fleet by opening three stations in Texas. These stations in Amarillo, Mesquite, and San Antonio are part of Clean Energy’s America’s Natural Gas Highway (ANGH) network.

Under the ANGH network, Clean Energy is developing LNG fuelling stations on the interstate highway system that will provide natural gas to trucks traveling across the U.S. The company plans to open 150 LNG fueling stations in the first phase, out of which 70 were completed as of September 30, 2013. The company will probably provide an update on the construction of its ANGH network when it announces its fourth quarter results. Recently, Clean Energy opened its first LNG station in Florida, and companies like UPS and Raven Transport, among others, will use it. As more and more fueling stations on the ANGH network become operational, Clean Energy will post better sales in the coming years.

What about the financials?

Although the development of filling stations on the interstate highway has further improved Clean Energy’s growth prospects, it has taken a toll on the company’s financial statements. Over the five-year period from 2008-2012, the company failed to generate annual profits and positive free cash flows. As a result, the company was forced to raise additional finances to continue its expansion plan. Last year, Clean Energy completed a convertible debt offering of $250 million, and the company will pay 5.25% interest in semi-annual payments beginning April 1, 2014. The increase in interest expenses will further impact the company’s profitability.

However, the company can offset its increased interest expenses by utilizing the funds efficiently. In order to see whether the company incurred capital expenditures (capex) efficiently, investors should compare the company’s past capex to sales ratio.

Historically, the company successfully translated its increasing capital expenditures into increasing sales. The company’s capex increased consistently from 2010-2012, showcasing higher investments made for its future. These investments paid off in the first nine months of 2013, as the company generated better revenue compared to its capex, helping reduce its capex-to-sales ratio. In 2014, the company will incur capex on the development of the remaining fueling stations on its ANGH network. Assuming the company displays similar efficiency with respect to generating revenue through its capex, we can expect Clean Energy to post increased revenue in the coming years.

Conclusion

The benefits that natural gas offers as an alternative fuel to gasoline and diesel will definitely lead to increasing demand for NGVs in the coming years. Clean Energy’s ANGH network will help it capitalize on the increase of NGVs. Even though the company’s financials have suffered from the funding of its projects, the company’s financial position continues to improve as more filling stations become operational.

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Actinium Pharmaceutics, Inc. (ATNM) Engages Goodwin Biotechnology to Supply Iomab™-B for Its Phase 3 Clinical Study

Today before the opening bell, Actinium Pharmaceutics reported that it has engaged Goodwin Biotechnology in a manufacturing supply agreement. In this agreement, Goodwin Biotechnology will be the overseer of the current Good Manufacturing Practices production of a monoclonal antibody that is expected to be used in an upcoming phase 3 clinical trial of Iomab™-B. Iomab™-B is to be used in preparation of patients for hematopoietic stem cell transplant (HSCT), which is commonly referred to as a bone marrow transplant (BMT).

“This agreement with Goodwin Biotechnology represents a major risk mitigation step in conducting our phase 3 trial of Iomab™-B,” said Kaushik J. Dave, President and CEO of Actinium. “Goodwin Biotechnology has significant experience in working with companies like ours and the capabilities to provide the scale-up needed for a late-stage clinical trial. Its competencies in process and product implementation, quality assurance, and GMP manufacturing make it ideally suited as a manufacturing partner for Actinium as we look forward to launching this pivotal phase 3 trial later this year.”

“We are very excited to be working with Actinium on Iomab™-B, their lead product candidate,” said Karl Pinto, CEO of Goodwin Biotechnology. “Actinium’s cutting edge proprietary platform is able to target different types of cancers that are without any approved treatment options. We look forward to a long-term partnership with Actinium, not only on Iomab™-B, but hopefully also on other products in their pipeline such as Actimab-A.”

Based out of New York, Actinium is a biopharmaceutical company developing innovative targeted payload immunotherapeutics for the treatment of advanced cancers. Currently, it is conducting a single, pivotal, multicenter Phase 3 clinical study of Iomab™-B. In that study, the radioimmunoconjugates and its treatment efficacy are being examined in refractory and relapsed Acute Myeloid Leukemia (AML) patients, who are over 55 years of age, with a primary endpoint of durable complete remission.

For more information on Actinium, visit: www.actiniumpharmaceuticals.com

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Risks Loom But Qualcomm Inc. (QCOM) Remains a Promising Growth Stock

Driven by exponential growth in smartphone shipments, chipmakers such as Qualcomm (QCOM) and Broadcom (BRCM) have seen their addressable markets increase. As smartphone manufacturers look to integrate more features, chipmakers need to continually upgrade their chipsets and release new ones, which is why demand for smartphone chips continues to remain strong.

The need for low power consuming processors for a better battery life has been a prime concern for various smartphone manufacturers, but Qualcomm seems to be addressing that need now. Windows RT is among the first operating systems that incorporates a processor to run on low power chipsets. It uses Qualcomm’s processors based on the ARM architecture.

Qualcomm has already been winning orders for its Snapdragon series of processors from smartphone manufacturers like Sony, Samsung, HTC, and Xiaomi. The sales of the Snapdragon 800 processors are expected to increase due to the increased deployment of 4G LTE in key markets such as the U.S. and China.

However, Broadcom poses a tough challenge to Qualcomm in chips for modems, wireless, and LTE applications. It recently acquired Japan-based LTE wireless chipset company Renesas Electronics for $164 million . Chips manufactured by Renesas are already certified by leading wireless carriers like AT&T, Vodafone, Orange, EE, and NTT Docomo. This deal gives further impetus to Broadcom in the 4G modem market, as it looks to cut into Qualcomm’s share. But then, Qualcomm has its own set of advantages.

Qualcomm’s licensing policy can leverage more growth in the future

Qualcomm is now focusing further on its licensing business to ramp up its top line. The company currently holds numerous wireless patents, enabling it to earn royalty fees from various handset manufacturers that use Qualcomm’s chipsets. Currently, the major chunk of its revenue comes from the sale of chipsets.

Qualcomm faces fierce competition from other chip manufacturers like Intel and Samsung. But with the focus on its licensing policy, it remains in a position to keep its revenue stable while also profiting from growth in smartphone shipments that use its intellectual property.

The only concern with the licensing policy would be the pricing of the handsets since Qualcomm does not have any control over that. But no business is risk-free and under any situation, Qualcomm is benefiting with this business strategy and expects further growth. The margin in the licensing business is higher than selling chips, and this has a positive effect on the bottom line.

A threat for Qualcomm

Qualcomm is facing regulatory problems in China. Recently, China’s National Development and Reform Commission (NDRC) launched an antitrust probe. This was a surprise for Qualcomm as it was not aware of any violation. The Chinese government’s policy of royalty further favors local suppliers, making life difficult for Qualcomm.

Organizations in China are spending heavily to acquire Chinese mobile chipmakers. Spreadtrum Communications and RDA Microelectronics were acquired by Tsinghua Unigoup. Both these companies were on similar technology platforms as that of Qualcomm, creating further competition for the chipmaker in the Chinese market.

RDA Microelectronics & Spreadtrum are known for their low-cost baseband chips. Players such as Qualcomm could face a fierce price war from both these companies, who can now count on financial support from Tsinghua.

Another threat

Apart from the above two companies, U.S. chipmaker Broadcom also has the potential to hurt Qualcomm’s stronghold on the LTE market in 2014. 2014 is an important year for Broadcom as it is relying heavily on the success of LTE growth.

On the other hand, the market for low-cost smartphones is on an upward trend, with the biggest market being China. Smartphones below $250 are anticipated to account for 46 % of the global smartphone market by 2018, up from 28% in 2012. To tap this budding market, Broadcom is collaborating with low-cost smartphone manufacturers in China.

Chinese manufacturers like TCL and K-touch have incorporated Broadcom’s dual core chipset for their 3G smartphones. These 3G smartphones are offered at affordable prices and could help Broadcom enjoy strong growth.

Broadcom should also benefit from the evolution of the Wi-Fi standard. It is a pioneer of 5G Wi-Fi and expects that its customers will gradually transition to 5G Wi-Fi going forward and help Broadcom grow further. However, Broadcom is late to the 4G modem party and the acquisition of Renesas could be thought of as a desperate move by the company as it looks to challenge Qualcomm. Qualcomm commands 63% of the cellular baseband market, according to Strategy Analytics, while Broadcom’s is still in the single digits. Thus, the road ahead for Broadcom isn’t as rosy as Qualcomm.

Conclusion

Broadcom is having difficulty growing its business. Revenue growth in the previous quarter was a mere 2.9% from the year-ago period. Comparatively, Qualcomm’s revenue grew 33% in the recently-reported fourth quarter while net income improved 18%. Also, Qualcomm is cheap at 19 times trailing earnings while Broadcom remains expensive at a P/E ratio of 34. Hence, Qualcomm’s diversification and leading position in the baseband market are reasons why investors should consider buying it to benefit from growing sales of mobile devices.

However, the threat of Chinese chipmakers cannot be ruled out for Qualcomm. Also, while Broadcom might not be a good investment, it can surely rain on Qualcomm’s parade through its partnerships in the Chinese market and its recent acquisition. Hence, investors should keep a close watch on Qualcomm and keep track of its business in China.

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Crumbs Bake Shop, Inc. (CRMB) Strikes Partnership with White Coffee

The nation’s largest cupcake specialty retail store Crumbs Bake Shop and industry leader in private-label coffee White Coffee announced today the completion of a licensing agreement that will bring the Crumbs Bake Shop brand packaged coffees and single-cup coffees to select retail outlets across the country. This new line of coffee products is set to feature five flavor profiles that were inspired by Crumbs’ delicious gourmet cupcakes.

White Coffee is a family of third-generation coffee roasters based out of Long Island City, NY, and is set to both manufacture and distribute the Crumbs Bake Shop Coffee collection. The five offerings will consist of three delectably flavored coffees reminiscent of Crumbs’ most iconic cupcakes – Blackout, Red Velvet, and Hazelnut. Also included in the mix will be a dark and medium roast. The coffees will make their debut in the second quarter of 2014 in mass merchants, supermarkets, wholesale clubs, and independent food stores around the country.

“This new line of coffee perfectly complements our baked goods and will bring the Crumbs Bake Shop experience not only to current guests but also to new customers across the country,” stated Edward Slezak, interim Chief Executive Officer and General Counsel of Crumbs Bake Shop, Inc.

Gregory White, VP of White Coffee commented, “We are very excited to be able to introduce the Crumbs brand coffee to our customers.”

The coffees are set to be packaged in single-cup coffees, 10oz. bags of ground beans, and 1.5oz. vacuum bricks.

To learn more, please visit www.crumbs.com

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