Clearsign updated chart - revenue potential and catalysts
Clearsign took a battering last week like a lot of the stock market, it was a correction on low volume after which you would normally hope for a decent bounce back which happened in Friday's trading, +10% for the day and a bit more aftermarket.
Where does Clearsign go from here? Well it is back to the median in the channel above as of now, a few weeks back I thought that it would stay in the upper half of the channel but clearly I was wrong about that, SeekingAlpha wrote a strong article on the future of Clearsign last week so that might have contributed to the rise on Friday.
So let's look at two important parts of Clearsign over the remainder of the year and try to determine if this is worth your money. But first let's set the scene and give a bit of background to the industry that they are operating in.
Essentially Clearsign has developed and patented a way to make flames burn better. Why is this important? For emission standards.
At the moment you have a refinery, flare or boiler and it produces high levels of NOX (atmospheric pollutants), as emission standards tighten up these levels have to come down.
It is EXACTLY like what happened with cars.
First you had diesel and petrol cars and no one cared what came out of the exhaust, then catalytic converters were introduced as emission standards tightened, better and smaller engines were produced and now most manufacturers (esp in Europe) have promised to stop producing anything but emission free cars.
So the same will happen with refineries and boilers and eventually planes will have to tow the line as well.
You can see this happening in China, California and Europe right now. China and California have set aggressively low NOX levels as standard, Europe and the rest of the US are following. This was less certain when Trump was in power but with Biden in and the pressure on big oil there is no doubt it is going to go that way.
At the moment the solution is bascially a catalytic converter, you treat the emissions as they exhaust the burner, this is expensive to fit and expensive to maintain and this is where Clearsign come in. Their solution changes the way the flame burns and produces less NOX from the very beginning with no need to treat the emissions afterward,
It is obvious how much of an advantage this is, it is the equivalent of changing from diesel to electric, so let's talk about potential catalysts coming up for Clearsign
Catalysts:
1) China - very close to certification of their 125hp fire tube boiler, news expected before end of Q2
2) Exxon - news expected Q3 of this year, the testing process for this installation has been arduous, recently this has also included testing with up to 18% hydrogen in the fuel, at every turn Clearsign has passed these tests with flying colours.
3) Mystery Euro supermajor - this means Chevron, BP, Total or Shell, prob no further order till 2022
Let's talk more about the Supermajor
from Q4 transcript
Additionally, on February the second this year, we were pleased to announce another order for ClearSign called process burner for my second super major. We believe this project is another validation project for our technology a part of a roadmap for future implementation to meet the anticipated future emissions requirements. This installation is in Europe and other first for us, but the super major has more refineries in California, U.S. Gulf Coast and many other U.S. locations.
Chevron does have a refinery in UK so might be them
BP doesn't have a refinery in California so not them
Total doesn't have a refinery in California and only one in the US so not them
Shell, this is my top bet, they have refineries all over mainland Europe and the US including California and the Gulf coast.
So what happens when you have installations with Exxonmobil and Shell, well that means orders.... and big ones, maybe not in 2021 but they ARE coming.
Let's talk a little bit about future revenues:
This is very very hard to quantify, each burner is about 100K not including installation and BMS. This still makes it a helluva lot cheaper than then alternative SCR tech, improvements have been made and this is now and one piece system so installation has been made more straightforward and serves the customer even better than before.
Before we even start we should say that 9 sales have been completed thus far, approx revenue of 1m+ will be generated from this not including spare parts and servicing in the future for every installation. Margins will be lower for the first year or two due to development of the product and the burden of proof of concept but once repeat orders start coming margins of 50% are anticipated with lower margins in China expected.
1) China - recently announced partnership with Shuang Liang Boiler Co, awaiting final approval of certification by Chinese government and once that happens orders should start flowing in at a steady rate, firstly for the 125hp firetube with more products to be added. Clearsign are saying this is a 8 billion market, could Clearsign get 10% of that over the next few years? What I would really like to know is how many boilers of that type Shuang Liang sell every year and how many of them could have Clearsign technology in them?
WSJ says they have 2.5 billion in sales per year, I am assuming with the guidance on emissions over there that Clearsign can get a chunk of that, once the CHinese government mandates something there's not a lot anyone can do about it except obey. NOX levels gotta come down and this is one way of doing it.
I am going to give this a figure of 5 million dollars by EOY
2) Exxonmobil - Will we get a follow up order this year... seems too good to be true but maybe in Q4 2021 after insallation is completed in Q3. Depending on their capex spending it could be large or small??
I am going to say that it's another 5 million based on 4 multi burner orders
3) California Boiler, Ashcor, World Oil, Zeeco all with potential to bring in more orders before EOY.
Conservative estimate of another 5m.
Total for this year could be 15m, based on a cash burn rate of between 1.5 and 2m this would put CLearsign in a great position and coming from what is basically zero revenue. Every year Clearsign makes an operating loss, when companies like this turn the coner of actually declaring a profit it is massive for the share price and I think this will happen in 2022 so I am in for a good long haul on this one with a PT of +100% by Q2 2022 or sooner.
GLTA
Where does Clearsign go from here? Well it is back to the median in the channel above as of now, a few weeks back I thought that it would stay in the upper half of the channel but clearly I was wrong about that, SeekingAlpha wrote a strong article on the future of Clearsign last week so that might have contributed to the rise on Friday.
So let's look at two important parts of Clearsign over the remainder of the year and try to determine if this is worth your money. But first let's set the scene and give a bit of background to the industry that they are operating in.
Essentially Clearsign has developed and patented a way to make flames burn better. Why is this important? For emission standards.
At the moment you have a refinery, flare or boiler and it produces high levels of NOX (atmospheric pollutants), as emission standards tighten up these levels have to come down.
It is EXACTLY like what happened with cars.
First you had diesel and petrol cars and no one cared what came out of the exhaust, then catalytic converters were introduced as emission standards tightened, better and smaller engines were produced and now most manufacturers (esp in Europe) have promised to stop producing anything but emission free cars.
So the same will happen with refineries and boilers and eventually planes will have to tow the line as well.
You can see this happening in China, California and Europe right now. China and California have set aggressively low NOX levels as standard, Europe and the rest of the US are following. This was less certain when Trump was in power but with Biden in and the pressure on big oil there is no doubt it is going to go that way.
At the moment the solution is bascially a catalytic converter, you treat the emissions as they exhaust the burner, this is expensive to fit and expensive to maintain and this is where Clearsign come in. Their solution changes the way the flame burns and produces less NOX from the very beginning with no need to treat the emissions afterward,
It is obvious how much of an advantage this is, it is the equivalent of changing from diesel to electric, so let's talk about potential catalysts coming up for Clearsign
Catalysts:
1) China - very close to certification of their 125hp fire tube boiler, news expected before end of Q2
2) Exxon - news expected Q3 of this year, the testing process for this installation has been arduous, recently this has also included testing with up to 18% hydrogen in the fuel, at every turn Clearsign has passed these tests with flying colours.
3) Mystery Euro supermajor - this means Chevron, BP, Total or Shell, prob no further order till 2022
Let's talk more about the Supermajor
from Q4 transcript
Additionally, on February the second this year, we were pleased to announce another order for ClearSign called process burner for my second super major. We believe this project is another validation project for our technology a part of a roadmap for future implementation to meet the anticipated future emissions requirements. This installation is in Europe and other first for us, but the super major has more refineries in California, U.S. Gulf Coast and many other U.S. locations.
Chevron does have a refinery in UK so might be them
BP doesn't have a refinery in California so not them
Total doesn't have a refinery in California and only one in the US so not them
Shell, this is my top bet, they have refineries all over mainland Europe and the US including California and the Gulf coast.
So what happens when you have installations with Exxonmobil and Shell, well that means orders.... and big ones, maybe not in 2021 but they ARE coming.
Let's talk a little bit about future revenues:
This is very very hard to quantify, each burner is about 100K not including installation and BMS. This still makes it a helluva lot cheaper than then alternative SCR tech, improvements have been made and this is now and one piece system so installation has been made more straightforward and serves the customer even better than before.
Before we even start we should say that 9 sales have been completed thus far, approx revenue of 1m+ will be generated from this not including spare parts and servicing in the future for every installation. Margins will be lower for the first year or two due to development of the product and the burden of proof of concept but once repeat orders start coming margins of 50% are anticipated with lower margins in China expected.
1) China - recently announced partnership with Shuang Liang Boiler Co, awaiting final approval of certification by Chinese government and once that happens orders should start flowing in at a steady rate, firstly for the 125hp firetube with more products to be added. Clearsign are saying this is a 8 billion market, could Clearsign get 10% of that over the next few years? What I would really like to know is how many boilers of that type Shuang Liang sell every year and how many of them could have Clearsign technology in them?
WSJ says they have 2.5 billion in sales per year, I am assuming with the guidance on emissions over there that Clearsign can get a chunk of that, once the CHinese government mandates something there's not a lot anyone can do about it except obey. NOX levels gotta come down and this is one way of doing it.
I am going to give this a figure of 5 million dollars by EOY
2) Exxonmobil - Will we get a follow up order this year... seems too good to be true but maybe in Q4 2021 after insallation is completed in Q3. Depending on their capex spending it could be large or small??
I am going to say that it's another 5 million based on 4 multi burner orders
3) California Boiler, Ashcor, World Oil, Zeeco all with potential to bring in more orders before EOY.
Conservative estimate of another 5m.
Total for this year could be 15m, based on a cash burn rate of between 1.5 and 2m this would put CLearsign in a great position and coming from what is basically zero revenue. Every year Clearsign makes an operating loss, when companies like this turn the coner of actually declaring a profit it is massive for the share price and I think this will happen in 2022 so I am in for a good long haul on this one with a PT of +100% by Q2 2022 or sooner.
GLTA
Comment:
More good news for Clearsign, they will be joining the Russell Micro-Cap index.
Comment:
CLIR has been absolutely bombed, however I do think it represents great value at this price but it's a risky one at this stage, it may take me a long time to et my money back, you may be better off in Uranium
This is great news for Clearsign, the future is bright.