Old but worth the read
EURO has just sold their division (Global Fluids
International, "GFI") fuel marking technology (to prevent
illicit marketing of fuels) to Swiss SICPA Big Whale, which
has an annual turnover
of 1.4 billion USD , 3,000
employees and works with about 200 governments
worldwide. SICPA has been in the security business since
1927. SICPA is the leading global provider of security inks
for printing currency as the dollar, euro and yen, designs
passp
orts and government bonds and solutions for
authenticating documents and sensitive products with
market value. Its Security Solutions division currently
provides over 40 billion US $ per year for the collection of
excise tax and VAT and ensures traceabilit
y of over $ 70
billion on tobacco, beverage and pharmaceutical products
in the world whole. It is simply amazing that this giant
company is interested in acquiring technology owned by a
Canadian public company with low capitalization. Political
relations S
ICPA go far beyond what any other company
listed in Venture can dream. See links "International
Advisory Board"
-
CEO1 SICPA SICPA CEO, Atl
antic
Council on SICPA GFI CEO I
sraliennen Presidential
Conference.
EURO CAD receives 16 million upfront payment for
the
sale of GFI and its shares are currently trading at 16.5c x
89 million = CAD 14.68 million market capitalization with
no debt on its books. EUO also, and this is where it gets
more interesting, receives a royalty of 5% (with a minimum
of 1.5 million C
AD per year) on all contracts that get
SICPA for fuel marking programs they sell to governments
worldwide. This includes both the logistics for the program
and the actual synthetic markers used. oil / fuel marking
programs is a market of 1 billion globally
(as estimated by
the CEO Bruce Rowlands). GFI has only one serious
competitor is Authentix the United States. GFI is the only
certified fuel marker ISO market and
Mr.
Rowlands has
mentioned several times in public appearances that
Authentix tech is "horse
and buggy" in comparison with
GFI's. The only reason EUO was never able to compete
with Authentix on a global scale is due to its very limited
resources and size (EUO got only 3 contracts: Albania,
Uganda and Tanzania and lost many bids because of
bribes
that Authentix could meet with representatives of
government that the EUO could not do.) by contract, EUO
also provide Xenemetrix spectrometers on an exclusive
basis SICPA for their fuel integrity programs, they are
required to analyze fuel samples taken t
o check if the fuel
has not been altered or illegally smuggled or otherwise.
Xenemetrix is a
controlled subsidiary 100% Euroc
ontrol,
so will another layer of extra income for EUO (with gross
margins of around 40
-
50%).
Suppose SICPA receives only 10% of the
world market or
USD 100 million / year, which is approximately CAD 140
million, 5% of it going to EUO = CAD 7 million / 89 million
shares = 7.9c Income EUO. Therefore, what is the value
of EUO? I do not know, but certainly not 16.5c! The
market is out to
lunch on EUO. As the market is declining,
I would say a price
-
earnings ratio (PE) 5 = 40 c. What is
even better, if the EUO plan is to return it in the form of
dividends, which the CEO EUO announced as their
intention, if we apply a conservative return of
8%, now is
EUO = 99c. Not bad for a share of 16c. As I said, with a
market penetration of only 10% for the new Global Fluids
International division (GFI) SICPA, a very high yield of 8%,
which in a market in negative interest rates could be much
low, which
leaves out any value for the division and for
Xeneme
tr
ix XwinSys. Incidentally, there is a call for
current offers (ec.europa.eu) to provide 28 states
throughout the EU a new fuel marker that I believe could
easily be worth about 150
-
200 million to be gra
nted
before the end of 2016. the size of this contract alone has
tremendous potential for obvious EUO SICPA if this
happens to be awarded. Let's say 150 million 5% = a fee
of around 12c CAD alone for EUO which would EUO on
the way of an assessment of more
than CAD $ 1 per
share.
XwinSys (fully automated metrology system for industry
semiconductor that combines image processing
technology 2D and 3D with the ED
-
XRF technology
Xenemetrix) is a unique manufacturing company, it is
much more advanced than that ca
n be read in their last
management report or even that their last presentation in
January would have us believe.
Check what Robert
McWhirter to say about it here2: I suspect Mr. Rowlands
will be looking for a similar type of operation with SICPA
for succe
ss, ie: initial payment + royalty streams in return
from the sale of technology. I can only dream that the
stock would be with 2 large flow
s
of secure royalties
supporting both annual dividends may be higher than the
current market capitalization.
To summa
rize, I believe that EURO is the best opportunity
risk / reward on the Canadian market at the moment
because it was trading at 16.5c, its valuation is supported
by its current cash value of approximately 17c per share
and NPV (NPV) of 22
-
24c factoring the
minimum payment
of future royalties and having a safe flow scenario of
potential royalties could easily exceed its current market
capitalization. Potential deployments other commercial
applications of their Xenemetrix spectrometers such as
Petromarine is n
ot even considered here.
https://www.eurocontrol.ca/images/reports_and_filings/independent_reports/2016/ESpace_Microcaps_Napoleon's_Blog_Feb25_16.pdf