Summary
In the past three months, TMG.V valuation jumped from about $0.08 to closing today at $0.215 cents.
Note that TMG.V's valuation has been relatively static for the past two years.
Earnings
Aside from Covid-19 related period, TMG.V has delivered roughly $5M in revenues per quarter in the past 7 quarters.
In addition, net income has been for the most part positive with a stable quarterly cash position roughly above $4.5M!
FY 2020 and FY 2019 were flat but Q4 2020 was impacted by Covid-19 lock-downs and would have probably delivered better results. Also even with Q2 2021 being lower than Q2 2020, TMG.V's latest MD&A specified the following:
While the Company ended the quarter with an order backlog of $5.5 million, compared to $8.2 million for the same quarter in previous year, order intake continues to be strong. Orders received during the second quarter this year are more than double the orders received during the same time last year and during the first six months of this fiscal year we received 66% more orders than the same period last year.
The Company defines its order backlog as the value of projects for which purchase orders have been received, but that have not yet been fully reflected as revenue in the Company’s published quarterly financial statements.
Commissions
As listed above. total of six major commissions (above $0.75M) were announced via releases in the last 10 months. However, as articulated in the Q2 2021 Earning release ten smaller orders (Mostly GEM) were listed.
• $115,689 GEM™ steam traps order for a gas processing plant in United Arab Emirates
• $307,298 heat recovery equipment order for a Canadian Hospital
• $146,555 heat recovery equipment order for a family-owned American lumber company
• $112,981 order for GEM™ steam traps from a international Tires producer
• $129,531 site survey and failed steam trap GEM™ replacement project for a multinational bio/pharmaceutical
• $101,000 GEM™ steam trap order from leading supplier of yarns
• $236,000 GEM™ steam trap order from a major fruit products processor
• $242,000 order for low maintenance GEM™ steam traps from a major grain and cereal processor
• $118,000 follow up GEM™ steam trap order from a globally recognized Tire Manufacturer
• $262,000 GEM™ steam trap order from a multi-national pharmaceutical company
In Short
In the last three months, TMG.V underwent a fundamental change in valuation. The catalyst of a strong Q2 2021 earning report with positive outlook followed by a large commission (over $1M) received the market's attention.
As economies resume their activities, climate change will be addressed by many governments. A recent Bloomberg article based on a Wood Mackenzie report suggests that drastic change are needed in carbon pricing.
Higher CO2 prices could encourage companies to reduce their footprint through capturing the carbon, where it could then be recycled into new products, potentially a “trillion-dollar industry,” the report said.
TMG.V appears to be very well positioned in this scenario.
However, the key will be to scale up growth. TMG.V's CEO mentioned that the focus is to sell more to existing customers and gain a deeper share of wallet.
--> This is precisely, what the last announced commission entailed combining both the FLU-ACE® and HeatSponge indirect heat recovery unit.
Even with the recent rise of the stock price, the current valuation premium received are still relatively low. At $0.22 cents, market capitalization is roughly $35M for a company that generate revenue north of $20M per annum.
Potential reasons are: a. TMG.V's addressable market is relatively undefined. For instance, with existing clients, how many more projects/installs could be generated by the company? Though "hundreds" were cited per customers, backlog number only reflect a small percentage and, the sales pipeline is relatively unknown. b.Fast-growing entities on the TSX Venture tend to grow via acquisitions. TMG.V has made only one acquisition in the past three years.
Nonetheless, earning performance in the last two years is commendable and the latest shareholder information deck suggests an awareness of potential valuation barriers. As such, TMG.V definitely appears to be at a turning point.