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Orbital Energy Group 4Q20 results ?3

Orbital Energy Group has announced its fourth quarter earnings:
The company is also acquiring Gibson Technical Services a telecom service provider, including project design, engineering & management for $48M in cash and OEG shares, which have a 2-year lockup.  GTS has telecom Master Services agreement which is expected to increase revenue 30% annually.  This puts the purchase price at 1x projected revenue and 6x EBITDA, which is reasonable.  The transaction is expected to close at the end of April and should significantly expand Orbital's operational capacity for transmission & distribution services.  More T&Ds acquisitions are expected, with one already in due diligence.  Orbital Power is expected to be cash flow positive in the second half, even with no BSF until next year.  Management says much business is waiting on Biden policy as well as vaccinations.  It is staffing up and recently surpassed 30 crews.

For Orbital Gas, management says it has developed a much-improved module with Mitsubishi and that gulf refiners signaled that spending would restart in 2021.  Orbital Gas has already been cash flow positive in the U.K. $2M in orders received recently.  There was also interesting mention of a renewable natural gas grid entry project in California, but no details were available.  News of Shell finally nearing a sale for its Puget Sound refinery in Washington, supports the domestic energy market outlook for at least the the short term.

The growth here is in-line with my initial ball-park projection, but Orbital had just $3M in cash and a $40.4M backlog at year end.  With further M&A expected to be primarily funded by equity, I think it makes sense to wait for the share count to stabilize before trying to make and rely on a better valuation estimate.  That said, pandemic relief makes this one of the few times where using equity so aggressively can make sense.  In the meantime, I could see OEG trading mainly between $4 and $6, but wider volatility is easily possible, since lower prices will hamper growth plans and could cause an implosion, whereas higher ones will have the opposite effect.

Since I like to buy low and sell high, I'm not particularly motivated to build a position right now.  However, I will note that stocks like this offer much better bang for the buck than the majors like Shell and Schlumberger in an energy transition as the market typically overlooks the risk in their legacy businesses as the attempt to adapt.   Of course, much will also depend on the details of policy and funding coming out of Washington.  I'll keep an eye on that in addition to OEG's stock price.