Energy Recovery 3Q20 schedule and GRoDT thoughts ?3

12:22 28-Sep-20

Barring surprises, this week looks set to be more about unreliable political maneuvering than ever.  If you want to stick to new actionable investing insights, you can skip this note.  I mostly want to document some of the science I've been looking at in order to be able to reference it later.  I'll also note confirmation on my expectation regarding Trump's tax returns, but don't expect me to comment further on the politics.  Again, only stimulus details and post-election policy matter from an investing perspective. 

Energy Recovery has scheduled its third quarter report to be released after the close on October 29th.  The average of 4 analyst estimates comes to 3 cents of EPS from $25.1M of revenue, declining slightly to $24.9M for the fourth quarter.  Presumably there is no chance of management formally giving up on VorTeq just yet, but it will be interesting to see how the market prices the stock with the return or normalized earnings.

Of more interest to me in energy was the first-ever sale of blue ammonia (made from fossil fuels) to Japan by Aramco, of all entities.  My initial reading indicates that it is worse than LNG from a climate and efficiency perspective.  The climate perspective could be mitigated with carbon capture, but I already held a dim view of those technologies as they make the economics even worse.  Even so, ammonia might gain traction, due to the ability to burn it together with coal.  Digging into details makes the scheme sound ripe for an environmental bait and switch.

I can't deny that it's possible that the world will eventually take to replacing LNG with green ammonia (made from electrolysis powered by renewables) once solar and wind have enough penetration.  However, replacing the the Haber-Bosch Process currently used to produce ammonia is over a decade off even by the timeline offered by proponents.  That leads me back Xebec in the meantime, due in part to the purification that the process requires.  The renewable end-of-life disposal issues that I referenced almost a year ago for wind turbine blades should also get further study.  In the end, both AMSC and Xebe still look like more appropriate business models for investing in the energy transition, but neither AMSC nor XEBEF/XBC is priced attractively just now.  The same goes for VUZI, which continues to tout small volume successes.

RESN is more attractively priced, but it's hard to trust management, which is conducting a pair of webinars next week.  This could easily be setup for more dilution, even though it doesn't seem necessary just yet and the company's revenue ramp should be accelerating soon, if Samsung is actually using its filters for Verizon's 5G mm-wave rollout.  It's not just politicians who are unreliable.