We needed to start the new year off with some real enthusiasm and energy. So I took that literally, as I know that so many of you have picked small cap resource stocks this year in the Fool Share Challenge and, of course, it was an oil company that won last year.
None of you, however, went for this already profitable alternative energy company Alkane Energy (LON:ALK) which is on a very low rating and set for significant double digit earnings growth this year. Alkane Energy is the UK’s leading coal mine methane (CMM) producer. Alkane Energy has unrivalled expertise in the design, build and operation of methane gas fuelled power plants. Our clean tech power plants contribute to the UK’s efforts to reduce the emission of harmful ‘green house’ gas. Alkane has 17MWs of installed electrical generating capacity covering CMM, conventional gas and biogas. Here is their website. The company updated the market only a couple of days ago and it was very positive.
Trading for the year ended 31 December 2010 has been very encouraging, with output increasing by more than 25% compared to the same period last year. For the period, the Group expects to have delivered an estimated full year electricity output of circa 120GWh (2009: 95GWh). This increase reflects the contribution of the three new sites which became operational during the year, at Florence in Staffordshire, Newmarket in West Yorkshire and Kings Mill Hospital in Nottinghamshire. As at the year end, the Company had 12 operating sites (2009: 9). The average electricity sales price for 2010 is expected to be around £44/MWh (2009: £54/MWh).
The Board expects that the results for the year ended 31 December 2010 will be in line with market expectations. Looking forwards, the news is even more promising.The on-going roll out programme is progressing well and Alkane remains confident of opening a further three coal mine methane sites during 2011. Electricity pricing has shown greater strength over recent months and as at 31 December 2010, approximately 65% of the Group’s expected 2011 output is now contracted at an average price of £48/MWh.
If one looks back at previous updates, that suggests that the company is now achieving in excess of £50/MWh and we know there are three additional sites this year. The forecasts for the current year therefore need upgrading and I understand the brokers and analysts are in the process of doing so. You can probably pretty much work out the ball park yourselves. I think that the company will be on a p/e of little more than five for this year and there is clearly more growth and other projects in the pipeline...
Alkane continues to work on a number of new biogas projects. We have secured a contract to supply the gas to power facilities to the TEG Group PLC anaerobic digestion plant at Glenfarg, Scotland in 2011. During the year we have also worked on municipal food waste projects in collaboration with TEG, and we are working together on ongoing bids for three of the regions in the Welsh Assembly Government’s food and green waste treatment programme.
The Alkane chief executive is Neil O’Brien and he was very pleased to take this opportunity to come and present to investors. They are just the kind of profitable under researched small cap company on a low rating that Mello attendees like and for them to be a natural resources alternative energy play not even spotted for the competition suggests they need to find themselves an audience of private investors. As Neil correctly pointed out this week:
“We have continued to see strong, organic growth in our core coal mine methane business and we are encouraged by our progress in related markets such as biogas. Alkane remains well positioned to capitalise on a strengthening outlook for electricity prices and we continue to see opportunities for further growth.”
I am sure Alkane Energy is worth further research and Neil will be presenting along with his colleague Peter Kitson so they will both be staying for dinner and answering all your questions on the recent trading and those future projects. I will have a stock of annual reports available and Neil will have a presentation pack to hand out. The last interim results to 30th June can be found here.
The Seasalt restaurant where we hold our Mello dinners will be open from 6 pm for those who can join us this coming Monday evening. The SeaSalt restaurant is in Beckenham (www.seasaltbeckenham.com) which is right opposite the rear exit to Beckenham Junction Station (just 15 minutes on the train from Victoria) and there is parking behind the restaurant. The presentation will be upstairs in the boardroom from about 7.30pm and the 15 minute introduction to the company by Neil will be followed by a Q&A session then dinner downstairs in the restaurant at about 8.30pm.
These are regular events (third Monday of the month so put the dates in those new diaries!) and we have about forty or fifty regulars.. For future notes, the February Mello on the 21st February will be a memorable one for The Minx who will be attending to collect her trophy and prize after winning the 2010 NFSC with her Nautical Petroleum choice. I hope to have the directors of Nautical Petroleum (LON:NPE) with us too to share some of the glory and present the award. The March Mello on the 21st again will be a night with a difference as we look at the world of small cap investing through the eyes and mindset of one of the most succesful fund managers around...Giles Hargreave so there is lots to keep you warm investing wise at Mello through this winter.
Anyway, please message me if you can join us on Monday to help me and the girls with tickets and the SeaSalt staff planning the tables. Looking forward to seeing you all. These are regular events and I certainly want to keep them going in the very popular way they have been attended throughout 2010. May I wish all Mello attendees another great year in 2011 and for those who are not aware of the Mello company performances over the last two years, here is a link to MrContrarian's excellent site.
I shall look forward to catching up with as many as possible of you for our first event in 2011 and a free drink from me for anyone who says 'mine is a double over Liverpool' on the night after Blackpool's great win on Wednesday.
|Date||6:00pm Monday 17th January, 2011|
|Location||2 Southend Road, Beckenham, Kent|
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Attendees Confirmed (3)