Thursday, September 11, 2008

A-Power Energy (APWR) Update

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A-Power Energy Generation (APWR) put out a press release yesterday morning updating business conditions and restating they do not need to raise any cash in the open market to fund operations.
  • A-Power Energy Generation Systems, Ltd. (NASDAQ: APWR - News) ("A-Power"), announced today that Fuhrlander AG has upgraded the specs on its largest wind turbine from 2.5 MW to 2.7 MW and that it will supply to A-Power all of the components needed to produce the first ten units of the 2.7MW units in time to begin production in October of this year, as previously agreed.
  • The 2.7MW wind turbine will supersede the license agreement for Fuhrlanders 2.5MW wind turbine technology that A-Power entered into in 2007. While other terms of the license agreement remain unchanged, the upgrade will enable A-Power to produce wind turbines with an output of 2.7MW, the largest land-based wind turbine in production today. All of the components will be delivered to A-Powers recently completed wind turbine production facility in Shenyang, which is the largest wind turbine production facility in China. Five of the ten assembled 2.7MW wind turbines will be re-exported to Fuhrlander AG and the remainder will be delivered to A-Power customers in China later in Q4 2008.
  • Distributed Power Generation in addition to the robust growth of its domestic distributed power generation (DG) business, A-Power has been, since the beginning of 2008, actively engaged in international DG projects. On top of the $150 million dollar contract that A-Power signed with its Thai customer in April 2008, the company recently announced the signing of a MOU for a potential contract valued at $300 million for the construction of 4 distributed power systems in Thailand over a period of three and half years. A-Power is in the final stages of negotiating contractual details and expects to convert the MOU into a firm contract within the next 60 days
  • A-Power now expects to achieve record third quarter revenue and yet a still larger revenue in the fourth quarter of 2008, thus helping the company achieve its full-year net income target of $35-45 million.
  • While the upcoming production of 10 units of 2.7MW and up to 50 units of 750kW wind turbines in 2008 will demonstrate A-Powers ability to focus on and execute its wind energy strategy, the company expects to produce at least 100 units of 2.7MW and 300 units of 750kW wind turbines in 2009.
  • A-Power has a strong balance sheet and positive cash flow from operations, and plans to fund all of its ongoing and currently planned activities from existing funds.
In reward the stock has been decimated from near $16 to mid $13s in the past 2 sessions. This is simply an exasperating market. As we said, on the last conference call they gave guidance for $2.00-$2.50 for 2009 so at $13.50 it is now trading at forward P/E of 6 on 2009 for 50%+ type of growth. I was worried about this name only from the fact it has a very determined naked short selling effort going against it. It now appears technically it might have a good chance to retest old support at $12, wiping out all its gains.

A very cruel market in which the SEC does not enforce its rules. Determined hedge funds win by playing the game; the vast majority who are not daytraders or in and out of positions every 72 hours lose. Par for the course in a market that more and more people will simply give up on since the playing field is simply tilted in favor of those with lots of money. It really makes me wonder why to bother anymore sometimes. When stocks are driven down 25% in 1 day, and then "covered" in the last hour to make the stock go positive as naked shorts cover and no one at the SEC gives a rat's behind to research it, it is simply a pathetic state of affairs.

I bought a little more today but it seems quite useless at this point. If not a PE of 6, why not a PE of 2. I don't mind taking hits for stupid decisions or mistakes but taking on so much water for nothing more than a stock with relentless hedge funds used lack of SEC oversight to their advantage is a frustrating experience. Especially when the evidence is out there in the open in the historical stock action. Here is a day in early August, notice the huge short covering at 3 PM. Surely natural conditions dictate a stock drop from $24 to $19 in 5.5 hours and then recover back to $23 in the span of 40 minutes.


I'm still old fashioned and thought the stock market was a place small companies could come and raise capital and be valued on instrinsic value. Or when they had to do a secondary the stock price would reflect something near logic, so that they don't have to issue twice as many shares to raise the same amount of money. But not in this era when all they are are stock symbols to be relentlessly attacked without any nod to valuation. So they'll tell us "take advantage of the situation" as "this provides a great opportunity to buy" - just like it was at $20, $18, $16, $14... yeh. Unfortunately there is a limit to people's capital so those who took advantage of the "great opportunity" at $20 are not so lucky. 2008 gains are now history.

I confess, I do not know how to "invest" in this market anymore. Multiple stocks at 5-7 PE ratios punished day after day. While General Motors (GM) ramps.

Long A-Power in fund and personal account

Sincerely,
Sour Grapes


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