Hydrodec Groupwww.hydrodec.com TICKER: HYR EXCHANGE: L
Hydrodec's technology was patented in 2001, with a first demonstration refining facility commencing construction in 2002. Successful start up of the demonstration facility accelerated the growth of Hydrodec, and resulted in the formation of Hydrodec Group plc, which listed on AIM in late 2004. Hydrodec's technology is a proven highly efficient oil re-refining and chemical process which is being initially targeted at the multi-billion US$ market for transformer oil used by the world's electricity industry. The Group takes spent oil, including polychlorinated biphenyl (PCB) contaminated oil as the primary feedstock which is then processed at its two plants enabling 99 per cent or greater recovery of oil for reuse while also eliminating PCBs a toxic additive banned under international regulations without environmentally harmful emissions. The group sees the USA Japan and East Asia as the gateway to early exploitation of the full potential of Hydrodec's technology.
The announcements of February 10th and 17th outlined that conditions in the US market regarding the selling prices of transformer oil falling more rapidly than oil feedstock prices (as a result of oversupply rather than lack of demand), which has resulted in margin pressure , together with lower production than planned in December 2008 at Canton, have resulted in the company not being in a position to agree terms on the debt financing of the proposed Laurel, Mississippi plant, and that the company had a working capital shortfall of £450k on 17 February 2009.
On 23 February 2009 Hydrodec announced that it has raised approximately £1.9m before expenses from the placing of 19,230,114 new ordinary shares of 0.5p. This will be used to provide additional working capital and should cover the current working capital shortfall and allow the company to report an operating profit in the current year.
Since the earlier announcements, there are signs of stabilisation in the market price of SUPERfine in the US, and that feedstock prices are beginning to decline. With Canton expected to reach full capacity in the second half of the year, margins can be expected to recover and trading in the US will be profitable.
These issues have not occurred in the Australian market where trading remains profitable and cash generating.
Meanwhile, Hydrodec attained certification in Australia for its process to be used in treating extremely toxic, concentrated PCBs with effective zero air emission. This potentially opens up a highly lucrative market for treating PCB-contaminated transformer oils which can be sold as SUPERfine, but with a dramatic reduction in feedstock cost. Hydrodec will continue its application in the US for a PCB treatment licence that should allow Canton to generate fees for the treatment of contaminated transformer oils as well as enjoy good margins.
Although the market conditions and holding the Laurel plant in abeyance are not welcome news, the announced funding should allow Hydrodec to continue to develop its US business and to move into larger and highly profitable areas in the future.
We will be updating our forecasts in March.
Foreign buyers gorging on UK stocks
Document can be downloaded here: UK plc ‘going for a song’
Being a shareholder in a company that receives a juicy takeover offer is a marvellous feeling. Something that many fortunate investors have experienced over the past 3 years. Thanks to a spate of M&A bids by deep pocketed overseas buyers – partly triggered by the June 2016 Brexit result, which sent the £ tumbling and adversely affected the FTSE.
Consequently today, given this trend is unlikely to end anytime soon, we’ve highlighted 30 possible acquisition ideas in the attached research paper. Spilt equally between large and smallcap stocks – covering a broad selection of industries.
What’s more we believe most of these businesses are underpinned by strong fundamentals and substantial upside in the event of predatory interest.
According to Factset Mergerstat/BVR, the average bid premium paid for such deals between 2004-14 was 30% – with the figure trending upwards since the global financial crisis.
Happy investing. Published 27th August 2019