MagneGas Corporation (MNGA) is the producer of MagneGas™, a natural gas alternative and metal cutting fuel made from liquid waste. The Company’s patented Plasma Arc Flow™ process gasifies liquid waste, creating a clean burning fuel that is essentially interchangeable with natural gas, but with lower greenhouse gas emissions. MagneGas™ can be used for metal cutting, cooking, heating or powering bi fuel automobiles. MagneGas Corporation is helping to remove critical threats to our environment, power our lives and provide investors a “green” investment opportunity. The company was founded in 2007 and is based in Tampa, FL.
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Shares outstanding: 41.2 million
Recent price: 0.93
Market cap: 38.3 million
Insider ownership: 43%
Institutional ownership: 2.1%
Float: 24.3 million
Why MagneGas sales growth exceeding 200% is likely to continue
In the company’s Q2 reported last month, MagneGas Corporation grew sales to $584,445, (a 228% increase over the same period last year), and increased gross margins by 623 basis points to 36%. Management also decreased operating expenses (excluding non-cash items) by 6% during the same time. MNGA had a cash balance of $4,038,190 at the end of the quarter.
The numerous benefits of MagneGas™ over every other gas used in metal cutting combined with multiple applications for the gas explain why the U.S. Navy, General Motors, and the New York Fire Department became recent new customers of MagneGas Corporation.
Sales are likely to continue on a strong growth curve as increasing numbers of end users discover the remarkable competitive advantages MagneGas™ has over every other gas in the metal working market:
- MagneGas cuts metals 40-100% faster than acetylene and other gasses
- MagneGas uses 30% less oxygen during metal cutting
- MagneGas can save 30-60% in monthly overhead vs. less efficient gasses like acetylene and propylene
- MagneGas is much safer than any other gas in the industry (see video)
- MagneGas has the hottest flame temperature known at 10,500 F (!)
- MagneGas cuts are smoother and have far less heat displacement
- MagneGas cuts result in less waste and little or no post-cut processing
- MagneGas is a green energy fuel, is the only renewable gas on the market, and is made in the U.S.A.
This is a “must see video” of MagneGas in action, cutting through a 6 inch thick solid metal plate like butter.
When you see it you’ll know why sales grew over 225% in the most recent quarter.
Additional revenue via Plasma-Arc sterilization technology
In addition to MagneGas sales, the Company has patented technology that feeds liquid waste such as sewage or leachates through a Plasma-Arc to sterilize any bacteria or pathogens. The process meets EPA standards to bring the liquid waste from a Class B waste to a safer Class A. Recent studies have shown incomplete sterilization at sewage treatment facilities has caused elevated levels of drug resistant microbes in the liquid effluent and air surrounding sewage treatment plants. Likewise, the recent outbreaks of Ebola and other infectious diseases are driving the industry to develop better ways to sterilize sewage.
The Plasma-Arc sterilization system can be built permanently on site or operated as a mobile unit, converting harmful wastes into the green biofuel, MagneGas.
Game-changing co-combustion technology launch pending
Some of the strongest moves made in stocks occur when a new, game-changing technology is launched by the company that meets a pressing need.
MNGA has developed a patented co-combustion technology that burns MagneGas with less efficient fuels, coal in particular. The result is improved emissions, improved efficiency and a dramatic reduction (30-40%) in CO2 emissions. MagneGas has been working with the independent laboratories of one of the largest power companies in the U.S. since early 2014, and their work verifying the benefits of co-combustion technology is nearing completion.
MNGA has been in contact with potential customers in the U.S., Mexico, Germany, Italy and Australia and is finding global interest in the co-combustion technology. In Europe, where a cap and trade market exists for CO2, if we assume the typical power plant releases 3.5 tons of CO2 per year, at today’s EU market rate for CO2, a 20% reduction of CO2 would have a value of $4.6m dollars per year per power plant. With some 7,000 coal fired power plants in the world, investors can anticipate this to be a significant new business line for MagneGas Corporation.
Management anticipates launch of this technology as a “late 2015 to early 2016 event.”
Despite environmental and human health concerns directly attributed to the use of coal, global demand for coal over the next five years will continue marching higher, breaking the 9-billion-tonne level by 2019 according to the International Energy Agency.
Finding ways to make coal combustion cleaner is a global imperative, and the co-combustion technology MagneGas is bringing to market could see very high demand coming out of the gate as a result.
Last month MagneGas’ CEO Ermanno Santilli gave the following bullish outlook on the company’s co-combustion technology:
Given the recent and first ever-proposed reduction of carbon emission from power plants in the United States, many power plants are slated to spend billions of dollars on complicated scrubbing technology, which does not increase efficiency and did not reduce CO2 emissions will certainly benefit. In our opinion not only does our technology effectively reduce emissions, but we believe it will also improve the overall energy output of the plant by literally re-burning the smoke from coal-fired power plants.
Once verified, MagneGas would be the only technology available that reduces CO2 and saves money, unlike carbon capture projects. We are very excited about this opportunity and we will keep investors informed of our progress. We are extremely encouraged by the outlook of this business line, as the potential to save coal plants billions of dollars in costly retrofits to meet new and more aggressive environmental regulations. We plan to provide additional updates in the very near future. (see: Q2 2015 Results – Earnings Call Transcript)
The commercial launch of MNGA’s Co-Combustion technology could be game-changing for the company- and the coal industry.
Coal-fired power plants have no choice but to find ways to reduce Co2 emissions, and MNGA’s technology is “the only technology available that reduces CO2 and saves money, unlike carbon capture projects.”
How big could the media buzz get when MNGA launches its Co-Combustion technology?
Given the media’s attention to global warming and the well-documented adverse impact from coal plants, I believe news of the launch of MNGA’s Co-Combustion technology will reach well beyond the investment community, garnering major exposure in the media. With a float of just 24 million, MNGA shares could go on a huge run with this launch.
Expect a strong Q3 coming up
MNGA reported just $146,400 in sales for Q3 of last year and the year-over-year growth when Q3 of this year is reported should be tremendous. The coming Q3 results should provide continued evidence that MNGA is on a high-growth trajectory.
After reporting 228% sales growth in Q2, more new customers and new contracts have dominated the news flow from MNGA:
- MagneGas Selected for Firefighter Steel Structural Collapse Training, Multiple Cities to Participate
- Industrial Gas Company with Multiple Locations in Two States Begins Distribution of MagneGas Fuel
- MagneGas Moves To Advanced Testing of Co-Combustion Technology For Coal Emission Reductions
( Aug 10)
- MagneGas Receives First Gasification Equipment Order from U.S. for $550,000; Forms Joint Venture for Major Expansion
- Major Government Contractor and Minister of Energy in Haiti Considering MagneGas Fuel and Equipment Import
- MagneGas Completes Successful Demo with Multiple Major Utility Companies, Next Steps Requested
- MagneGas Corporation has just begun a high growth trajectory with 228% sales growth last quarter while gross margins increased to 36% and operating expenses were reduced by 6%
- Competitive advantages of MGNA’s products (both MagneGas™, and Plasma-Arc sterilization) are just beginning to be recognized by the market as shown by the surge in sales in the most recent quarter and positive news of multiple new contracts since
- Pending launch of MNGA’s Co-Combustion technology that dramatically reduces Co2 emissions from coal-fired power plants while, (according to management), saving money at the same time, is likely to be a strong future catalyst for the stock, especially with a float of 24 million shares
With several positive near term events about to come into play, I firmly believe “STRONG BUY” is an understatement in the case of MNGA shares at current levels and am long the stock.
Disclosure: The publishers of Microcap Research own shares of MGNA bought in the open market. Our partner Brite Ideas LLC was paid $20,000 by an unrelated party for coverage of MNGA.