Pfie research profile_20130301


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Pfie research profile_20130301

  1. 1. Market DataFiscal Year March 30Industry Oil & GasMarket Cap $54.2Price/Earnings (ttm) 44.7xPrice/Book (mrq) 5.6xPrice/Sales (ttm) 3.6xEBITA (ttm) $1.9MROE (ttm) 13.8%Shares Outstanding 45.2MFloat 6.6MAvg. Daily Vol. (3 mos.) 7,130Income SnapshotFY12 YoYChangeRevenue $15.9M 98.2%Gross Profit $9.0M 92.6%Gross Margin 56.7% -1.65ptsOperating Income $4.4M 86.6%Operating Margin 27.4% -1.72ptsNet Income $3.2M 96.0%Net Margin 20.0% -0.23ptsBalance Sheet Snapshot3Q13Cash $1.5MNC Working Capital $5.9MCurrent Ratio 4.46D/E Ratio 0.0%Book Value $0.21February 15, 2013Target Price: $2.15Recent Price: $1.21Profire Energy, Inc.(OTCBB: PFIE)Profire is well-positioned to drive continued revenuegrowth as it benefits from favorable industry dynamics.Profire Energy (“Profire” or the “Company”) is a technology company that assistsenergy production companies in the safe and efficient transportation, refinement andproduction of oil and natural gas. As energy companies seek greater safety for theiremployees, compliance with more stringent EPA standards and enhanced marginswith their energy production processes, Profires burner management systems(“BMS”) are increasingly becoming part of their solution.Investment HighlightsPFIE is growing rapidly and is in a strong financial position. Profire hasbeen ranked one of the 1,000 fastest growing companies in the world by TheInternational Business Times. The Company generated a 98% increase in revenuefrom 2011 to 2012. Additionally, the company increased net income by 88% duringthe same period. For the fiscal year ended March 31, 2012, the company earned a34% return on assets and a 45% return on equity. Also, for this time period thecompany held a cash and cash equivalents total of $1.9 million and carried no debt.PFIE’s products serve a large unmet market need. Profire’s primaryproduct, its BMS technology, provides a safe and efficient solution for re-ignitionand temperature regulation for use on processing vessels in the oil and gas industry.In order to process the oil or gas, these vessels require heat provided by a burner,and occasionally the flame extinguishes, creating production inefficiencies.Traditional methods for reigniting failed flames include using a rag tied to a stick, amethod in which the technician is put in danger. Profire’s BMS technology is able toquickly and safely reignite a failed flame, minimizing production loss and keepingemployees safe.PFIE positioned to benefit from improved worker safety initiatives. Withthe expectation of increasing worker safety initiatives, Profire is poised to benefit, asoil and gas companies are required to maintain compliance. Companies in the oiland gas industry will need to comply by purchasing the type of products made byProfire, or risk facing costly fines. Compared to other BMS technologies on themarket today, Profire’s technology meets or exceed all relevant codes or standards.The Company has received appropriate CSA and UL certifications for its BMStechnology.
  2. 2. PFIE is expanding into the U.S. market. Profire initially focused its salesefforts in Western Canada, with 95% and 100% of total revenues generated comingfrom Canada for the years 2012 and 2011, respectively. Due to the success ofProfire’s systems in Canada, the Company is initiating an expansion of its salesefforts into the U.S. The Company opened offices in Houston, Texas and Lindon,Utah in order to serve current and expected clients in the regions. This expansionimpacted overall 3Q13 results, producing a nominal net loss of $0.3 million for theperiod. On a nine-month basis the Company has maintained positive net income of$0.9 million. We believe the expansion efforts will bear fruit in coming quarters asProfire gains market share in the largely untapped U.S. market.PFIE is in an advantageous competitive position. Profire has a first moveradvantage in a new multibillion dollar market and is the largest operator in thespace. The Company’s competitors are small private regionally-based companies,the largest of which only does about one-third of the sales volume of Profire. Itscompetitors also lack the service to support their products. In comparison, Profireprovides installation and maintenance services for its products. Because companiespurchase BMS technology to reduce waste and prevent injury, quality is the mostimportant competitive factor. Profire’s product quality has landed customers thatinclude Exxon-Mobile, Husky Oil, Devon Energy, Shell, Conoco-Phillips, and othermajor multinationals.MarketU.S. projected to experience unprecedented growth in energyproduction. Profire is positioning its expansion into the U.S. marketduring a time with an exceptionally favorable outlook. The U.S. EnergyInformation Administration projects that by around 2020, the United States isexpected to become the largest oil producer in the world, overtaking Saudi Arabia,and a net exporter of oil by around 2030. In a research report from the HarvardKennedy School, former oil industry executive Leonardo Maugeri projects that U.S.production of oil will increase from the current 8.1 million barrels per day to 11.6million barrels per day in 2020. Additionally, Baker Hughes, one of the worldslargest oilfield services companies, estimates the number of U.S. rigs has increasedto 1,759, nearly equal to the number oil and gas rigs in the rest of the worldcombined.Current penetration for BMS technology in the U.S. is estimated at 1% to 1.5% of a$2.5 billion to $6.7 billion overall market. As U.S. production of oil and gascontinues to expand, Profire is positioned to benefit with its technology offerings.
  3. 3. The following diagram and explanations of oil and gas production activities indicatewhere Profire BMS technology adds value (denoted on diagram by red flags):1. Extraction. The gas comes up the well because it is lighter than air. The oil,however, often requires a jack to help “pull” it up the well (if the pressurebelowground doesn’t force it up the pipe). The oil and gas travel up the samewell and arrive at the same wellhead.2. Separation. At the surface, the oil and gas must undergo some initialproduction processes before it can be transported or refined. Many applicationsare used in this processing, which require heat to function properly. This heat isprovided by a burner flame, which can be managed by a Profire BMS.3. Transportation. The gas from each well is piped through a “gathering line” toa “mainline”, where it is compressed and then piped to a refinery. Line heatersare used to intermittently heat the gas as it travels to a refinery. The oil can alsobe piped to a refinery, or it can be stored temporarily in a heated tank, where atruck will pick-up and transport it to a refinery. Adequate heat is needed forthese transportation processes to work properly. Heat is provided by a burnerflame, which can be managed by a Profire BMS.4. Delivery. The oil and gas is refined and then transported to local areas for use.These sophisticated refineries use very complex systems to ensure properrefining.ProductsIn the oil and natural gas industry, various applications (e.g. tanks, line heaters,separators, dehydrators, amine reboilers, etc.) are used in the production andtransportation of oil and natural gas. These applications require heat, which is usedto facilitate the proper function of the application. To provide that heat, a burner isused within the application.
  4. 4. Profire’s primary products monitor and manage burners. This technology helps tomake oil and gas companies safe, more efficient, and more compliant. Key featuresof a BMS include:With a BMS Without a BMSAuto Re-Light The BMS quickly detectsthe flame absence in thecombustion application,and can quickly reignitethe burner flame.Worker must discover andreignite the extinguishedburner. The worker thenreignites the applicationmanually (often with afuel-soaked rag that’s tiedto a stick). This takesworker time and can bevery dangerous.Temperature Control The BMS will managetemperature as set by theuser, ensuring that theburner flame is on onlywhen needed.No electronic temperaturecontrol. The applicationburns continuously, oftenneedlessly, until the flamefails.Remote Monitoring &ControlThe BMS is compatiblewith remote monitoringand control technologies(i.e. telemetry). Thisallows the user tomonitor and manage theBMS from the comfort ofan office.No remote monitoring orcontrol is possible.Emergency Shutdown The BMS can detectwhen certain applicationinputs (e.g. high/lowpressure, level, etc.)indicate a potentialproblem, and can shutdown the applicationsafely.No safety shutdowncapabilities exist.
  5. 5. Profire BMS technology provides numerous benefits for oil and gas companies:Increased Operations Efficiency Combustion applications function only when needed. The BMS can monitor and reignite failed burner flame, allowing oilfieldprofessionals to manage more wells and get more done. Reliable burner management means less production-loss. You can restassured that the burner flame is working properly, so the application canfunction as it should.Increased Safety Antiquated and dangerous forms of re-ignition (such as the “rag-and-stick” method) are replaced with safe, automated burner detection andre-ignition.Increased Compliance By providing a reliable form of re-ignition, many complianceconcerns are mitigated, especially when used in conjunction withother Profire products.ManagementBrenton Hatch, CEOMr. Hatch co-founded Profire Combustion, Inc. (now a subsidiary of ProfireEnergy) in 2002. Since that time he has served as the Chief Executive Officer andGeneral Manager of the Company.Prior to founding Profire Combustion, between 2001 and 2002 he was amanagement consultant and General Manager of Titan Technologies, Inc., anoilfield service and distribution company in Edmonton, Alberta, Canada. In thisposition, he performed an in-depth analysis of the operations and management of alldivisions of Titan Technologies. Based on his analysis, company-wide operationalchanges were implemented to improve company performance.From 1989 to 2000 he served as President and Chief Executive Officer of KeatonInternational, Inc., an educational services company based in Edmonton, Alberta,Canada. He managed all executive functions of the company and particularlyfocused on the development and management of the company’s educationalservices. During his time at Keaton International, Mr. Hatch led corporate
  6. 6. networking and marketing campaigns world-wide. He earned a Bachelor’s Degreein Education from the University of Alberta in 1974.Harold Albert, President & COOMr. Albert co-founded Profire Combustion, Inc. (now a subsidiary of ProfireEnergy) in 2002. He has served as the President and Chief Operating Officer ofProfire Combustion since that time. Mr. Albert oversees R&D of all new products,as well as all Canadian operations.Prior to founding Profire Combustion, he worked in the oil services industry forTitan Technologies, Inc. from 1996 to 2002. During that time, he served as anAssociate Manager overseeing the company’s burner division. From 1993 to 1996he was employed with Natco Canada doing start up and commissioning of oil andgas facilities in both Canada and Russia.Andrew Limpert, CFOIn November 2007, Mr. Limpert joined Profire Energy and assumed management ofthe Company’s financial responsibilities as CFO.From 1998 to 2008, Mr. Limpert was an advisor with a regional firm, providingwealth management direction and strategic and financial consulting for severalinvestment banks. For five years he served as a director of Ohr Pharmaceutical Inc.,a New York-based biotech incubator. In April 2010, Mr. Limpert resigned as anofficer and director of Ohr Pharmaceutical. Over the course of 15 years, Mr.Limpert has founded, consulted on, and funded numerous business ventures in boththe private and public arenas.Mr. Limpert graduated from the University of Utah with a Bachelors of Sciencedegree in Finance in 1994. He earned a Masters of Business Administration with anemphasis in Finance from Westminster College in 1998.
  7. 7. Peer ComparisonName Ticker PriceMarketCap (M)P/E(ttm)Fwd.P/EP/S(ttm)P/B(mrq)Rev.(ttm)Rev. PerShare(ttm)Rev 1yrgrowthEV/EBITDA(ttm)BVPS(mrq)Fwd.Revs.Fwd.NetIncomeWillbros Group WG 7.32 359.39 N/A 17.6x 0.2x 1.6x 1911.7 39.91 43.5 149.9x 4.44 2114.5 24.2Gulf Island Fabrication GIFI 24.82 357.71 63.1x 13.8x 0.7x 1.3x 480.5 33.40 24.0 10.3x 19.61 450.2 25.3ITP Energy ITPG 2.15 77.63 N/A N/A N/A 8.4x N/A N/A N/A N/A 0.26 N/A N/AGreenhunter Energy GRH 1.90 58.95 N/A N/A 4.2x N/A 12.2 0.43 N/A N/A -0.43 38.3 0.8Forbes Energy Services FES 3.20 67.69 N/A N/A 0.2x 0.5x 441.6 21.02 33.4 4.1x 6.53 509.6 3.2Frontier Oilfield Services FOSI 1.90 35.73 N/A N/A 2.8x 6.1x 9.8 0.68 -89.4 N/A 0.31 N/A N/ABolt Technology BOLT 15.67 135.14 18.6x N/A 2.3x 2.0x 57.1 6.66 35.4 9.2x 7.75 N/A N/AGlobal Geophsyical GGS 4.37 164.20 9.1x 9.6x 0.4x 1.2x 396.8 10.67 51.3 2.2x 3.60 361.6 27.0Powersecure International POWR 8.46 154.89 62.1x N/A 1.1x 1.4x 155.0 8.23 35.1 20.5x 6.01 N/A N/ACal Dive International DVR 2.09 203.14 N/A N/A 0.4x 0.7x 445.9 4.82 -10.6 73.4x 3.03 540.4 1.1T.G.C. Industries TGE 9.64 199.09 13.7x 12.6x 1.1x 2.6x 178.8 8.62 39.4 4.1x 3.75 N/A N/AMitcham Industries MIND 15.83 203.22 11.4x 10.9x 1.8x 1.2x 113.3 9.00 58.1 3.2x 13.40 115.7 22.2Natural Gas Services NGS 18.44 227.39 19.1x 18.7x 2.6x 1.3x 88.8 7.30 20.9 5.9x 14.05 89.9 13.3Median 18.6x 13.2x 1.1x 1.4x 7.5xProfire Energy PFIE 1.20 54.19 44.7x 9.5x 3.6x 5.6x 15.2 0.34 98.0 27.7x 0.21 21.1 4.6As of February 15, 2013Source: BloombergValuation ConclusionPFIE has shown tremendous growth relative to its peers, with FY2012YoY revenue growth of 98% and YoY net income growth of 88%. Goingforward, the Company expects to gain market share in the fast growingU.S. oil and gas market, which the U.S. Energy InformationAdministration projects will overtake Saudi Arabia as the world’s top oilproducer by 2020. Companies such as Profire that provide products andservices to the oil and gas industry should benefit. Given PFIE’shistorical growth, expected U.S. expansion and the expansion of the U.S.oil and gas industry, we believe it is appropriate to value PFIE at apremium to the median forward P/E of its peer group. Applying a 17.0xforward P/E multiple to Profire’s estimated forward earnings would givePFIE a share price of approximately $2.15, representing upside ofapproximately 80%.
  8. 8. Additional InformationAuditor: Sadler, Gibb & Associates LLCLegal Counsel: Poulton & YordanTransfer Agent: OTC Stock Transfer, Inc.Recent press releasesSEC filings
  9. 9. About RedChipRedChip Companies is an international, small-cap research and financial public relations firmheadquartered in Orlando, Florida; with affiliate offices in Qingdao, China; Paris and SanDiego. RedChip delivers concrete, measurable results for its clients through its extensivenational and international network of small-cap institutional and retail investors. RedChip hasdeveloped the most comprehensive platform of products and services for small -capcompanies, including: RedChip Visibility Research™, Traditional Investor Relations, DigitalInvestor Relations, Institutional and Retail Conferences, RedChip Small-Cap TV(TM),Shareholder Intelligence, Social Media and Blogging Services, Webcasts and RedChipRadio(TM). RedChip is not a FINRA member or registered broker/dealer.None of the profiles issued by RedChip Companies, Inc., constitute a recommendation for anyinvestor to purchase or sell any particular security or that any security is suitable for anyinvestor. Any investor should determine whether a particular security is suitable based on theinvestors objectives, other securities holdings, financial situation needs, and tax status.RedChip Companies, Inc., employees and affiliates may maintain positions and buy and sellthe securities or options of the issuers mentioned herein. All materials are subject to changewithout notice. Information is obtained from sources believed to be reliable, but its accuracyand completeness are not guaranteed. Profire Energy, Inc. ("PFIE") is a client of RedChipCompanies, Inc. PFIE agreed to pay RedChip Companies, Inc., a monthly cash fee and 5,000shares of stock under Rule 144 for eight (8) months of RedChip investor awareness services.Investor awareness services and programs are designed to help small-cap companiescommunicate their investment characteristics. Investor awareness services and programs aredesigned to help small-cap companies communicate their investment characteristics. RedChipinvestor awareness services include the preparation of a research profile(s), multimediamarketing, and other awareness services.Additional information about the subject security or RedChip Companies Inc. is available uponrequest. To learn more about RedChip’s products and services, visit, call 1-800-RedChip (733-2447), oremail info@redchip.comCompany Contact Info:Profire Energy, Inc.321 South 1250 West, Suite 1Lindon, UT 84042Phone: (801) 796-5127Website: www.profireenergy.comInvestor Contact Info:RedChip Companies, Inc.500 Winderley Place, Suite 100Maitland, FL 32751Phone: (407) 644-4256Website: