AGX Slides
- 2. • NYSE: AGX • Current Price: $37.72 • Market Cap: 550.45 Million • P/E: 14.95 • Beta: 1.08 • Profit Margin: 9.10% • Sales Y/Y: 1.684%
- 3. • Argan is an undervalued company that will be on the leading end of the natural gas industry. Further, as a natural gas plant construction company, Argan will realize an increase in contracts in their backlog given aging infrastructure.
- 4. • Argan Inc. is a holding company that provides engineering, procurement, and construction services for the power and renewable energy sector. • The company primarily specializes in developing natural gas power plants in addition to alternative fuels (ethanol, biodiesel) and renewable energy (biomass, wind, solar). • Argan operates through its subsidiaries Gemma Power System, Atlantic Projects Company, and Southern Maryland Cable.
- 5. SEGMENT BREAKDOWN 5 • Power Generation - constructed 80 facilities with 11,000 MW power generating capacity (EPC). • Alternative Fuels - installed more than 370 million gallons per year of installed alternative fuel capacity. • Renewable Energy - installed more than 435 MW wind power facilities, 12 MW solar power facility capacity.
- 6. GEMMA POWER SYSTEMS ● Gas-fired power plant designer and builder with experience in alternative fuel and renewable energy. ● Development, consulting, engineering, procurement, construction, commissioning, and maintenance services. ● EPC of 80 facilities: 11,000 MW power generating capacity. ● Technology Agnostic Approach - Adaptable ● Backlog: renewable energy and alternative energy projects. 6
- 7. GPS NATURAL GAS DEVELOPMENT ● July, 2015 - GPS was given limited-notice-to-proceed with the construction of a 1,000 MW combined cycle power plant in Pennsylvania (Moxie Freedom). ● Marcellus Shale Region - 104,000 square miles 7
- 8. GPS MAP 8
- 9. ATLANTIC PROJECTS COMPANY ● Services: Engineering, Procurement, & Construction (EPC), Original Equipment Manufacturer (OEM). ● Installation of gas and steam turbines (300), compressors, generators, large electric motors, boilers, and piping systems in power plants and refineries. ● Sectors: Power Generation, Oil & Gas, Industrial & Process ● International Scope: Iceland, Singapore, Ireland, Kuwait. ● Clients: 9
- 10. SOUTHERN MARYLAND CABLE • Provides technology wiring for power plants, government, defense contractors, and telecommunication companies. • Sectors: Power Industry and Telecommunication Infrastructure Services. • Directional Boring Drills: steerable and trenchless cable installation technique with minimal ground disturbance. 10
- 11. • Gemma Power Systems: 94.5% (Domestic) • Southern Maryland Cable 3.6% (Domestic) • Atlantic Projects Company 1.9% (International)
- 12. VALUE THESIS • The demand for new gas-fired generation capacity plants due to retirement of older and inefficient plants • GPS acquired 2 construction service contracts in August. • Strong backlog - 660 M • Below average EV/EBITDA 12
- 13. 13 • Low Demand for electrical power may deteriorate financial outlook • Revenue is not directly controlled • Awarded through contracts • Dependence on one or a few customers • Dependence on large contracts result in uneven revenues
- 15. ● Industrial and residential/commercial sector are increasing demand for electricity ○ Industrial: Manufacture goods to accommodate growing middle class. Advanced manufacturing, automation and control technology ○ Residential/commercial: Rising living standards create higher electricity consumption.
- 16. • Retirement of coal/gas plants due to age drives further investment in new gas-fired technology
- 17. • Clean Power Act: EPA finalized the Clean Power Plan to cut carbon pollution from existing power plants • Closing down of plants due to regulation. Pounds per million Btu
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