Sunday, March 23, 2014

The Best Small Cap Biofuel or Synthetic Fuel Stocks? GEVO, KIOR, SZYM & SYNM

Small cap biofuel or synthetic fuel stocks Gevo, Inc (NASDAQ: GEVO), KiOR Inc (NASDAQ: KIOR), Solazyme Inc (NASDAQ: SZYM) and Syntroleum Corp (NASDAQ: SYNM) all seem to have been seeing some trading action in recent days – meaning its worth taking a closer look at all four before taking a look at their rather dismal long term performance while noting that none are yet profitable:

Gevo, Inc. A leading renewable chemicals and advanced biofuels company, Gevo, Inc has developed bio-based alternatives to petroleum-based products using a combination of synthetic biology and chemistry. The company produces isobutanol, a versatile platform chemical for the liquid fuels and petrochemical market that has broad market applications as a solvent and a gasoline blendstock to help refiners meet their renewable fuel and clean air obligations. Last week, Gevo, Inc announced that Porta Hnos S.A., a 132 year old family owned company in Argentina that produces liquor, vinegars and has a 120 m3/day corn ethanol plant (half of all current ethanol plants in Argentina were designed by Porta), had signed a letter of intent to become the exclusive licensee of GIFT(R) in Argentina to produce renewable isobutanol. However and back in December, Gevo, Inc sank around 27% after raising $25 million in a share offering priced at $1.35. The funds raised will be used to restart biofuel production at its facility in Luverne, Minnesota and to repay $5.1 million in long-term debt (note: isobutanol production in Luverne was halted in September 2012 after contamination issues forced an adjustment to the manufacturing process with output resuming on a small scale in June). Moreover, Gevo, Inc's income statement is all over the place with revenues of $24.39M (2012), $64.55M (2011), $16.40M (2010) and $0.66M (2009) for the past four reported years while net losses have been $60.71M (2012), $48.21M (2011), $40.11M (2010) and $19.89M (2009). Gevo, Inc is scheduled to report its end of the year financial results on Tuesday, March 25, 2014 at 4:30 pm EDT. On Tuesday, Gevo, Inc rose 3.57% to $1.45 (GEVO has a 52 week trading range $1.12 to $2.45 a share) for a market cap of $68.42 million plus the stock is up 2.1% since the start of the year, down 26.8% over the past year and down 91.3% since February 2011.

KiOR Inc. A "next-generation" renewable fuels company that has developed a proprietary technology platform to convert biomass into renewable crude oil that is processed into gasoline, diesel and fuel oil blendstocks, KiOR Inc built the first commercial scale cellulosic fuel facility in Columbus, MS, which started production in 2012. However, the company has been hit with setbacks in recent months or years. In late December, KiOR Inc gave an update about its Columbus facility where the CEO stated:

"Despite our accomplishments to date, we still have a lot of work to do to bring the Columbus facility towards target throughput, yield and financial performance levels. The financial performance of the facility was also negatively impacted by the temporarily depressed pricing for RINs caused by proposed 2014 renewable volume obligation rulemaking by the USEPA."


"To that end, from now through the end of the first quarter of 2014, we expect that our efforts at Columbus will be focused on implementing a series of mechanical improvements to the facility rather than production volumes. We plan to operate the facility on a limited campaign basis only to verify the expected impact of improvements we intend to implement."

The update was led to some analyst downgrades and more investor discontent – especially in light of its June 2011 IPO at $15 a share that have seen shares subsequently go to the $1 level. Otherwise, KiOR Inc is scheduled to host an earnings conference call about end of the financial year results on Thursday, March 13, at 10:00 AM. On Tuesday, KiOR Inc fell 9.03% to $1.31 (KIOR has a 52 week trading range of $1.10 to $6.35 a share) for a market cap of $139.93 million plus the stock is down 26.8% since the start of the year, down 77.6% over the past year and down 91.3% since July 2011.

Solazyme Inc. The pioneer of an industrial biotechnology platform that harnesses the prolific oil-producing ability of microalgae, Solazyme Inc uses standard industrial fermentation equipment to efficiently scale and accelerate the microalgae's natural oil production time to just a few days. At the end of January, Solazyme Inc announced that commercial operations had commenced at both Archer Daniels Midland Company (ADM)'s Clinton, Iowa facility, and the downstream companion facility operated by American Natural Products in Galva, Iowa (ANP) with the press release noting that "this is a critical milestone for Solazyme's large scale commercial manufacturing capabilities." The news helped to send the stock up 30% (no doubt in part due to shorts having to cover their positions) – especially after November news that oil production at its Moema plant in Brazil was being pushed into the first quarter. However and while investors should note that Solazyme Inc's revenues have been consistent at $39.75M (2013), $44.11M (2012), $38.97M (2011) and $37.97M (2010) for the past four reported years, its also had net losses of $116.39M (2013), $83.13M (2012), $53.90M (2011) and $16.28M (2010). This means investors really need to watch Solazyme Inc's financials while traders should be watching the short interest. On Tuesday, Solazyme Inc rose 6.82% to $14.41 (SZYM has a 52 week trading range of $7.15 to $14.44 a share) for a market cap of $980.77 million plus the stock is up 35.4% since the start of the year, up 53.6% over the past year and down 30.4% since June 2011.

Syntroleum Corp. A producer of synthetic fuels from a wide variety of feedstock, from natural gas to fats, oils and greases, Syntroleum Corp uses the Fischer-Tropsch process to produce significant amounts of synthetic diesel and jet fuel as well as its Bio-Synfining® technology to produce renewable synthetic fuels with the same superior qualities. Back in December, it was announced that Renewable Energy Group Inc (NASDAQ: REGI) would acquire substantially all of the assets of Syntroleum Corp with the terms of the transaction calling for SYNM to receive 3,796,000 shares of REG common stock (subject to reduction in the event that the aggregate market value of the REG common stock to be issued would exceed $49 million or if the cash transferred to REG is less than $3.2 million). The CEO of the Renewable Energy Group commented:

"Combining Syntroleum's renewable and synthetic fuel technologies with REG's expertise in biodiesel production, sales, marketing and logistics should be a positive outcome for investors in both companies. This will help us grow our advanced biofuel business, enhance our intellectual property portfolio, expand our geographic footprint and launch REG into new customer segments."

With that in mind, its worth noting that Syntroleum Corp might have actually turned a profit last year depending on what fourth quarter financials turn out to be. On Tuesday, Syntroleum Corp fell 4.08% to $3.76 (SYNM has a 52 week trading range of $2.39 to $7.75 a share) for a market cap of $37.47 million plus the stock is up 7.4% since the start of the year, down 13.9% over the past year and down 44.7% over the past five years.

Share Performance: GEVO, KIOR, SZYM and SYNM

Finally, here is a look at the share performance of all four biofuel stocks:

The above performance over the long term is not very inspiring – meaning most investors will want to stick with traditional oil or natural gas related fuel stocks.

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