Alto Ingredients, Inc. (ALTO) research, news, and more from GeoInvesting

Company description

Wed, 26 Mar 2014 04:00:00 GMT

Pacific Ethanol, Inc. (PEIX) is the leading marketer and producer of low-carbon renewable fuels in the Western United States. Pacific Ethanol also sells co-products, including wet distillers grain ("WDG"), a nutritious animal feed. Serving integrated oil companies and gasoline marketers who blend ethanol into gasoline, Pacific Ethanol provides transportation, storage and delivery of ethanol through third-party service providers in the Western United States, primarily in California, Arizona, Nevada, Utah, Oregon, Colorado, Idaho and Washington. Pacific Ethanol has a 91% ownership interest in New PE Holdco LLC, the owner of four ethanol production facilities. Pacific Ethanol operates and manages the four ethanol production facilities, which have a combined annual production capacity of 200 million gallons. The facilities in operation are located in Boardman, Oregon, Burley, Idaho and Stockton, California, and one idled facility is located in Madera, California. The facilities are near their respective fuel and feed customers, offering significant timing, transportation cost and logistical advantages. Pacific Ethanol's subsidiary, Kinergy Marketing LLC, markets ethanol from Pacific Ethanol's managed plants and from other third-party production facilities, and another subsidiary, Pacific Ag. Products, LLC, markets WDG.

Research

Mon, 15 Mar 2021 15:36:02 GMT

Alto Ingredients, Inc. (NASDAQ:ALTO), a leading producer of specialty alcohols and essential ingredients reported its Q4 2020 results. We disclosed we were closing out our long position based on the sub par results. You can see our earnings coverage note here. We participated in the conference call hoping for more color on guidance, like management has done in the past. While the Company did not provide specific 2021 guidance, it did provide some details for gross profit goals for its specialty alcohol division:

“Given the ongoing market demand dynamics and associated volatility in both the hand sanitizer and renewable fuel markets, we believe it’s inappropriate to provide guidance at this time. What we can provide is additional framework related to our specialty alcoholic contracted product. Setting aside the many other variables, including the sale of both our renewable fuel and uncontracted specialty alcohol, we would expect our specialty alcohol contracted sales to contribute at a minimum $60 million in gross profit for 2021.”

The gross profit guidance of $60 million does not imply strong growth, when compared to gross profit of $52.9 million achieved in 2020. We will continue to monitor ALTO’s restructuring process.

The full transcript can be read here.

Research

Thu, 11 Mar 2021 19:04:40 GMT

Call to Action - ALTO

We are removing ALTO from our disclosed longs after subpar Q4 2020 results. The stock will remain on our watchlist as we monitor the company’s restructuring efforts.

Alto Ingredients, Inc. (NASDAQ:ALTO) ($7.28; $526.5M market cap; Was marked down 15% pre market) a leading producer of specialty alcohols and essential ingredients, announced Q4 2020 results:

Sales of $168.8 million vs $357.6 million in the prior year and below analyst estimates of $234.2 million
Non-GAAP EPS of $0.06 vs a loss of $0.85 in the prior year but below analyst estimates of $0.24

“In 2020, we significantly increased production of our profitable specialty alcohols, reduced the impact of unprofitable fuel-grade operations by idling or selling assets, and lowered operating and overhead expenses,” said Mike Kandris, CEO of Alto Ingredients. “These efforts increased our 2020 Adjusted EBITDA to over $67 million, a remarkable achievement that was within our August 2020 guidance. We also significantly improved our balance sheet, reducing our total debt by approximately $146 million during 2020.

We are pursuing a more sustainable and profitable path forward, delivering quality products driven by solid consumer demand. We are currently operating plants with an annual production capacity of 290 million gallons, of which 70 million gallons of specialty alcohols are already contracted for 2021. Our transformation is far from complete and with a significantly improved balance sheet, we are actively developing and exploring new build and buy opportunities to grow and expand our business to further increase revenues and profitability while maintaining and controlling expenses. We believe we are well positioned to capitalize on the opportunities ahead to deliver long-term growth for all our stakeholders.”

The company’s conference call is today at 11 AM est. We will be on the call to see if management offers any insight into what we consider to be light Q4 results and any guidance for 2021.

Research

Mon, 21 Dec 2020 05:00:00 GMT

Pacific Ethanol Inc (NASDAQ:PEIX) ($5.81; $420.1M market cap), a company that produces and markets low-carbon renewable fuels and alcohol products in the United State, announced it has amended its credit agreement with CoBank:

“The Company, with its borrower subsidiaries, Pacific Ethanol Pekin, LLC and Illinois Corn Processing, LLC paid $24.9 million in connection with the amendments, repaying all term debt and reducing the borrowers’ revolving lines of credit to $30 million in total. At the same time, CoBank and the borrowers agreed to reduce certain reporting requirements and eliminate the requirement of the Chief Restructuring Officer position. With the pay down of the CoBank loans, and previous principal payments on the Company’s senior notes, the Company expects to be net term debt free, meaning its consolidated cash exceeds its remaining term debt, at the end of 2020.”

Research

Mon, 16 Nov 2020 15:55:52 GMT

Pacific Ethanol Inc (NASDAQ:PEIX) – Announced Q3 2020 results:

Sales of $204.7 million vs $365.2 million in prior year and slightly ahead of analyst estimates of $199.3 million
EPS of $0.24 vs a loss of $0.58 and slightly ahead of analyst estimates of $0.22

“Our 3rd quarter net income of $14.9 million and Adjusted EBITDA of $34.1 million reflect our efforts to reposition the company to produce sustainable and profitable results going forward. We have successfully transitioned production at our Pekin, Illinois campus to approximately 50% specialty alcohols. We are further expanding capacity at our Pekin facility and investing in quality assurance and certifications to expand addressable customers and markets to further build our business.”

Reaffirmed second half guidance:

“We are reaffirming our second half of 2020 guidance of Adjusted EBITDA between $50 and $70 million dollars and $66 and $86 million dollars for the full year,” stated Bryon McGregor, Pacific Ethanol’s CFO. “The majority of our 2021 specialty alcohol production has already been contracted at fixed prices for terms of one year or more. We expect long-term tailwinds from continued growth in demand for specialty alcohols and essential ingredients.”

Given that the company reported adjusted EBITDA of $34.1 million in Q3, the Q4 revenue guidance of $15.9 to $35.9 million is likely the reason why the stock did not react positively to the strong results.

While we are not ignoring the high range of guidance, it is our belief the demand for the company’s sanitization product will remain healthy enough to possibly allow them to come in at the higher end of that range.

Still, this wide range could limit P/E multiple expansion beyond 5 to 10 on an average 2021 EPS estimate of $1.33 leads us to be somewhat conservative in our short term price expectations.

The company also entered into an agreement to sell its Idaho grain handling facilities for $10 million as it continues efforts to solidify the balance sheet. Recall, the company raised $75 million through an equity offering in October, which it plans to use to pay down debt.

Research

Tue, 27 Oct 2020 17:28:35 GMT

Pacific Ethanol Inc (NASDAQ:PEIX) ($7.92; $502.9M market cap), a company that produces and markets low-carbon renewable fuels and alcohol products in the United States. announced a strategic realignment to focus on specialty alcohols and essential ingredients as well as an intent to change its corporate name. The company also provided preliminary Q3 2020 results and disclosed a $75 million equity offering.

Name Change:

“The decision to rename our company is part of our transition from a transportation fuels-focused business to a consumer products and ingredients-focused business and reflects the fact that specialty alcohols used in consumer products are now the largest contributor to our revenues...

Going forward, the company will focus on specialty alcohols and essential ingredients for four key markets: Health, Home & Beauty; Food & Beverage; Essential Ingredients; and Renewable Fuels.”

Preliminary Q3 2020:

“The company expects to report Q3 2020 sales of $204 million, net income of $15 million and adjusted EBITDA of $34 million. This reflects a decrease in net sales of approximately $161 million, an anticipated increase in net income of approximately $43 million and an anticipated increase in Adjusted EBITDA of approximately $46 million from the same period last year.”

The large decrease in sales is due to the sale of its ownership stake in Pacific Aurora in February 2020.

Offering:

“The company priced 5 million shares at $8.42. In lieu of common stock, certain investors will be issued 5-year pre-funded warrants to purchase 3,825,493 shares of common stock at a price of $8.42 per pre-funded warrant. The total number of shares and pre-funded warrants being issued will be 8,900,493. In addition, in a concurrent private placement, the company also issued to investors, for a nominal price, warrants to purchase an additional 8,900,493 shares of common stock at an exercise price of $9.757 per share.”

Despite the issuance of new shares, the company will use a portion of the proceeds to pay down some high interest debt and expects the transaction to be accretive to 2020 earnings.

Research

Fri, 28 Aug 2020 17:47:28 GMT

Call To Action - Looking to Add to Our Long Position In PEIX

In our August 19, 2020 email we mentioned we had established a long position in Pacific Ethanol Inc. (NASDAQ:PEIX) ($3.80; $216.5M market cap) as we look into the company’s turnaround initiatives.

We have reached out to management to set up an interview. However, we are considering adding to our long position as we continue our due diligence process if the stock remains at current levels, especially if shares dip back under $4.00.

Shares have been on a roller coaster ride the past several days reaching a high of. $5.33 on the 18th, to a low of $3.25 on the 26th. However, Form 4 filings after the close yesterday show several insiders, including Co-CEO Neil Koehler, have bought over 120,000 shares as the stock pulled back from recent highs. This marks the second time in the past week insiders have stepped in on price weakness. Last week, director Gilbert Nathan purchased 56,000 shares as the stock dipped to the low $3’s, and he was also part of the buys yesterday, picking up another 72,000 shares at an average price of $3.42

Research

Wed, 19 Aug 2020 19:22:13 GMT

**Call To Action - Established a Speculative Long Position in PEIX

Yesterday, via premium tweet we disclosed a long position in Pacific Ethanol Inc. (NASDAQ:PEIX) ($5.06; $288.3M market cap) as we look into the company’s turnaround initiatives. Several factors have caught our attention:

Recent strong Q2 results
- While sales were down 38%, EPS was $0.27 vs a loss of $0.17 fueled by its alcohol based products.
- The company reduced its long term debt by nearly 50%
- Offered strong second half 2020 guidance of adjusted EBITDA of $50 to $70 million with momentum continuing into 2021 (first half 2020 adjusted EBITDA was $16.5 million)
The company is selling non-performing assets to pay down debt
The company has the ability to pivot and revive idled ethanol plants to address the under supply in the liquid sanitizers market due to COVID-19 .

“Our high quality alcohol products consistently achieve significantly better margins than fuel ethanol. Moreover, high-quality alcohol is typically sold at fixed prices and volumes with longer-term commitments than fuel ethanol , allowing us to lock in our input costs over the contract term and better secure favorable margins. The majority of our high quality alcohol production is contracted through 2020, and we are building a strong book of sales for 2021 as we add new customers and renew existing contracts.”

Extremely strong analyst 2021 EPS estimate of $1.61

Recent insider purchase
- Director Gilbert Nathan 56,725 at an average price of around $3.40

The Company reports its financial and operating performance in two segments: (from 10-Q )

Ethanol production, which includes the production and sale of high quality alcohol, ethanol and co-products, with all of the Company’s production facilities aggregated
Marketing and distribution, which includes marketing and merchant trading for Company-produced high quality alcohol, ethanol and co-products and third-party ethanol.

It should be noted that the PEIX recently filed an At The Money offering for up to $30 million. This means that the company can sell new stock in the open market at any time, Also, the company operates in highly unpredictable markets with respect to supply, demand and raw material pricing associated with the industry, which will likely prevent the stock from attaining a premium valuation. Ultimately, we think the company should trade between a P/E of 5 to 10 on 2021 EPS. Because of these factors and as we stated in our premium call To Action tweet, we are viewing PEIX as a short term speculative holding . However, The move to abandon less predictable markets is interesting, something we will keep our eye on.

Research

Tue, 27 Jun 2017 04:00:00 GMT

Pacific Ethanol Inc. (NASDAQ:PEIX) ($6.20) announced this morning that they were making a $76M acquisition of Illinois Corn Processing, LLC. The company entered into a definitive agreement to acquire Illinois Corn Processing, LLC (“ICP”) for $76 million, which includes $15 million in working capital. The transaction is expected to close in July 2017, subject to customary and other closing conditions. The company lists the highlights of the acquisition as:

Adds 90 million gallons per year of production capacity
Diversifies fuel ethanol production with high-value beverage and industrial grade alcohol
Expands export opportunities
Consolidates additional production in Pekin, Illinois with a combined 250 million gallons of production
Immediately accretive to earnings

Additionally, the company expects the acquisition to result in better margins and additional cost savings of $3M over the course of 6-12 months from the closing date.

Independence Holding Company (NYSE:IHC) ($19.90) announced this morning the preliminary results of its tender offer:

“Independence Holding Compan y(“IHC” or the “Company”) announced today the preliminary results of its tender offer to purchase up to 2,000,000 shares of its common stock at a price per share of $20.00, net to the seller in cash, without interest, less any applicable withholding taxes, which expired at 5:00 p.m., Eastern time, on June 26, 2017. Based on the preliminary count by Broadridge Corporate Issuer Solutions, Inc., the Depositary for the tender offer, approximately 1,390,266 shares of common stock were properly tendered and not withdrawn, including approximately 28,983 shares that were tendered through notice of guaranteed delivery and 5,689 shares that were tendered as odd lots. Accordingly, IHC expects to accept for purchase a total of 1,390,266 shares at a purchase price of $20.00 per share, for an aggregate purchase price of $27,805,320.”

Research

Wed, 08 Mar 2017 17:13:47 GMT

**Mock Portfolio

Considering Adding PEIX to Buy on Pullback Mock Portfolio 4.0

PEIX ($7.35) is a leading producer and marketer of low-carbon renewable fuels in the United States. We are considering adding the stock to our Buy On Pullback Mock Portfolio 4.0 due to muted/negative reaction to strong Q4 2016 results announced on March 1, 2017 PEIX:

Sales of $441.7 million vs $376.8 million in the prior year and ahead of analyst estimates of $421.6 million
EPS of $0.30 vs a net loss of $0.03 in the prior year and ahead of analyst estimates of $0.21

Quotes from management:

“In 2016 we achieved our overall strategy of double-digit revenue and net income growth by developing and launching proprietary, innovative products and entering attractive new market segments.” We believe that as we continue to innovate, build retailer relationships, and deliver great products to our customers, we will continue to set records in 2017 and beyond.”

Shares opened strong on the earnings, up 6% in early trading, reaching $9.35 before retracing and closing at $7.90. The drop continued the next day even though Roth increased its price target to $12.00 from $11.00. Currently, shares are trading at $7.35, 25% below earnings day highs.

There are certainly regulatory issues that pose unpredictable risks to the entire ethanol industry and we usually tend to stay away from oil and energy provider and exploration microcap stocks due to unpredictable market trends. However, we think the selloff may be overdone. Management addressed this concern on the conference call:

“On the regulatory front, we also see continued support for the ethanol industry. Thus far, we believe all indications are that the new administration will be supportive of policies such as renewable fuel standard, which prioritize domestic energy resources. 2016 was a year of growth for E15 sales and infrastructure development. At the end of 2016, there were over 600 stations and as expected to double by the end of 2017, offering E15 for sale. We’re seeing increased momentum in the adoption of E15 infrastructure as the 15% ethanol blend becomes increasing reality in the U.S.”

But really, we don’t think regulatory concern is putting pressure on shares. You may be aware that Co-Founder Maj Soueidan recently wrote an article discussing how to dismantle FORM 4 filings to find winning bets in the microcap space. PEIX may be in great illustration of this point.

On March 3, 2017, 2 days after the earnings release, Candlewood Investment Group, a large stakeholder in PEIX, filed a form 4. The Group is distributing 2.1 million shares to its limited partners. This scenario can happen when funds merge into parent funds or plan to terminate the fund, as dictated by their mandates. We think this could be causing an overhang on the stock as these investors may be selling the shares or as market participants get out of the way until the selling risk passes. When the risk does pass, we think shares could move higher quickly. The disclosure of the form 4 filing is why we decided to bring the potential idea to the GeoInvesting Premium Community.

After years of losses, PEIX strong Q4 results and analyst estimates have also caught our attention. Estimates for 2017 are $0.89 vs. $0.00 for 2016. A P/E of 15 on analyst 2017 EPS estimates of $0.89 equates to a near term price target of $13.35. Analysts also forecast PEIX to maintain these EPS levels in 2018.

Caveats:

Industry dynamics/regulations constantly changing
Analyst are calling for flat growth in 2018 vs. 2017
Do not know how long Candle “distribution risk” will remain as an overhang. The firm still owns 5 million shares
The latest 13D/A filed by Candlewood Investment Group does not include a favorable purpose of transaction section that prior 13D’s included
Attached to the 13D is a “standstill agreement,” which is generally an agreement put in place to prevent a hostile takeover or the sale of shares from a large shareholder
This standstill agreement mentions exceptions but does not disclose what they are. The Standstill terminates at 4pm EST on June 30, 2017
P/E of 15 may be too aggressive for an energy provider