Aspire Clean Tech Index Portfolio Update - Up 14% Since Inception, Beating DJIA, S&P; 500 and Nasdaq

Sep 03, 2008
Author: SCP Editor

September 3, 2008 – Since we began publishing the Aspire Clean Tech Index (ACTI) on April 24, the ACTI is up 14%, while the DJIA is down 10%, the S&P 500 is down 7% and the Nasdaq is down 2%. The ACTI is led by Hydrogenics (Nasdaq:HYGS), which is up 74% and LDK Solar (NYSE:LDK), which is up 57%. Laggards in the ACTI include Verenium (Nasdaq:VRNM) which is down 24% and Yingli Green Energy (NYSE:YGE) which is down 15%. We have closed Composite Technology (OTCBB:CPTC) at $1.24, locking in a 35% gain since it was initiated in the ACTI and a short recommendation on Akeena Solar (Nasdaq:AKNS) at $4, locking in a 39% gain since it was initiated in the ACTI.

We regularly update our analysis on the stocks in the ACTI at the Small Cap Pulse website, adjusting our targets for the stocks based on broader dynamics in the economy as well as each company’s fundamentals. We remain bullish on all of the companies listed in the ACTI:

·         LDK Solar (NYSE:LDK) – initiated in ACTI on April 24 at $31, and closed yesterday at $48.74. Our last analysis on the stock was on August 25, when it was trading at $49 (close to today’s price), was that it is trading at 5x P/S (ttm), and only 2.51x FY 2008 forecasted sales of $1.7 billion. Discounting the P/S multiple for our FY08 forecast to 4x, we arrive at an implied market cap of 6.8 billion, which would yield a $64 stock price. At the current 5x P/S basis for our forecasted FY08 number, we would arrive at a $79 stock price.  

At $49, LDK is trading at 17.98x P/E (ttm). At 22x our forecasted FY08 earnings of $306 million, we arrive at an implied market cap of $6.7 billion, which would yield a $63 stock price. We think that the 22x P/E is a justifiable multiple, given the leadership position LDK has in its sector, the fact that it is anticipating significant margin expansion as it becomes more vertically integrated and considering the company’s anticipated earnings and revenue growth.  

So at $49, we continue to believe that there remains significant upside to LDK’s stock.  

·         EnerNOC (Nasdaq:ENOC) – initiated in ACTI on May 5 at $14.36, and yesterday closed at $15.09. At the current level, ENOC is trading at about 3.6x P/S (ttm). In its most recent quarterly announcement, ENOC raised revenue guidance for FY2008 from a range of $99 million to $105 million, to a range of $101 million to $107 million. Assuming that ENOC comes in at $105 million, and a P/S multiple of 3.5, we arrive at an implied market cap of $367 million, or a stock price of about $18.50 (assuming 19.7 million shares out).

ENOC’s revenue growth of 133% in the FY06 to FY07 period, and our expected growth of 73% in the FY07 to FY 08 period, as well as its relatively strong gross margins (avg. of about 35%) bode well for the company’s ability to achieve profitability in the next 12 months we think, which, in turn, should support stronger multiples. In addition, we think the company is well positioned in a high growth industry for at least the next 10 years.

We will update the rest of the ACTI over the next few days. Companies currently represented include:

·         Hydrogenics (Nasdaq:HYGS) – up 74%

·         Verenium (Nasdaq:VRNM) – down 24%

·         A-Power (Nasdaq:APWR) – down 10%

·         Echelon (Nasdaq:ELON) – up 5%

·         Yingli Green Energy (NYSE:YGE) – down 15%

·         Evergreen Solar (Nasdaq:ESLR) – down 2%

·         Johnson Controls (NYSE:JCI) – down 5%

·         Ultralife Batteries (Nasdaq:ULBI) – up 3%

·         American Superconductor (Nasdaq:AMSC) – flat

Note: percentages are based on yesterday’s closing prices.

Disclosure Note: SCPEditor is LONG LDK, ENOC, HYGS, VRNM, APWR, ELON, YGE and AMSC