Yahoo Finance
Filing
Apr. 17, 2018
Year-end Sept. 30. Dec 2017 Data
Price: $0.445, Share outstanding 56m. Options 3.5m below $0.3/share. Cap: $25m
1.Basic Information
(1) History
The company was founded by Dr. Reza Shah, a former NASA engineer, in 1998. He is an inventor of many items. In 2002 Kevin Callahan joined the company and started to commercialize those inventions. The company IPOed at 2005 through a reverse merger. In the beginning, the company has several products besides the Safe-T-Element. It is mainly a fire prevention technology for the electric stove. Reza Shah died around 2008. Callahan continues to commercialize those products. It did quite well and reached $3m in revenue and almost profitable at 2010. Then for the next 3 years, it had some drawbacks. Since 2014, it started to pick up again and reached record revenue of $10m in 2017. Lately, at Q1 2018 the revenue was down surprisingly caused by its major hotel customer postponed delivery to Q2 and Q3 of a big project. The stock price fell from above $1 to currently 40c level.
(2) Business-related:
1) SmartBurner: This is the standalone coil burner replacement. The retail price is around $200 per set of 4 burners. Recently it has been picked up in sales volume. It can be used by the general household. However, I think the adoption rate of this product by general household is very low.
2) Saft-T-Element: This is the non-standalone coil burner which needs professional installation on the stove. I guess its cost should be cheaper than the standalone burner and it is more effective than the standalone ones. This is mainly used in hotels and multi-unit apartments.
3) Saft T Sensor: This is a sensor for the microwave. When it senses smoke, it can shut down the microwave power supply. It works best for students dormitory which false alarm from microwave causes a lot of headaches.
4) Range-Reminder: Replacement dial ring on the stove to remind user if cooked for a certain time. It is quite complicated to setup and I don't think this will be popular. However, it can be useful for the OEM manufacturers because they can implement it in their products.
The smart burner is their major product and it best to be used for hotels, rental apartment, student dormitories and people who often forgetting they are cooking. However, there is a concern that the smart burner will take a longer time to cook and might not hot enough for cooking something. It should do a better job of marketing their product.
Also, it seems that its technology should be very attractive to OEM stove manufacturer. However, they seem not very interested in this company. There is a UL858 regulation which requires the stove to contains certain fire prevention. It will be a requirement after April 2019. Don't know how those manufacturers will act to this regulation.
(3) Management.
Callahan is the key person in this company. He did a good job running the business, although there are some losses in the previous years. They are not that big. He raised money at the right price point. Also, he seems pretty good in loading those commercial clients.
(4) Debt and Credit Facility.
At Dec. 2017, it has $8m in cash and no debt.
(5) Insider holding, options, Insider trading info, share buyback.
(6) Employee numbers
(7) Industry comparison.
It seems there is no direct competitor to its product. However, major stove OEM manufacturer might be able to come up with something similar or with different technology.
(8) Major events
2. Financial data.
3. Valuation
(1) Based on 2017 and 2016 number, it has generated around $1.3m in real income. Currently, the price is around 20 P/E. Not really cheap. However, since there is $8m cash on hand, if the company can maintain its profitability, the price can be supported.
4. Risk
(1) Its revenue is concentrated on major customers and rely on big projects. Future revenue may fluctuate greatly.
(2) Its retail and marketing to the general public is weak and may never be popular products.
(3) It seems unable to attract the OEM manufactures.
5. Conclusion
Based on current revenue, the company is traded not cheaply. If the company can restore growth, the price is very acceptable.
6.Links
Interview
Interview
