Tecogen Reintroduces TecoFrost in Time for Skating Season
As the National Hockey League began its season this past week, we are reminded that hockey and ice skating will become popular activities for many people in the United States over the next several months. Tecogen Inc (US: TGEN – $2.25 & GER: 2T1 – €1.99) is taking advantage of these events as its recently reintroduced Tecofrost ammonia refrigeration system achieved its first sale from an ice skating facility located in Massachusetts this week. The system will provide cooling for ice making, with waste heat recovery used for dehumidification, ice resurfacing, domestic hot water, and space heat.
Tecogen already has ice rink owners as long-term, loyal customers, but will be able to increase its sales to this sector with Tecofrost. With global warming and the growing popularity of hockey in the southern United States, Tecofrost will make it easier and cheaper for rink owners to solve the very challenging task of keeping up ice quality on warm days. Tecofrost runs on natural gas instead of electricity, so building owners can achieve substantial savings in locations where natural gas is the cheaper option of the two.
Tecogen chose the Massachusetts location in order to re-introduce Tecofrost as a “soft launch” near its manufacturing facility. Operations will be closely monitored from that facility at this early stage of deployment. Upon determination that the system is working as planned, we expect Tecogen to build a strong backlog of Tecofrost orders. The demand for this product will certainly exist for rinks as well as other large industrial facilities.
Tecofrost Is An Efficient Cooling System Solution For A Variety Of Industrial Buildings
We have previously written about the robust and versatile nature of Tecogen’s Tecochill system for a variety of buildings such as schools, apartment buildings and hospitals. What those buildings all have in common is that they consistently house large amounts of people in them. Tecochill has a non-toxic design that circulates chilled water or directly chilled air, making it an ideal efficient temperature control system for those kinds of locations.
Tecofrost is designed specifically to meet the cooling demands of industrial buildings and manufacturers such as dairy operations, meatpacking, bottling facilities, food processing and cold storage facilities. Ammonia refrigeration systems are typically found in these locations as they are the most efficient and effective way to cool them. A food processing facility, for instance, may have a refrigeration plant consisting of multiple compressor systems that serve different cooling loads throughout the facility. The versatility of the Tecofrost system enables it to be a drop-in replacement for one or more of the plant’s existing electric compressor systems, or supplement the plant as a low operational cost “first on/last off” machine. Employees located in these facilities have proper protective equipment and are trained to handle these systems, so toxicity at these locations is not a concern.
Tecogen CEO Benjamin Locke echoed our bullishness over the reintroduction of Tecofrost and the possibility of increasing backlog as the industrial building market previously not available to Tecogen will be aggressively pursued, “We are excited for the potential of Tecofrost to open up new industrial process cooling markets that could not be served with our Tecochill product. Previously, markets such as food and beverage operations, meat and dairy processing, and cold storage were not a fit for our chillers. The re-introduction of Tecofrost includes improvements such as a new compressor with higher efficiency, and our patented Ultera emission aftertreatment package, ensuring strong operational cost savings and clean emissions that will help drive new sales. We are approaching these markets with our manufacturing partner Vilter, which allows us to leverage their sales channels into new markets and geographies. We expect additional orders for Tecofrost as many facility operators look to reduce energy costs without sacrificing system performance.”
Tecogen’s Stock Remains a Strong Buy Headed into 2020
The reintroduction of Tecofrost gives shareholders another reason to be excited about Tecogen’s prospects for the remainder of 2019 and 2020. The stock price has rebounded since making a 52-week low last week, but still sits at a remarkably cheap price. TGEN trades at less than two times its trailing revenue. It’s as if the Company is trading in a slow growth and low margin industry, neither of which are the case.
Investors who do a little research on our site and elsewhere will be quite familiar with Tecogen’s growing backlog and numerous contract announcements throughout 2019. Perhaps the catalyst to a significant increase to the stock price will be the demonstration of consistently positive EBITDA and net income, showing favorable earnings multiples that the market can no longer ignore.
With each new contract being announced, we attain a higher level of confidence that the next six quarters between now and Q4 2020 will demonstrate profitable growth. We are maintaining our bullish price target and expect significant returns for shareholders who are patient enough to buy and hold TGEN through these next several quarters. Smallcaps Recommendation: BUY.
|Smallcaps.us Advice: Buy||Price Target: $9.41||Latest Company Report (pdf)|
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