Coates International Ltd (OTCMKTS: COTE) returned substantial returns to the investors last week after the company communicated that it had received a profitable contract from the company ‘Secure Supplies Mexico LLC. Coates’, which is the owner of the patented technology ‘Coates Spherical Rotary Valve’ being used for internal combustion engines. It will deliver 40 to 50 CSRV industrial electric power generators to operate on gaseous hydrogen produced by Secure Supplies Mexico. Have a look at the price action:
Coates International has been working on the development of its patented technology ‘Coates Spherical Rotary Valve’ for more than 20 years. The system can be adaptable for use in piston-driven internal combustion engines of many different types. The patent is believed to provide meaningful fuel savings as compared to internal combustion engines, based on the conventional “poppet valve” assembly, which is widely used. In this video, you can obtain more information about the technology and on this website, you can find the CSRV system advantages.
Coates International, Ltd. was founded in October 1991, but it is the successor-in-interest to a Delaware corporation incorporated in August 1988. The company has accumulated a large amount of expertise, which we appreciate very much. The technology is matured, known, and profitable. We did some due diligence and found out that the company is based in Wall Township, New Jersey, close to New York City. Check this location here. You will be able to see where the factory is located. This is the website of Coates.
The new contract was delivered on April 19, 2017. It noted that the project engaged with Secure Supplies Mexico LLC consists of a solar system and is budgeted for $412,000,000. The CEO and President, Mr. George J. Coates, commented the following about the news:
“This is only one of the projects that our Company is involved in with Secure Supplies. These projects work in the following way: Secure Supplies set out on the site where hundreds of solar panels are erected producing electric power and producing hydrogen, which is stored in special expansion tanks. When the sun goes down, the Coates CSRV electric power generators fire up operating on the stored hydrogen, which is produced by the sun. These CSRV generators are synchronous and only produce the power required at any given time up to 50 M.W. These are the most “green” projects ever. These projects are many worldwide. Coates CSRV engines are the only engine suitable to operate on gaseous hydrogen continuously.” Source
In addition, the business leader claimed that “management believes this is a turning point for the Company that will benefit all involved“. We could not agree more. Once you see the financial perspective of the company, you will come to know why.
The balance sheet reported in the last annual report looks very similar to the one showed by other manufacturers and it is true that the company seems to be in a “turning point”. Have a look at the assets of the company and note the large amount of property:
- Total current assets: $247,673
- Property, plant and equipment, net: $2,076,396
- Total Assets: $2,362,235
As stated earlier, this is a typical manufacturing firm with large amount of capital expenditures and little cash standing in the balance sheet; nothing new. The liabilities look large as compared to the assets, as we said before. However, note that the company is financing its operations, using the accounts payable account, which investors should appreciate as the company did not have to issue a lot of long term debt:
- Accounts payable and accrued liabilities: $2,461,175
- Promissory notes: $1,454,699
- Deferred compensation payable: $1,272,317
- Total Current Liabilities: $5,658,784
- Total Liabilities: $7,559,117
As mentioned by the CEO of the company, the new contract means a lot for the company. It will help management a lot in dealing with other stakeholders and will provide some time to the company. That is the reason that the last jump in the share price was produced. To cut a long story short, this company is quite a risk play that may return substantial returns to some savvy traders. If the company is able to use the new contract to negotiate with providers and can continue its operations, the share price will jump even more. The other scenario is that the company will have to restructure the business.
If you are thinking of making an investment here, it is key that you are informed about the news released by the company. You can do that either by using Google alerts, checking the website everyday or subscribing to our email newsletter, wherein you will receive investment analysis.
Coates International recently delivered news regarding a new contract signed in Mexico, which will help the company clean its balance sheet. We believe that the company will try to sign other agreements with international corporations worldwide. That is why we recommend to stay alert and follow the company. To sum up, this is a risky play, but there are catalysts in play and traders may see big returns if management can deliver. We will be updating our subscribers as soon as we know more. For the latest updates on COTE, sign up below!
Disclosure: We have no position in COTE and have not been compensated for this article.