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Tag: Profitable

The Comic Creator Crowdfunders’ Xmas List

Crowdfunding
Tyler shares four purchases for their creative businesses that ComixLaunch Pro say they are happy they have made over the years. If you...

A Dozen Ways to Add Value to Your Trade Collections So Even Fans That Have Every Issue Will Back Again

Crowdfunding
Thinking about collecting your comic series into a trade collection and launching it on Kickstarter? Don’t do it until you listen to this...

Tokens vs Accounts: A love letter to the NY Fed (and a quibble) – Bits on Blocks

Blockchain
I was just reading an excellent recent post on the New York Fed’s blog Liberty Street Economics, entitled “Token- or Account-Based? A Digital Currency...

Plane Finder API

Aviation

Plane Finder API for DevelopersLive flight API of Aviation Edge provides airplane GPS data for developers. The Plane Finder API answers all needs in order to build a flight tracking feature for your project. With its detailed data, you can search by flight number, departure or arrival IATA/ICAO codes, registration number and the IATA code […]

The post Plane Finder API appeared first on Aviation database and API.

What Is Proof of Stake (PoS) & How Does it Work? Ultimate Coin Staking Guide

Blockchain
The recent rise of blockchains based on Proof-of-Stake (POS) has provided a new way for crypto holders to increase their holdings for relatively little...

Inside ComixTribe: A Week in the Life of Running a Comics Publishing Business

Crowdfunding
Ever wondered what exactly ComixLaunch host and ComixTribe Publisher Tyler James does all week? Then this is your episode, as Tyler is pulling...

#AskComixLaunch Kickstarter Exclusivity, Backer Fatigue, Crowdfunding a Self-Funded Book & How Long it Takes to Find Backers

Crowdfunding
Tyler dives back into the ComixLaunch Mailbag and answers a host of questions from comic creator crowdfunders. Highlights of This Session Include:...

Game Changers Deep Dive: Amsterdam Launches Climate Neutral Roadmap 2050

Carbon
Launch Of Amsterdam’s Climate Neutral Roadmap: An Interview With Deputy Mayor Marieke Van Doorninck Q: Many cities aim for climate neutrality in 2050 – what...

Mike Welch – A Legend Passes On

Supply Chain & Logistics
It took me a few days to even think about a world without Mike Welch.  Mike was truly a special man.  He was special not in a flashy way but special in a very specific way; he made everyone's life a little bit better.  He was a friend to me, a business mentor to me, a supplier in some instances and he was a model of community involvement for the community my family lived in for so many years.  He made our life better.

I feel a need to tell the story of how Mike and I met and started working together.  In 2004 I was the General Manager of a the Ford Service Parts Business working for Schneider Logistics (SLI).  Ford was building out their Daily Parts Advantage service model and asked SLI to somewhat replicate what we were already doing for GMSPO.  As the GM I had to find dedicated carriers to make all the deliveries nationwide to almost 5K dealers and we were having trouble finding a carrier in Evansville, Indiana.

Luckily, I had an acquaintance who used to sell truck parts but now owned a company called Segmentz.  They were a very small LTL company and at the time Ford wanted to really look at costs and so we took a chance on this small, unknown and very inexperienced company.  Right after we contracted with them they purchased Express-1 from Mike Welch.  This acquisition is what made Express-1 a public company and it turns out the only real profitable part of the merger / acquisition was the part we contracted with for the Ford Service Parts. 

This caused Mike to become President of the combined company and they shed just about everything that was Segmentz.  This is how I met Mike.  I was living in Novi, MI and Green Bay, WI at the time.

Fast forward to 2005 and I had decided to leave SLI and went to Whirlpool in St. Joe Michigan.  One morning I went to get my haircut and who was in the barber chair but Mike Welch!  I was shocked as I really had no idea they were based in Buchanan.  We talked a lot and it turns out Mike was deeply involved in my son's school and he was a great expedite provider to Whirlpool.  This meant I was able to rekindle both our professional work and our personal relationship.   So, what did I learn from Mike:

  1. He was a humble man and he taught me the art of humility.  While being wildly successful in the logistics business he never sought the spotlight.  He made his business better, he took care of his associates and he made his customer's businesses better. 
  2. He taught me about giving back.  While he clearly made a lot of money when he sold to XPO he always took care of the community.  He always was there when we needed him for the boys and girls clubs, the Lakeshore Foundation and anything else which would make the community better.  He was always there.
  3. He never forgot his friends.  While I considered him a friend I would not say we were super close however every time I saw him you would think we had been friends since grade school.  He always had time and he always engaged.
  4. Finally, he was a great businessman.  He was an entrepreneur, he served his customers, he was proud of what he built and he always was innovating.  I learned a lot about just down to earth business concepts from him.
So, we in the logistics and supply chain world lost a great one.  While the company (Express-1) was not as big, I would put Mike up with Don Schneider, J.B. Hunt and all the greats of our industry.  

Mike, you will be missed by all... God Bless you and your family and I hope to see you again...

Read about the history in Mike's own words at this Interview by the Wall Street Journal.

Windlab

SPACS

One of the more interesting companies to launch an IPO in the last few years is Windlab, a windfarm development company that was founded in 2003 to commercialise software developed at the CSIRO. Windlab’s proprietary software Windscape overlays atmospheric modelling on geographical features to identify and evaluate potential windfarm sites. In their prospectus they claimed this software gives them a significant advantage over other windfarm development companies, as it enables them to identify sites with high wind resources without conducting costly and lengthy on-site testing. As evidence of this claim, the two windfarms that delivered the highest percentage of their maximum output throughout 2018 are on sites found and developed using windscape, Coonooer Bridge and Kiata both in Victoria. 

The company listed in August 2017 on the ASX at $2 a share, equalling a fully diluted market cap of $146.3 million. While initially results were promising, with the company making a profit of $9.5 million in 2017, 2018 has seen a complete reversal of that progress, with revenue dropping from $23.1 million to $3.5 million, and the company making a loss of $3.8 million. As a result, the share price has declined steeply, and is now trading at around $1.04, or a market cap of $77 million.
While for the average company a decline in performance of this magnitude would suggest that something is seriously wrong, I don’t think this is the case for Windlab. Like any company that gains most of its revenue from developments, significant swings in profit from one year to the next are inevitable. The company went from reaching financial close on two windfarm sites in 2017 to one in 2018, and while the failure to reach financial close on a single project was disappointing, it is not surprising given the long timeframes required for most wind farm developments.  It is my belief that the market has overreacted to Windlab’s 2018 results due to a misunderstanding or mistrust of the companies operating model, and that at the current share price the company is significantly undervalued.

The Case for Windlab


 Renewable energy is going through a difficult time in Australia, with little cohesion between federal and state governments, and new connection requirements making connecting a renewable energy plant to the grid more expensive. However, if you believe that climate change is real, then renewable energy should be one of the fastest growing industries over the next twenty to thirty years. While growth in the efficiency of solar tends to get more attention, Windfarm technology is also improving in efficiency, and nearly all renewable energy experts see wind farms playing a significant role in the transition to renewable energy. On a much shorter time scale, if Labor wins the upcoming federal election the domestic market for renewable energy should improve markedly. Labor has a policy of 50% renewable energy by 2030, and to achieve this the level of investment in wind farm projects in Australia will need to increase exponentially.

Windlab is ideally placed to take advantage of this, as the development of windfarm sites is perhaps the most profitable part of the wind farm industry. From 2014 to 2017 the company managed an average Return On Equity of 42%, in a time that included significant growth and the cost of listing on the ASX. 

. 2017 2016 2015
Revenue  $                                          24,515,379  $           18,101,100  $         10,012,006
Expenses -$                                          10,098,372 -$            13,023,113 -$           8,524,804
Profit before income tax  $                                          14,417,007  $             5,077,987  $            1,487,202
Income tax -$                                            4,912,534 -$             1,779,491  $                 14,687
Profit  $                                            9,504,473  $             3,298,496  $            1,501,889
Equity at the start of the year  $                                          13,404,230  $             9,207,680  $            7,699,065
ROE 71% 36% 20%
Average 42%

The company is able to achieve this sort of ROE as windfarm developments are sold once all approvals and agreements signed but before construction begins, meaning developing multi-million dollar projects does not require significant capital. For example, take the site of the Coonooer bridge wind farm, a 19.8 megawatt wind farm in North Western Victoria with a total development cost of $48.6 million. After identifying the site with Windscape, Windlab spent only $300,000 in acquiring the land, then spent $2.2 million or research and planning applications for a total investment of only $2.5 million. Windlab then sold 96.5% of the equity in the Coonoer Bridge to Eurus Energy for just over $4.7 million who then funded the construction of the site with help from grants from the state government. In total, Windlab walked away from this transaction with over $4.7 million in cash and a remaining 3.5% stake in the project, a return of over 111% on the initial investment. 

Valuation


While historically Windlab has sourced most of its revenue from wind farm development, the company also has a growing asset management arm of the business, where they provide asset management services to Wind and Electricity farms, in addition to significant equity in operating and soon to be operating Windfarms. Although historically insignificant when compared to the companies development fees, these sections of the business are quickly growing, and seems to be the managements way of ensuring cashflows are a little more predictable in the future.

In order to accurately value Windlab, I have therefore broken down the company into three separate areas.

Inventory (wind farm development projects)

The book value Windlab gives to its inventory as per the 2019 financials is $9.69M, though this is overly conservative as projects are valued at the lower of their cost or net realisable value.  In order to get a more accurate picture of the actual value of Windlab’s inventory, I have tried to assign individual value to some of Windlab’s larger projects.

Lakeland Wind Farm

Lakeland is a 106 megawatt project located in Northern Queensland. While Windlab does not give a breakdown of inventory values, due to its size and stage in the development cycle the Lakeland Wind Farm is probably the single project with the largest value in the companies inventory.  Lakeland is also one of the main causes for the decline in share price over the last six months, as the project was scheduled to reach financial close in 2018 until the primary investor pulled out at the last minute. This delay has meant the project is now subject to new requirements to connect to the electricity grid, which will mean significant additional costs to increase the stability of the connection (this is a change to the nation-wide connection criteria for renewable energy plants designed to address unstable supply).

While these setbacks are undeniably concerning, Windlab claims that the delay has also allowed them to re-tender for more efficient turbines and they have not yet impaired the inventory value of the project, something they have done in the past when projects are compromised. As per their latest announcements Windlab are still confident of reaching financial close on this project in 2019.
If successful, Lakeland will be the largest project brought to financial close by Windlab to date, at 106 Megawatts. For Kennedy, a 56 megawatt project, Windlab received a financial close payment of 5.4 million, while keeping 50% equity in the project. If Windlab is to acheive a similar margin and equity structure for Lakeland, this would result in a payment to Windlab of $10.2 million, with the remaining 50% equity in the project worth at least $10.2 million as well, for a total value of $20.4 million. Given the uncertainty around the project though, a 50% discount would seem appropriate, which gives the project a total value of $10.2 million for our calculations.

Miombo Hewani

Another late stage windfarm project for Windlab is the Miombo Hewani windfarm in Tanzania. This 300-megawatt, $750 million project is Windlab’s first foray into East Africa, and is undoubtedly the companies most ambitious yet. The project received approval from the Tanzanian government in July 2018 and will receive partial funding from the Government of Finland. Windlab have not committed to achieving financial close in 2019 for Miombo Hewani which is understandable given the uncertainty of operations in Africa, but as development approval is already in place as well as some funding arrangements, financial close can’t be too far off. Demonstrating the significant potential value of Miombo Hewani and Windlabs other East African investments, Eurus Energy, a Japanese sustainable energy company that has partnered with Windlab in the past recently bought a 25% stake in Windlab’s east African projects for $10 million USD, valuing Windlab’s remaining stake in their East African portfolio of development projects alone at $30 million USD, or $42.2 million AUD. While this may seem excessive, Windlab stated in their prospectus that their target development margin for Windfarm developments is $250,000 per megawatt of capacity, and from 2015 to 2017 the company had overachieved this, with margins of $260,000 to $490,000 per megawatt. If Windlab was to successfully reach financial close on Miombo Hewani at their target development margin, this would result in a payment of $75 million alone. As a result, adopting the value assigned by Eurus Energy of $42.3 million for the companies East African projects seems reasonable.

Greenwich

The last late-stage development project worth noting in this section is the Greenwich Windfarm in the USA. Windlab officially sold the project in 2018, but will only receive the bulk of their payment of $4 million USD (5.6M AUD) when construction begins. While Windlab have stated they expect to receive this payment in 2019, a group of neighbours have mounted a challenge to the project to the Ohio Supreme Court seeking to dispute the approval given by the Ohio Power Board. . Given the uncertainty of the case, it is probably prudent to discount this payment by 50%, which would mean a value of $2.8 million for Greenwich.


While the projects listed above are the most likely to result in some form of payment in the next 12 to 18 months, Windlab has numerous other projects earlier in the development cycle. These include:
  • 640 megawatts of approved potential capacity across multiple projects in South Africa. (While South African Renewable Energy projects have been on hiatus, it does seem the projects are about to get up and running again after a recent change of government 
  •       250 megawatt project in Northern Queensland that Windlab is intending to submit a development application for in 2019
  •           230 megawatt project in Vedigre USA that Windlab no longer has control over, but is eligible for up to $4.6 million in success payments if the project reaches financial close.


While an exact value for all of these projects is difficult, I have assigned a value of $15 million for the remainder of Windlab's projects.

Excluding Windlab’s asset management business, which I will cover separately, Windlab spends around $6.4 million a year on project expenses, administration and employees. The projects I have listed above are predominantly expected to reach some form of financial close in the next three years, so it seems logical to assign a cost of $19.2 million, or three years of costs to the above calculations. Once a tax rate of 30% is factored in, you are left with a total inventory value of $35.177 as per the below table.

Project Value
Lakeland  $   10,200,000.00
East African projects  $   42,300,000.00
Greenwich  $     2,800,000.00
Other projects  $   15,000,000.00
Total  $   70,300,000.00
Book value  $     9,690,000.00
three years of annual costs  $   19,200,000.00
tax on projected profit  $   12,423,000.00
Value after tax  $   38,677,000.00

Operating Wind Farms

Currently Windlab has significant equity in two large operating or soon to be operating Wind Farms, Kiata, in Melbourne’s North West which has now been operating for just over a year, and Kennedy Energy Park in Northern Queensland that has completed construction and will be connected to the grid in the coming months. Both projects were originally found and developed using Windlab’s proprietary technology Windscape, with Windlab then subsequently selling down equity in the project to help fund development. Windlab owns 25% of the Kiata wind farm and 50% of Kennedy, and combined these two projects have a book value of $43.6 million on the Windlab balance sheet.
Kiata is a 30 megawatt 9 turbine windfarm in Northern Victoria that had its first full year of operation in 2018, with a total profit of $4.57 million for the year. Wind farms are thought to have a useful life of roughly 20 years, after which significant refurbishment costs are needed in order to continue operation. If we discount these future cash flows at a rate of 7%, (which seems reasonable given the relative low risk of an established wind farm) we get a total value for Kiata of just under $43.9 million. This values Windlab’s stake at $10.97 million.

To value Kennedy is a little more complex, as it has not yet begun operation. However, we know that the project is a 56-megawatt project, combining 41 megawatts of wind with 15 megawatts of solar. The plant also has 2 megawatts of battery storage to help modulate supply and allow storage of excess energy in non-peak times. If we extrapolate the annual profit per megawatt of capacity of Kiata in 2018 of $152,353 and assign the same discount rate, we are left with a value for Kennedy of $83.6 million, or $41.8 million for Windlab’s 50% ownership.

Combined, this gives a value of $52.86M for these two projects. 

Asset management

Windlab’s asset management arm is perhaps the easiest to understand and value. Windlab leverages its expertise by providing ongoing management services to existing wind and solar farms, both that the company has an equity stake in, and to third party independent energy farms or resources. This side of the business is quickly growing, with revenue increasing by 27% in 2018 to $2.97 million, with profit before tax of $610,000, or $427,000 after tax assuming a 30% tax rate. The company signed a significant asset management contract in early 2019 for a solar farm, indicating that they are continuing to grow this business. Given both the significant growth of this area and the broader growth potential of the industry, a P/E ratio of 20 seems coservative, which would value Windlab’s asset management division at 8.5 million.

Software

Lastly, As Windlab has demonstrated ability to use Windscape to develop high-performing Windfarms, it seems only fair to give a value to the Windscape software itself. Windlab is continuing to use this software to identify projects into the future, and the company has proven that this software can provide the company with a significant edge on development projects.  While this is a difficult thing to do, $10,000,000 seems like a conservative valuation, considering both Windlab’s historical performance and the likely growth of the energy sector in the future.


Putting it all together

Area Value
Development Projects  $   38,677,000.00
Operating wind farms  $   52,770,000.00
Asset Management business  $     8,500,000.00
Windscape software  $   10,000,000.00
Cash  $   14,622,414.00
Liabilities -$   10,755,130.00
Total  $ 113,814,284.00
Shares outstanding (diluted) 73848070
Price  $                     1.54

If we add together the values as per the above calculations, we are left with a total value of $113.8 million for the company, or $1.54. As the company is currently trading around the $1.02 mark, this suggests the company is significantly undervalued at its current price. 

3 Costly Shipping and Fulfillment Blunders and How to Avoid Them

Supply Chain & Logistics

Logistical options for shipping and fulfillment have expanded with the rapid growth of e-commerce, cloud, and mobile computing solutions. While this growth has created many opportunities for small and large businesses alike, it’s also raised the standard with consumer expectations. If modern enterprises fail to plan...

The post 3 Costly Shipping and Fulfillment Blunders and How to Avoid Them first appeared on Ottawa Logistics.

How to Prepare Your E-commerce Store for Your Best Holiday Season Ever

Ecommerce

The holiday season is the most critical time of the year for most e-commerce stores. Through some strategic planning in the three months prior to the holiday season, you can prime your e-commerce company for your most profitable year ever. Below is a look at...

The post How to Prepare Your E-commerce Store for Your Best Holiday Season Ever first appeared on Ottawa Logistics.
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