Alternative Energy Trade Option: Pacific Ethanol Inc. (PEIX)
  • Stock Alert for Pacific Ethanol Inc. (PEIX)
  • Stock Alert for Pacific Ethanol Inc. (PEIX)
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    Stock Alert for Pacific Ethanol Inc. (PEIX)

    Pacific Ethanol Inc. (PEIX) is a marketer and producer of low-carbon renewable fuels in the Western United States. It also sells co-products, including wet distillers grain (WDG), a nutritional animal feed. Serving integrated oil companies and gasoline marketers who blend ethanol into gasoline, the Company provides transportation, storage and delivery of ethanol through third-party service providers in the Western United States, primarily in California, Nevada, Arizona, Oregon, Colorado, Idaho and Washington. PEIX has a 20% ownership interest in New PE Holdco LLC, the owner of four ethanol production facilities. The Company operates and manages the four ethanol production facilities, which have a combined annual production capacity of 200 million gallons. The facilities in operation are located in Boardman, Oregon, Burley, Idaho and Stockton, California, and one idled facility is located in Madera, California. The facilities are near their respective fuel and feed customers, offering significant timing, transportation cost and logistical advantages. PEIX’s subsidiary, Kinergy Marketing LLC, markets ethanol from Pacific Ethanol’s managed plants and from other third-party production facilities, and another subsidiary, Pacific Ag. Products LLC, markets WDG.

    Share Statistics (03-Nov-11) FY2009 FY2010 % Chg Q22010 Q22011 % Chg
    Symbol PEIX Revenue, $Mn 316.56 328.33 3.7% 76.76 214.59 179.6%
    Current price $0.67 Gross marg. -7.0% -0.2% -97.1% -3.6% 0.6% -116.7%
    52wk Range: $0.25-$7.98 Oper. margin 30.3% -1.3%
    Avg Vol (3m): 3,191,490 Net margin -97.3% 22.5% -123.1% 141.4% 0.3% -99.8%
    Market Cap. 17.17M
    Shares Outstanding 25.74M EPS, $ -7.55 -3.14 -58.4% -0.70 0.03 -104.3%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    Shares in PEIX traded as much as 32% higher yesterday, extending Wednesday’s gains, after the company provided an update on its senior convertible notes.  Nearly 22 million shares traded hands yesterday, more than twice the 10-day average.  Over the last 52 weeks, the stock has ranged from a low of $0.25 to a high of $7.98.

    Shares of the renewable fuels company have gained 81.1% in the last five days and 148.2% in the last month.  Year-to-date, the stock is down 88.2%.

    The Company on Wednesday reported that the aggregate unpaid principal balance of the notes, originally $35.0 million as of October 6, 2010, has declined to $820K as of November 1, 2011. The principal balance was $8.4 million as of October 3, 2011, the date of the Company’s last update. To date, a total of $33.0 million in principal has been converted into 58.4 million common shares, at an average conversion price of $0.56 per share.

    Neil Koehler, president and COE of PEIX, said the proceeds raised under these notes allowed the Company to secure its ownership interest in the Pacific Ethanol plants and significantly improve its cash position.

    PEIX last week announced its results for the third quarter ended September 30, 2011, highlighting an all time high net sales of $271.6 million. That compared to net sales of $46.0 million in the prior-year period.  The Company said it sold 122.6 million gallons in total during the third quarter of 2011, representing a sequential increase of 22% and a year-over-year increase of 71%.

    PEIX attributed the increase in net sales to the fact that it did not consolidate the results of the Pacific Ethanol plants in the third quarter of 2010. The increase in total gallons sold was primarily due to continued strength in the Company’s marketing business and a 54% increase in average sales price per gallon. In addition, the Company’s third quarter 2011 results include the impact of the Stockton plant’s operations whereas it was idled during the third quarter of 2010.

    For the quarter, the Company reported net income available to common stockholders of $4.0 million, compared to a net loss of $12.9 million for the third quarter of 2010, which included a loss on the Company’s investment in Front Range Energy LLC of $12.1 million. Adjusted EBITDA, which  excludes the Company’s fair value adjustments on its convertible notes and warrants and loss on its investment in Front Range Energy LLC, improved to $2.9 million for the third quarter of 2011, from $0.9 million in the third quarter of 2010.

    Through retiring the convertible notes and reporting positive financial results for the third quarter, we are building shareholder value and positioning the company for continued growth and profitability,” said Koehler.

    Source:

    http://www.pacificethanol.net/site/_documents/news/PEIX3Q11Earnings_ResultsFINAL.pdf

    http://www.pacificethanol.net/site/_documents/news/PEIXNovemberConvertUpdate110211Final.pdf

    Financial Strength (03-Nov-2011)

    Company

    Industry

    Sector

    S&P 500

    Quick Ratio (MRQ) 1.34 2.49 0.61 0.60
    Current Ratio (MRQ) 1.87 6.98 0.86 0.93
    LT Debt to Equity (MRQ) 891.37 17.00 13.71 97.88
    Total Debt to Equity (MRQ) 1,126.10 19.73 18.23 137.88
    Interest Coverage (TTM) -36.47 2.62 20.47

    Source: Reuters.com, SEC Filings.

    Technical Analysis

    Source: http://stockcharts.com

    PEIX is above the upper Bollinger Band, implying that it is currently extended from its recent trend. Be aware, however, that a cross outside of the Bollinger Bands can sometimes be a signal of trend strength and not, necessarily, trend reversal.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Nov03-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Archer Daniels Midland Company ADM 29.23 19.75B 9.40 8.62 0.23 0.23
    Valero Energy Corp. VLO 25.30 14.47B 5.58 5.94 0.12 0.12
    Specialty Chemicals Median       10.13 n/a 0.65 n/a
    Pacific Ethanol Inc. PEIX 0.68 17.45M n/a n/a n/a n/a

    Source: Thomson Financial

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