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🕐18.05.10 - 22:25 Uhr
Capital Ideas Research Initiating Coverage on Legend Power Systems Inc.
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The stock market values "green" revenue at very generous multiples. Legend Power Systems Inc. (Legend) has announced its first sale and we expect many more. Investors will be rewarded as the company moves from an R&D to sales focus. Governments, companies and utilities have set ambitious conservation goals. With wind and solar initiatives, electricity can only get more expensive. Legends patented Electrical Harmonizer-AVR will help customers reduce electricity consumption and save money. Governments, companies and utilities have set ambitious conservation goals. With wind and solar initiatives, electricity can only get more expensive. Legends patented Electrical Harmonizer-AVR will help customers reduce electricity consumption and save money. Like many green products, incentive funding is part of the value proposition. With the incentive, customers can achieve a payback of three years or less. Electricity rates in its next target market, California, are almost double those of Ontario so paybacks should be the same or better without incentives. We believe managements forecast is credible and are prepared to value revenue at 83%, of that of other green product companies, for a target price of $0.90. Our recommendation is to buy for those investors prepared for the uncertainties of a product launch. INTRODUCTION AND VALUE PROPOSITION Legends home province of BC plans to become carbon neutral in five years and energy self-sufficient by 2020. The government of Ontario has pledged to close its coal generation facilities. While prices for coal and natural gas rise and fall, the cost of electricity seems to be on an ever upward path. With utilities introducing more expensive sources of green power, this trend can only be expected to continue. The rising cost of electricity has made energy reduction a commercial priority. At the same time, companies and government agencies want to be and, be seen as green. Large companies now audit their carbon footprint, sustainability and environmental risks. More importantly, major institutions are actually taking environmental policies seriously. Electric utilities are also keen to pursue certain green initiatives, especially those that help defer major investment in grid and generation capacity. Legend Power Systems offers a proven product to help major electricity users reduce consumption and save money. The electric grid has unavoidable inefficiencies. Transmission wires are less like a pipe and, more like a leaky hose. There is a loss of power as electricity moves down the line. To ensure 114 volts at the end of the grid, utilities need to push higher voltage at the beginning of the line. Customers closest to the substation receive and, pay for, higher voltage than they need. This extra power provides no benefit and adds wear-and-tear on electric appliances. Legend Power Systems Electrical Harmonizer-AVR automatically measures voltage and like a tap, takes only the voltage required, sending the excess down the line. Investment in an Electrical Harmonizer-AVR, is green and makes financial sense. Most customers achieve a payback on investment of less than three years. Heavy users of electricity can achieve a payback of less than two years. The customer saving is as much as 10%, which translates to an even larger savings to a utility, about 12%. As the company expands outside Canada, we believe that the high costs of electricity through much of the US will make a compelling case for the product, with or without incentives. Click here to real full report from Capital Ideas Research
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