ME2C Environmental (MEEC:OTCQB), the trade name of Midwest Energy Emissions Corp., garnered coverage by Zacks Small-Cap Research, which initiated on the pollution control company with a CA$1.09 valuation, reported analyst Steven Ralston in a Feb. 7 research note. ME2C's current share price, in comparison, is about CA$0.48 per share.
"ME2C Environmental is positioned to accelerate topline growth and achieve growing profitability by providing a patented mercury capture process," Ralston wrote. "Currently, the company commands roughly a 15% market share (CA$22 million [CA$22M] of a CA$150M market)."
Recently reported Q3/22 financials showed revenue to be up 49.1% year over year, coming in at about CA$7.5M. Revenue last year at the same time, in comparison, was about CA$5M. In Q3/22 ME2C reported a net income, of CA$569,379 whereas the year before it reported a net loss, of CA$206,648. Adjusted Q3/22 EBITDA was CA$1.165M versus CA$697,000 in Q3/21.
Company revenues are expected to keep rising, reflecting at least a 50% increase in the full-year 2022 figures when reported and in 2023, Ralston wrote. Growth is expected to come from ME2C's:
1) Patent infringement litigation. ME2C owns 40 existing and pending patents in the U.S., all pertaining to mercury removal. The Texas-based firm's suit against refined coal entities is slated for trial in November of this year.
"If successful, the potential compensation from a verdict or from a negotiated settlement would be transformational for the company," Ralston wrote.
2) License agreements and supply contracts. ME2C expects to increase sorbent product sales and licensing fees from its mercury emissions sorbent enhancement additive, or SEA, technology over the next two to three years by continuing to enforce its successful patent litigation effort against coal-fired electric generating units, Ralston explained.
"Ultimately, we expect that the organic growth of the company's sorbent product sales should result in a 40–45% market share in the U.S.," noted Ralston.
To be able to handle the anticipated boost in demand for sorbents, the company built a new manufacturing and distribution plant in Texarkana, Texas. It is slated to come online this year; commissioning is currently underway.
3) Rare earth extraction and remediation technologies.
"Management is pursuing research in chemisorption technology (the company's core competency) for applications related to rare earth elements extraction, coal ash cleanup, and wastewater remediation," substantial potential markets, Ralston wrote.
As for its financial position, ME2C had CA$1.26M in cash on hand and CA$2.19M in working capital as of Sept. 30, 2022.
Insider ownership of ME2C is 32%, more than double institutional ownership, which is 13%.
Regarding the outlook for the company, Ralston wrote, "We are optimistic [about] the ultimate success of ME2C Environmental."
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Disclosures For Zacks Small-Cap Research, Midwest Energy Emissions, February 7, 2023
I, Steven Ralston, hereby certify that the view expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research report. I believe the information used for the creation of this report has been obtained from sources I considered to be reliable, but I can neither guarantee nor represent the completeness or accuracy of the information herewith. Such information and the opinions expressed are subject to change without notice.
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