Stock broker Ambrian released an initiating coverage report on Cinpart (AIM: CINP), giving the UK based electrical components producer and supplier a “speculative buy” rating, highlighting the high potential of voltage optimization products that is addressing an extensive market that is at the moment covered by just three players, including Cinpart’s Active Energy.
The report highlighted Cinpart’s 72% owned Active Energy (AE), the manufacturer and distributer the Voltage Master optimization product, which improves energy efficiency and slashes electricity bills by 13% on average. The broker labeled it a “compelling part of the group,” estimating its margin at £12,000 per unit. This business has achieved strong commercial traction since acquiring the technology in March, having won a £1.2 million supply and installment contract with an international retailer.
Ambrian said AE’s Voltage Master had a competitive edge over rivaling products, being more robust and tailored to customers’ requirements than those of its competitor Power Perfector Limited (PPL), which sold around 500 voltage optimization units last year. Amrbian estimates that if AE reached achieved similar sales, it could be on a P/E (price/earnings) ratio of 2x based on the current market cap.
The total market for voltage optimization tools was estimated to cover 85% of all commercial buildings in the UK, including 18,000 government buildings, representing a market big enough for more than the existing three companies, including AE, PPL and Energy Management Systems.
Ambrian said that while AE wasn’t likely to achieve such a high sales level in the next 2-3 years, it could become an “attractive option” for a larger energy management systems provider wishing to enter the market.
Cinpart’s two other businesses Gasignition and Derlite, which make components for European gas compliance manufacturers, were projected to break even in 2010 and return to profits in 2011.
The company last traded at 13 pence per share.
Shares in Cinpart have more than doubled over the past 6 months, rising from 6 pence in June.