SIRC - potentially seriously undervalued pennystock solar play

[The_Ni]

SIRC released Q3 results on Friday: revenue was $48.2M (964%+ YoY), gross profit was $25.2 (2,372%+YoY), net income was $18.4M (was a loss last year). Company valuation is $193M. Sounds undervalued, doesn’t it?

Solar Integrated Roofing Corp (SIRC) installs solar things (roofing systems, charging stations, HVAC etc.). They’ve had a tough few years, and are turning their fortunes around. This is a penny stock, they are in a very competitive industry, and their track record is just this quarter, so the risks are very high. Wanted to share why I like this stock, bought into a small position two months ago in Nov, and will now double down on Tuesday.

Considerations:

• They expect to “substantially exceed” their 12 month revenue guidance of $100M
• They see annual run rate approaching 200M (same PR as above)
• Growth is both organic and through acquisitions.
• Leadership has solid experience in the sector. SIRC came on my radar when I saw the press release for their President joining in Nov. I remember reading this sentence, looking at their market cap, and thinking, this could be a multibagger. Now, this is a company press release and pipeline is not quite revenue by far, so buying at this time was a leap of faith for sure.

“In his initial four months since joining SIRC as CEO of our USA Solar Networks subsidiary, Pablo has developed a nationwide dealer and contractor network while concurrently securing $280 million in commercial projects for our development pipeline”

• They have submitted their application to the OTCQB market; while this is not as cool as making it into the S&P or even the Russel, it’s another positive signal.
• Word is if they keep doing well, they will apply for NASDAQ in a year or two.
• The CEO has engaged on Reddit (link to AMA) and Discord; again, not material financial info, but positive signalling - I like management that keeps up with the times.
• Stock price jumped 55%+ on Friday before ending the day up 24%, so market is reacting positively.
• Even if one does not see the long term potential for the company, Q3 results could make for a nice swing trade:
  
  

My bull thesis is mostly based on the notion that a company approaching $200M annual run rate should not be valued at $193M, and a general gut feeling that management is doing the right things. I don’t think $1 is unreasonable in 2022 vs $0.42 now.

However, I want to reiterate that penny stocks are very risky and all kinds of things can go wrong. Dilution, convertible debt nonsense, key person risk, wonky financials, etc. Super important to do your own DD.

[brummel]

Thanks for the DD Ni, Appreciate it!

Any idea why it had a run last February? Or did it just get the same boost that a lot of penny stocks got around that time?

[The_Ni]

Cheers!

And I don’t know for sure, but the rally seems to start on Feb 3, which is also when SIRC announced that they are looking to acquire an EV charger installers:
https://seekingalpha.com/news/3657616-tesla-certified-installer-solar-integrated-roofing-taps-ev-charger-installer-acquisition-on-opening-of-ev-charging-solutions-division

Which they followed through on Feb 11:
https://seekingalpha.com/news/3661256-solar-integrated-roofing-signs-loi-to-acquire-pacific-lighting-management

So EV positive sentiment around this news would be my guess.

[brummel]

Roger, will put this on the watchlist!

[The_Ni]

Market continues to respond well to their earnings, with 37% price appreciation yesterday despite market choppiness.

Yesterday, they also announced that they were buying seven firms that does related business for $21.6M in cash. No new shares issued, and no dilution. They expect $78M in incremental annual revenue.

There was also a Q&A yesterday with the company folks, the recording is here:

- YouTube

Didn’t listen through it all; replicating [a Reddit thread] below that has the notes.(https://www.reddit.com/r/SIRC/comments/s7jtnx/upbeat_sirc_qa_this_afternoon/) below.

All this is generally bullish. However, there are risks when companies grow too fast - something to keep in mind.

---

[Copy pasted from Reddit]

Upbeat SIRC Q&A this afternoon.

Here are my key takeaways from this afternoon’s Q&A:

Darin Pastor President of Arbiter Bank reaffirmed $42M loan to SIRC. Darin stated he cannot (due to regulations) endorse SIRC as a company. He then went on to say that it is because of what Dave Massey is doing is the “future” and why Arbiter decided to make the loan. Quote: “Will be worth every penny”. Funds expected to drop on January 24.

Meetings with other Banking institutions scheduled for investor conferences during February and March in an effort to attract more institution investment in SIRC (“Capital Stack”).

SIRC Corporate HQ now officially in Nevada which should result in lower corporate taxes.

Plemco EV subsidiary has been working with several California municipalities for EV charging and has about $4m in projects to date and expected to grow exponentially.

Heartland Construction (LOI just announced) will be focused on growing the SIRC commercial business.

Storm Ventures Group - SVG (LOI just announced) has signed up some 200 roofing companies to sell solar. Expect SVG acquisition to be completed very soon after Arbiter funds drop. After SVG is acquired SIRC sales force will double from 200 to 400.

$78M Revenue for seven new acquisitions was trailing revenue. Will most likely increase significantly once folded into the SIRC operation.

After recently announced acquisitions are complete SIRC W2 employee count will increase by 140 to 675.

Deal in the works to buy out note holders resulting in 40M shares going to company treasury.

Law suit filed against Hunter Ballew for misrepresentation of Cornerstone financials. If successful, this will result in return of an additional 45M to SIRC treasury.

Shares purchased from note holders, 40M, plus 45M (if law suit is successful would result in a total of 85M share reclamation to the company treasury.

SIRC is forming a $100M “Finance Division” to take all project financing in house. SIRC Finance will provide funding and retain all related interest payments and avoid the costs of third party financing. Board member Hector Pena is leading this effort and projects with a $100 million fund, he could get our balance sheets to $1.5 billion in assets.

Up-list to OTCQB expected in the next week or so with OTCQX up-list to follow later this year.

Audit completion for all existing subsidiaries expected to be complete by March 30 allowing for SEC Form 10 filing.

SIRC internal workforce coupled with external contractors will be sufficient to handle sales growth.

Final selection of a national marketing firm to spread the company’s brand underway and expected soon.

Material sourcing proceeding for the Calaway Farm project. Estimated construction time 3 months. The initial Calaway project will become a “template” for deals for the rest of the Calaway holdings.

La Gonave Island project planning and negotiations actively proceeding with government officials.

SIRC received 60M RxSeed coins (crypto currency) as compensation for their involvement with the company.

[The_Ni]

SIRC has given up most of the gains since earnings. Five-day graph below.

There is no negative news associated with this, so general market sell-off is the likely cause. I continue to remain bullish on them, and this is a long-term hold for me.

In fact, if it falls back close enough to 0.30, will get some more. Penny stocks with decent fundamentals will often respect channels (until they don’t, of course). Three-month graph below.

[The_Ni]

The cautious part of me is saying these guys are 6 months late to the alternative energy party, but hard to ignore the potential here. They shared some comparables in the Feb Investor Presentation.

Was interesting listening to the leadership team here:

Solar Integrated Roofing, Inc.’s Pablo Diaz, President, and Mr. Troy Cylmer, COO

The President seems like an industry expert who is more intent on talking about the technical stuff and needs press training, but the COO seems to be his cheerleader and the smooth talker, so a good team?

They confirmed that they are racing through OTC-QB to OTC-QX, and Nasdaq “soon after.”

Stock price stubbornly at $0.40, though.

[The_Ni]

Just by way of an update since its been two months since the last one: SIRC fell to the $0.30 support level again and is making its way back up. I considered topping up but eventually did not. They have an audited financial report coming out (it’s a pinkslip now) and still working on uplisting. Super slow going, may retest lows again before appreciating in value.

[The_Ni]

Two months goes by fast…

By way of update, there isn’t much. Still waiting for uplisting. SIRC continues to do what small, growing companies do - make the sales while dealing with misplaced SWIFT codes, bad debt collectors and Florida.

Broke below the 0.30 level though. Given their rather low multiples which really point to higher prices, and the general market condition, ignoring this level break and continuing to hold.

[The_Ni]

SIRC has been beat down real hard, from a mix of market conditions and internal issues. Am down 70% on my position.

Nevertheless, sticking with it. Market cap is $80M. Q1 revenue was $27M with $5.7M net profit. They are growing through acquisitions.

Things not going well for them:

• NASDAQ listing is taking much longer than anticipated.
• They had to dilute by 7% because some loan is coming in later than expected.
• Their CEO is taking a bit of heat for the two things above
• Some are accusing some pumper communities of P&D-ing this

Given that prices have fallen so much, I’ve doubled my position today. This is a long term swing.

Caution: This is an OTC ticker, so financials are not quite audited. And listing might not happen in 2022, so the pain might continue for a while. Overall, still very risky play.

[The_Ni]

Would obviously not have predicted this in a million years, but the settlement of a case resulted in the reduction of outstanding shares by 8.6%. Stock up 28% today.

The entry at $0.124 yesterday seems to have been fortuitous; it closed at $0.171 today.

https://seekingalpha.com/news/3848416-solar-integrated-roofing-settles-with-k-hunter-ballew-and-cancels-45m-shares

Stay tuned for more from the fast life in the OTC lane!

[The_Ni]

With the purchase from 2 weeks ago, cost basis moved up to about $0.27. Setting sell order for the half of my holdings that are under water at $0.29 (current market price is $0.22). Reason is will be overweight if it crosses over $0.30 again. This is a penny stock so nothing can be taken for granted - could move in the opposite direction again and don’t want to be caught under with 2x my usual allocation.

[The_Ni]

Gotta love it when a plan comes together. Flipped the lot obtained for $0.124 in mid-June for $0.29 as limit sells were triggered today morning. SIRC is back to regular weight in the portfolio.

There’s been a bit of a spike in SIRC prices as they released some information yesterday that suggests company is going in the right direction.

Most important is perhaps the indication that submission of Form 10 is “imminent” - Form 10 being what they need to submit to get registered to trade on Nasdaq.

$225M projected revenue with positive net income margin (don’t have most recent numbers) for a company with a $139M market cap that is trying to get into NASDAQ by year end seems cheap, still. Will not double down just yet to stick to allocation rules, but will definitely flip again if it falls below $0.20 again.

[OtherJim]

I feel the need to say that this should be in the OTC call outs hall of fame.

[The_Ni]

Haha it’s flying, isn’t it! 36% feels a bit too much, too fast in one day though though.

Today’s spike seems to be on the back of their tweet noting they would benefit greatly from the allocations to green energy in the Inflations Reduction Act. Some pumpers seem to be taking note too. And there is the general frothiness in the market.

Parabolic moves almost always run out of steam though, so this should retrace back a bit one the hype dies down.

[The_Ni]

SIRC announced quarterly results:

… our record Q2 2022 earnings of 66.2M, up 729% from this year-ago quarter; Net Profit of 18.9M up 662% from this year-ago quarter; and a GAAP EPS of 0.03

With a $66M revenue and a ~$240M market cap, that’s a P/S of 1:1 on a brick and mortar company.

Prices themselves have drifted down a bit from the levels it rose parabolically to, and if the overall market weakens, it might drop down to the $0.30 level again. If it does, will grab some more.

Edit: The “729%” and “662%” claims are not sustainable - they grew through acquisition and so they have an order of magnitude more in sales. Growth should be much more organic now, and these figures will certainly not be repeated. So it’s really cosmetic and not material. The organic growth should still be juicy though.

[The_Ni]

That was some serious selling off after earnings. Can’t think of anything other than “sell the news.”

Form 10 for Nasdaq inclusion gets filed in the next day or so. Should become be in effect within 60 days, unless someone messed something up. (Which isn’t impossible given this is a small OTC.)

Setting limit buys at 0.22 and 0.16. Fairly arbitrary levels. Still expect this to be $1 after Nasdaq induction. Incidentally, $100M in financing is contingent on the induction, so that’s another strong catalyst. Won’t need to dilute more.

[The_Ni]

@The_Ni

Form 10 for Nasdaq inclusion gets filed in the next day or so

True to their OTC heritage, they were two weeks late, but it is finally submitted. Something about auditors needing to sign it and it becoming 1,000 pages long yadda yadda.

Price has settled back down to the $0.30 level. Although its consolidating for now, it may fall some more soon, both because no news is expected for the next month or two, and this tends to puke when markets drop.

Won’t be surprised at all if it falls to the $0.20 level (see below). Still have the same buy orders up as noted above.

Just wanted to share this update since the Form 10 submission is a big deal.

[Brutus]

Thanks for the update, I played some shares a few weeks ago, 22 to 27. Been watching since. I may pick up some shares again soon, especially if it gets close to 20 again.

[Brutus]

Just saw this is $0.19, will try to pick some up in the morning