The Next CPSH(CPS technologies)?

OPTT(Ocean Power Technologies), The Next CPSH(CPS technologies)?

Let’s start off with a breakdown of what OPTT does:

Ocean Power Tech describes itself as, “an innovator of distributed offshore power solutions which provide persistent, reliable, and economical power and communications for remote surface and subsea applications”(Investor Presentation). Their value proposition revolves around four major factors including decreased costs, increased safety, faster decision-making, and sustainability. Ocean Power Tech is one of few providers that provide remote offshore power, surveillance, and communications.

Why does OPTT have the opportunity to double or more?

As Biden enters office, he vows to transition the country's fossil fuel energy usage to renewable energy. Ocean Power Tech provides a unique solution that converts ocean wave energy into electricity. This solution is becoming more feasible as shown through a recent bloomberg video. Although this company was founded in 1984, it has many tailwinds that can ramp up the potential growth of the company. Recently, OPTT has been able to acquire contracts with the US Navy, ENI, and Mitsui. Since Ocean power Tech heavily relies on these contracts to gain revenue, it’s essential for them to continue contracting their solutions to other companies or potentially the government. The more n more contracts Ocean Power Tech can secure, it will only continue growing its revenue 100% YOY (seen from 2019 to 2020)

One potential catalyst that can potentially bolster Ocean Power Tech to new highs is IF Joe Biden mentions the possibility of using the ocean as a renewable energy source. Since there are few US competitors in this industry, Ocean Power Tech can take advantage of this and become the prime candidate to lead the efforts of converting ocean wave energy into electricity, and receive many contracts doing so.

Technology offered by Ocean Power Tech

Source (Investor Presentation)

The four areas Ocean Power Tech is targeting are offshore oil and gas, science and research, communications, and defense.

Their partnerships/contracts include:

Science and Exploration: Mitsui(worth 37b)- In 2012, Mitsui’s shipbuilding and Engineering portion awarded OPTT with a $900,000 contract. Later, in 2016 Mitsui would go on to lease a PB3 Powerbuoy for approximately $975,000.This contract would be a testament to OPTT’s technology at the time.

Oil and gas: Eni SpA(worth 42b)- In 2018, Eni SpA entered a contract with OPTT for a lease of a Powerbuoy. After over a year of success, announced March 3rd, 2020 Eni SpA entered another 18-month agreement to test their power buoy at a decommissioned offshore gas exploration rig to provide communications and power. This could serve as a potential catalyst, as the success of this project could mean a lot of future contracts with this oil and gas giant.In addition, their acquisition of 3Dent technologies gives them greater access to a larger customer base in this field.

Defense and Communications: Ocean Power technologies was awarded a $225,000 contract with the US Navy for their powerbuoy in February 2019. Since then, they were awarded a $2.4m contract for communications in October 2020. As Biden continues to electrify, this company is likely to receive more contracts from the US Navy as wave power is a much better resource to use overseas than relying on foreign oil. These contracts will easily add up overtime as the company's current value is a mere 81.65m(March 5th).

More on the Navy Recently: Source (Ocean Power Tech Twitter)

A recent tweet from Ocean Power Tech’s Vice President of Business Development. Discussing the marine surveillance solution that the US Navy will be using. This could mean another likely contract on the way for Ocean Power Technologies and serve as a catalyst.

Financials

Most recent investor presentation that features 2020 numbers(Not including March 5th earnings)

Source (Investor Presentation)

Highlights

183% revenue growth YOY

80m cash on hand(very high for mcap of 81.65m)

Net loss YOY has decreased 14.4%, and while it is still a concern as it's a significant amount relative to its revenue, it is a small company in its early growth stages.

Overall, the past earnings reports and the report March 5th indicated how inconsistent their earnings currently are as

Most of this growth comes from contracts. However, we see this growth exponentially increasing with the new administration, as contracts should become more prevalent. In addition, CAGR growth in ocean power industry is expected to grow by 29 percent until 2027

How is it similar to CPSH?

-CPSH was a small cap in many hot industries similar to OPTT

-CPSH exploded after a dod(department of defense) contract. OPTT has the catalyst of bigger contracts coming for their clean energy ocean technology

-Another clean energy contract from the US Navy could mean the start to a 100+ percent move out of anticipation of being used throughout all naval aspects similar to CPSH’s rally

Conclusion

At a sub $100m market cap, Ocean Power Technologies presents a unique and potentially very profitable opportunity. As this valuation is beyond justifiable with their current contracts and potential growth in the coming years.