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Jun
11
Questor Technology is on the rebound and so is the stock price
Posted by: Gerry Wimmer
6/11/2017
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TOP IDEAS: Sales and earnings are rising again as Questor Technology (TSXV: QST) capitalizes on its hybrid clean-tech solutions and tougher US state-level waste emission regulations for oil and gas producers.




Note: Investorfile's share price accumulation target of $0.65 for Questor Technology Inc. was reached on June 3, 2013. For the record, we do not revise share price targets for our Top Ideas - Small Cap Value Stocks. We have positioned our blog to be one of the first providers for a pragmatic perspective of a small cap company stock's potential worth, where there may be uncovered value that has been largely overlooked by the investment community.


Questor Technology (TSXV: QST - $1.14) holds the record as the Investorfile blog’s number one performer with the stock price soaring 1,215% to a high of about $5.00 since we first introduced the Company as one of our Top Ideas (See: Questor Technology Inc: A small cap clean-tech company that makes money). But that occurred back in 2014. Since then world oil prices collapsed and what followed was the massive spending cuts by the oil and gas industry (Questor’s main customers) and the Company’s stock price fell to trade at a fraction of its highs.

Despite the setback, our enthusiasm for Questor Technology’s potential had never waned insomuch as we proclaimed in December of 2016 that the Company is one of our Top Ideas to watch out for in 2017 (See: Investorfile predictions for 2016 perform well. Looking forward to 2017). Since that blog post, Questor Technology’s stock price is already up 73%.

Questor Technology is a leading provider of waste gas combustion incineration solutions to improve air quality. The Company's proprietary incinerator technology, which is safe, reliable and very efficient, is deemed a best-of-breed clean-air solution for oil and gas producers needing to comply with stricter emission regulations. To date the Company's incinerators have been deployed all over the United States and Canada, as well as in many other countries worldwide.

Last year the Company saw the introduction and implementation of its hybrid incineration technology. The technology allows its oil and gas customers to purchase a base level of capacity and rent additional capacity to meet the shorter-term demands of high initial production. The benefits are lower capital and operating costs, reduced lease footprint, and clean enclosed combustion to meet stringent emission regulations that are starting to be strictly enforced in the USA on a state-by-state basis.

The demand for Questor’s clean-air incineration solutions has heightened again in 2017. This is mainly driven by an increase in drilling activity, coupled with tougher state-driven waste emission regulations, most notability in the state of Colorado . In Colorado, oil and gas companies have started to embrace Questor’s hybrid incineration technology over historical methods due to its increased financial efficiency. Now oil and gas customers only purchase the incinerator capacity that they require with an option to rent additional capacity when needed, such as during the temporary well-testing operation. For Questor, this approach has balanced its revenues generated between sales and higher margin rentals.

The sales success of Questor’s hybrid incineration solutions is evident in the Company’s Q1 report for 2017. Questor Technology reported that revenue in the first quarter of 2017 was $3 million, an increase of 36 per cent from the same period in 2016. Rental revenue doubled during this period to $1.5 million due to the higher activity in the United States. Adjusted EBITDA jumped significantly in the quarter to $800,000, primarily due to the rental revenues and significantly higher utilization and expansion of equipment that was relocated to the United States. The Company earned a profit of $419,000 in the quarter, which equated to $0.02 in earnings per share.

Looking forward, the Company says it expects to continue to expand its presence in the United States. While stricter waste emission regulations in Colorado were a catalyst for growth in that state, Texas, Ohio, Pennsylvania and other states are considering similar regulations to Colorado. This will create additional growth opportunities for the Company’s hybrid incineration technology.

Based on the strong demand from the United States, Questor has set its 2017 capital budget to $3.5-million (funded from its existing cash resources) in order to increase its rental fleet of incineration units by 36%. We note that the Company reported that it also received $4 million of orders from a key client for the purchase of its hybrid incineration units for delivery in 2017.

From what we see, Questor Technology is ideally positioned to deliver a strong rebound in its financial results for 2017 and beyond. Could the stock price also rebound to reach its all-time highs of $5.00 in the future? We would not rule that out!

The Company has maintained a strong balance sheet with cash in the bank and no debt.

Questor Technology has approximately 26.4 million shares outstanding.

The Company’s website www.questortech.com

Author Ownership Disclosure: TSXV: QST- YES


Read Disclaimer:

This article is for informational purposes only. This article is based on the author's independent analysis and judgment and does not guarantee the information's accuracy or completeness. The information contained in this article is subject to change without notice, and the author assumes no responsibility to update the information contained in this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.

Investorfile.com is not engaged in an investor relations agreement with Questor Technology Inc. nor has it received any compensation from Questor Technology Inc. for the preparation or distribution of this article.

The author of this article has acquired and may trade shares of Questor Technology Inc. through open market transactions and for investment purposes only.

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Gerry: Thanks for small cap stock suggestions over the past 5-years. Your record is very impressive and your analysis has been excellent over the years. I think small investors (and fund managers) should pay much more attention to your work. I look forward reading your blog over the next 5-years!