GERS: Today Earning Revenues over 49 cents/share

Long Range Forecast **- Feb 2010
The SkunK's long Range forecast is based on GERS meeting its EOY 2009 goals. The old goals of

'. . . at least 50 million gallons per year of corn oil extraction capacity, 50million gallons per year of biodiesel production capacity, and 16 million gallons per year of oilseed crush capacity online by the end of 2009."

were not restated in the 2Q and are "no longer operative". The 16 million gallons per year of oilseed crush capacity will remain in my equation - based on this statement 2Q, p.28-29:

"While there can be no assurances in this regard, we expect to receive this approval this year. The expansion [" . . . to increase our oilseed crush capacity to about 16 million gallons per year."] can be expected to be completed within approximately six months after the successful completion of a cost-effective financing for this project."

I will also include 40mmgy of extraction capacity based on this information:

"We are currently operating and building facilities that correspond to 18 million gallons per year of corn oil extraction and 10 million gallons per year of biodiesel production capacity, and we are under contract to later expand existing and build new corn oil extraction facilities to extract more than an additional 20 million gallons per year of corn oil, and to increase our oilseed crush capacity to about 16 million gallons per year."


I will also include 40mmgy of biodiesel capacity based on the information below. The SkunK reads this to say we will develop our biodiesel capacity as it is required to meet our rising extraction capacity:

"In addition to expanding our existing 10 million gallon per year biodiesel production facility in Adrian, Michigan to 20 million gallons per year over the next three quarters, we have executed agreements to build GreenShift-owned biodiesel facilities at Global Ethanol’s Lakota, Iowa ethanol facility and Northeast Biofuels’ Fulton, New York ethanol facility. Each new facility is designed to commence production at the rate of 10 million gallons per year and to scale to higher capacities as warranted by the availability of our corn oil supplies as our extraction facilities are brought online. Our development plan for these new facilities is to phase them into construction in a staggered fashion that follows after the construction of our extraction facilities."


So based on all the above the SkunK has decided to use 40mmgy extraction and biodiesel capacity and 16mmgy oilseed crush capacity for his "conservative" long range forecast.

At $1.40 of operating income per gallon (2Q, p.33) the skunk will figure $56M of Operating Income produced from converting 40mmgy of extracted corn oil into biodiesel. With 13M to cover the bills plus extra to finance the additional production - at 1.50/gallon capital expenditure for the 32*mmgy COES and 1.50/gallon 22*mmgy biodiesel production (at 20% interest) we reach a 29.2M break even point. That leaves us with a 26.8M dollar profit.


[54M X 1.50 X .2 = 16.2M] [13M + 16.2M = 29.2M] [*32 and 22* {rather than 35.5 and 30} low-ball figure in the SkunK estimated (guesstimated) portion of the under constructed facilities {as of 30 June we have over 9.7M assets labeled "construction in progress"} already included in our current financing - and any 2009 invested profit that would lower our initial financing outlay.] [Future financing should be under 20%, but since that is what our last deal was - the SkunK feels obligated to go with that.]

*****

The Construction and Technology sales have very high margins. Any revenues here will have a large positive impact on the bottom line. In a humongous effort towards being conservative in my predictions - and the lack of actionable guidance by management, the SkunK will leave this portion blank as a buffer in the other two revenue areas. $0.00.
*****

The Oilseed crush capacity is expected to be at 16mmgy capacity by mid year 2009. Even given time to ramp up - it should be producing at this capacity by EOY 2009. Plenty of time to influence the Feb 2010 long range share price. The following is from the Feb '08 Shareholder letter, when oil prices were a "little" lower and not so profitable.


"Once the expansion is complete and we scale up to full production, this plant is expected to generate more than $80 million per year in oil sales and $12 million in annualized EBITDA at current market prices."



Using 7.8M as the additional financing needed to finish the expansion, the SkunK will assign 20% interest and charge $1.6M in interest and fees to service the new debt. Since we already have the COES paying the corporate bills not included in the $12M EBITDA above - the SkunK is gonna allow [$12-1.6= $10.4M] - another $10.4M to drop to Net Income.

26.8M + 10.4M = 37.2M Net Income/profit


EBITDA & Shares Outstanding = Using the formulas in the Feb 2008 Shareholder's letter we can first estimate EBITDA and then the shares outstanding. Ebitda is estimated at $1/gallon with biodiesel at 3.60/gallon. I will go with a more current $1.40/gallon - since we are now estimating shares outstanding - in this case the higher number is more conservative. So we now add the two and get 68M EBTDA. [56M + 12M}

Including performance based compensation, this is the theoretical OS shares with $68M EBITDA:

current os 82,751,515
series "b" 60,633,325
series "d" 108,160,000
series "e" 20,000,000
Total 271,544,840


adding another +28M shares as a "SkunK Factor" to cover possible dilution to cover equity conversions - we end up with an even 300M shares outstanding in Feb 2010.


With $37.2M profit and 300M shares OS we get over 12.4 cents per share or using a PE of thirty - we get a share price of $3.72.

************
History of Long Range forecasts

Just cannot make this stuff up:

The SkunK, feeling a rare reflective moment coming on, decided to play it out and went back to his first post on his long range forecast from over seven months ago!!! Although it is true he predicted $12.50 per share for Feb 2010 - he based that on predicted earnings of 12.5 cents a share!!!!!!!!! After a lot of water has gone under the bridge - today he used a totally different method/with different inputs and came up with 12.4 cents a share!! That is a tenth of a penny gap! Just substitute my conservative p/e of 30 today with the aggressive 100 I came up with earlier - and we are right back at over twelve dollars. {If we had a disruption in world oil supply concomitant with a bull run in the domestic energy sector - a p/e of "100" is still not out of the question.} The four long range forecasts the SkunK has done between Feb '08 and today all come in between about 9 and 12.5 cents earnings/share. The price investors are willing to pay for those earnings is anyones guess. The SkunK has thought today it is 30 times - but he has been as high as 100 times.

*********
SkunK's Feb 22th figures
25m/200m = (net income)/(TotalOS) = diluted EPS = .125
(PE) X (Diluted EPS) = (PPS)
100 x 12.5 =
$12.50 Share Price in FEB 2010**
First SkunK Blog: http://greenshift-gers.blogspot.com/2008_02_01_archive.html
**********
SkunKs April 19th figures:
28.97M/280M Shares = (net income)/TotalOS) = .1035
(PE) X (Diluted EPS) = (est PPS)
100 x .1035 = $10.35 Share Price in FEB 2010**
*************
SkunK's May 30th figures
34.7M/388.3M Shares = (net income)/Total OS) = .08936 (PE) X (Diluted EPS) = (est PPS) 55 x .08936 = $4.91 Share Price in FEB 2010**
*************
At just $4.25/ gallon of Biodiesel (x 40mmgy= $170M) and using the $80M in culinary oil sales above - the Skunk can easily see $250M in revenues by Feb 2010. {This is with NO Construction and technology sales - our current revenue leader.} At $250M revenues and a market cap of $1.1Billlion (3.72 x 300M shares), we would be at a price/sales ratio or PSR of of 4.4. This type of PSR is not out of the question as we see from this 2007 graphic: We see Google sitting with a market cap almost 13 times revenues, and Apple at almost 5 times revenues. As mentioned in a previous Blog - we are reversed - today we sit with a market cap about 1/20th of our ttm (trailing 12 months) revenues.

Here are the 4 trailing quarters for GERS revenues ($40.7M): $11.5M Q2 '08; $6.6 M Q1 'o8; $18.2M Q4 '07; $4.4M Q3 '07.

At $40.7M ttm revenues combined with an os of 82,751,515 shares from the 2Q, gives us a revenues production of over 49 cents a share!


If we take the 2M market cap (that .025 represents) and divide by 40.7M we get a PSR of .049!!

{Revenue-based valuations are assessed using the price/sales ratio, or PSR. The price/sales ratio takes the current market capitalization of a company and divides it by the past 12 months trailing revenue. (or in my example the rate of revenues at an annualized rate, for a specific time. The market capitalization is the current market value of a company, arrived at by multiplying the current share price times the shares outstanding. This is the current price at which the market is valuing the company.}

EOY FORECAST**
24cents per share (18-30 cent trading range)

Long Range Forecast Feb 2010: $3.72.

**Note: I am a shareholder - I do not work for, nor do I receive any direct or indirect payment from GERS or anyone associated with them. (But it would be Kapitalist Kool if I did) I will not intentionally mislead - but I can be wrong (ask Mrs. SkunK for specific frequencies) - so do your own due diligence - and take responsibility for your own financial decisions – (and your own life in general) good or bad. I have been rightfully accused of being a rather cheery, positive individual who laughs at every opportunity. These tendencies may cause me to overlook deficiencies in this stock that are painfully obvious to others. Celebrate today - and some good garage logic luck to ya.

SkunK - (Blogger formerly know as Skunk)