Early this year, we took a deep dive into Attis Industries (NASDAQ: ATIS), and even then, the company seemed to be impressive. With the ability to refine biomass into several high-value products in a way that’s more efficient than anything on the market, the company was hard to ignore.
Now, just over a month later, the company’s story is an entirely different one. Over the past month or so, the company has released three news items that show that it is not just idling by, hoping for organic success. The company is reaching out and grabbing what they want.
In the past month or so, ATIS announced a collaboration with Novozymes, the planned acquisition of a Sunoco ethanol plant, and a partnership with Iowa State University having to do with carbon fiber.
Today, we’ll tie all of this in together. At the end, you will likely be surprised that the stock is trading with a market cap of around $12 million, a clear undervaluation. Let’s take a look!
ATIS Announces Novozymes Partnership
On January 16, 2019, Attis Industries announced that it has entered into a collaboration with Novozymes. In the release, the company said that Novozymes has committed to supplying the enzymes that are required to convert pulp into sugar at all of its biorefineries.
ATIS also said that it successfully converted the pulp extracted from its biomass processing into high yields of sugar using Novozymes’ proprietary enzyme cocktails. So, why does this all matter? Well, there are a few factors to consider:
- Novozymes Is Massive – First and foremost, Novozymes is a massive player in the industry, with the ability to scale as fast as ATIS can lead them. This is important considering the aggressive approach that the company is taking with regard to building small, yet highly productive biorefineries in rural areas around the United States.
- Surety – The Novozymes partnership doesn’t just bring scalability and a high-level partner to the table, it brings quality assurance. Novozymes is a leader, not only in the production of the enzymes needed by Attis, but also in data surrounding these enzymes. This means that the company is able to say that if it uses a specific amount of a specific enzyme or cocktail of enzymes, it can expect to see that specific amount of production.
- The Final Piece Of The Foundation Laid – At the end of the day, ATIS has some very ambitious goals. To reach the goal of deploying a large number of biorefineries across the United States, the company will need to be able to access the enzymes required to support production. This agreement locks the final piece of the foundation in place, giving the company the opportunity to grow from here.
Sunoco Ethanol Plant Acquisition
Shortly after announcing the Novozymes Partnership on January 22, 2019, ATIS announced that it has entered into an agreement to acquire an ethanol plant.
The agreement was signed with Sunoco LP, surrounding its corn ethanol plant and grain malting operation in Fulton, NY. The company said that it plans to develop the site into the most comprehensive Green Tech campus for renewable fuels in the country.
Under the terms of the agreement, Attis will pay $20 million in cash to fund the acquisition of the facility. Of course, the transaction is subject to regulatory clearances and customary closing conditions, but we expect that the transaction will come to a close relatively soon.
An important aspect of the acquisition is a 10-year offtake agreement that will commence upon the closing of the transaction. Under the agreement, Sunoco has agreed to purchase the ethanol produced, creating financial stability for the plant over the next decade.
What makes this a big deal? Several things…
The ethanol plant spans more than 90 acres and has a very high production rate. In fact historically, 61 million gallons of ethanol are produced annually at the facility. That’s 5,540 truckloads of ethanol per year.
The facility is also a heavy producer of other materials. It produces 350 million pounds of CO2 per year, 400 million pounds of dry distiller grains and 1.5 million gallons of corn oil.
The truth of the matter is that ATIS got a steal of a deal here. As mentioned above, the facility is being purchased at a price of $20 million. Here’s the breakdown of production value:
- Ethanol – The facility generates 61 million gallons of ethanol per year. At an average price of $1.39 per gallon in the United States and $1.26 per gallon in China, the value of the ethanol production alone comes to between $76.86 million and $84.79 million annually.
- C02 – Historically, CO2 has traded in the range between $9 and $26 per tonne. That brings the CO2 value to between $1.575 million and $4.55 million.
- Corn Oil – The price that ATIS can get for corn oil sits at around $0.23 per gallon. Considering current production levels, the value of this production is approximately $345,000 per year.
- Grain – Finally, the average going price for the grain product produced at the facility is about $0.08 per pound. Considering the 400 million pounds produced per year, the total value of this production comes to about $32 million.
- Total – All told, the Sunoco facility produces products with an approximate value in the range between $110.78 million and $121.685 million. Keep in mind, this is a company with a market cap of $12 million that will likely be generating revenue of well over $100 million annually relatively soon.
Iowa State University Partnership
Finally, we have a recently announced partnership between ATIS and Iowa State University. Iowa State University is the authority on the manufacturing of carbon fiber from biobased materials. Carbon fiber is a highly expensive product, largely due to the cost of the necessary materials to make it. So, where does Attis Industries come in?
One of the products produced in the company’s biorefining process is known as lignin, which can be turned into carbon fiber. Iowa State has tested several options; however, when making carbon fiber, they have needed to mix multiple materials together throughout the process.
This is where Attis Innovations’ lignin comes in. This lignin has been used by Iowa State University to produce carbon fiber. No other materials were needed in the process, simply lignin and processing resulted in high-quality carbon fiber.
This is a massive breakthrough for a few reasons:
- Reduction Of Price – As mentioned above, carbon fiber is very expensive because the materials used to produce it are expensive. However, ATIS is capable of producing lignin at such a low price that it is able to sell the product for just a fraction of the cost of materials needed to create the material.
- Iowa State Is A Leader – Iowa State isn’t just considered to be a leader in carbon fiber development from biobased materials, the university is considered to be THE leader in the space. The fact that Iowa State sees so much value in the company’s lignin is a source of validation for the company’s work and the value of its product.
- Global Implications – Because of the high expense associated with carbon fiber, it isn’t currently used in many applications that it could be. Due to the potential reduction in cost that Attis’ lignin provides and the validation that Iowa State provides, we could start to see carbon fiber being used in a mass market way in automobiles, off-road vehicles, and more. More importantly, ATIS would be at the center of this evolution.
The takeaway here is a simple one. With the recent developments announced by ATIS, the company has largely changed the game. With Novozymes, the company has locked the foundation for growth in place. With the Sunoco facility acquisition, the company is opening the door to more than $100 million in annual revenue. Finally, with the Iowa State partnership, the company is cementing itself as a leader in the carbon fiber market. All in all, it’s hard to imagine that this stock isn’t undervalued considering all of this recent news and the value that it provides to investors!
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