Description

Clear Blue Technologies is a nanocap that delivers clean, managed, wireless power – anywhere and anytime. CBLU uses its patented Smart Off-Grid technology, delivered through our Energy-as-a-Service business model, to manage lighting, telecom, Internet of Things devices, and other critical systems around the world. CBLU today sports a $29 mm fully diluted market cap with a few million dollars in debt (call it $32 mm EV). Apologies in advance if this only is actionable for PA’s and smaller funds (fairly illiquid with no analyst coverage).

The stock has recently tripled in the last couple weeks off the heels of a positive Q3 announcement along with a $5 mm order that was recently won by the company for 400 telecom sites in Africa. We believe CBLU has multi-bagger potential given the breadth of the market along with their niche as a preferred supplier for low voltage off grid power. We expect more positive announcements to follow in the coming months.

Given the nature of supplying power (30% source and 70% distribution / network), low voltage off grid power has an extreme value offering when evaluating the two options. Not to mention, given the weak grid infrastructure for a place like Africa, off grid may in fact be the only option.

CBLU targets 3 target industries i) smart city street lights ii) telecom / cell phone tower and cell phone roll out (FB a partner (FB TIP – view of getting next billion on the internet and on FB) iii) satellite infrastructure (power systems).

For the purpose of this report and expediency, we will highlight the opportunity that exists in Africa. For the record, the company has installations in 37 countries with some of the largest companies in the world. We believe we are at a very key moment in the company’s lifetime given the push for renewables, recent win, and place within a very fast growing market.

Much like Africa skipped the whole telephone line infrastructure and went straight to mobile phones, we are seeing the same dynamic play out with low voltage power sources for off grid applications like telecom sites.

What does CBLU do: CBLU targets to manage, control and service your power needs. They will start by selling you the system (hardware that usually includes controller, solar panel, lights etc) and then attach an IoT service (EAAS recurring revenue) through their cloud platform as they manage optimize your power by using their patented software / understanding of climate to optimize consumption.

On 11/17/20, CBLU announced a $5 mm win (to be realized in Q4/Q1) with a major telecom infrastructure operator to power 400 telecommunication sites in rural Africa (very cagey on the details given the highly competitive nature of the market). This win beat out names like Huawei, Siemens, as these larger players tend to focus on larger towers and are not competitive in the space. (Streetlights used to require 350 watts of power now require 35 watts) The language in the press release tends to indicate that given the preferred vendor relationship that CBLU has now secured, they are in pole position for the eventual rollout over the coming years (250 sites a quarter). This win represents but a fraction of what the TAM just in Africa alone can be. MTN has selected 5 managed network operators and CBLU now has relationships with 4 out of those 5. Behemoths like Vodaphone and Orange are soon to announce awards as well given the race is likely to consume the continent.

Admittedly light on valuation, from a high level the company is expected to be CF positive early next year and with the operating leverage this model seems to have:

Fully diluted shares count 66 mm (assuming warrant conversions) puts an enterprise value around $32 mm. Trailing four quarter revenue at $4 mm; its not hard to see this potentially representing a $15-$20 mm revenue business in ’22. Even with no economies of scale that puts you in the neighborhood of 4-5X '22 GP on a business that has the ability to flex in the neighborhood of triple digit growth over the next few years. Insider ownership is 20%.

As you might imagine, CEO and founder manages her own IR and they have a very revealing recent Q3 presentation along with webinar: https://cdn.locomotive.works/sites/5ad64d97a2f4220ad9468eee/content_entry5bae32d414ad66121f406d90/5fb57c94a155bb00ade4b324/files/Clearblue_2020_Q3_Earnings_Call.mp4?1605729428

What’s important to note is that the company is well capitalized with de minmis debt and a sales cycle that affords them the ability to limit an enormous inventory build as they grow. Translation: they could double or triple revenues in ’21 without having to raise additional capital. They have pointed to any capital raises being in the form of M&A targeted rather than fulfillment or cash needs for the current business.

Catalyst

Continued wins

Q4 earnings and annoucements