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Author: BrianMotleyFool One star, 50 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 71227  
Subject: Re: WPRT SHort Case Date: 10/6/2012 10:27 PM
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Duma,

>> To summarize, Westport Innovation’s current valuation has diverged significantly from its intrinsic valuation based on both current and forward business fundamentals and metrics. With the market ascribing tremendous value to the Heavy Duty segment as if the growth in this segment and associated revenue capture by the Company was a “done deal”, the margin of safety is non-existent at current levels.

With an increasing number of the established diesel engine manufacturers putting forward strategies for natural gas engines, the demise of Westport Innovations is not an “if” but “when” situation. In the meantime, the Company continues to burn approximately $100M in cash per year with a continued ramp in its opex indicating the lack of operating leverage in its business model. <<

Interesting article - thanks for posting the link. Ithink it is too pessimistic when it states Westport is destined for demise. That being said, I do think WPRT is overvalued right now, and have not been buying.

I do think that netgas fuel for transportation is a paradigm shift, and remain interested in ways to profit from it. My focus thus far has been on the buildout of fueling infrastructure, particularly buying up CLNE when price reflects good values, as I think it does at thte moment.

But it is worth making 2 points wrt WPRT and this article:
1. They note 1000 LNG refueling stations vs. 160k for gasoline. But ng is not, at this time, trying to replace gasoline. CLNE and other companies are aiming for particular niches, including local fleets and heavy duty long haul truck fleets. Thus, you do not need 160k stations. Once CLNE has built its infrastructure, ng trucks will be able to go coast to coast with fuel sources available. I do not think lack of fuelling will prove an impediment to rapid expansion of WPRT's desired market.
2. They note the big companies will invade WPRTs space. This is certainly true of Cummins, as they become a direct competitor to WPRT. But other companies have, thus far, been working with WPRT technology, as building a ng engine is a bit harder than a gasoline engine. See, for example, Volvo's new 13L engine, using WPRT HPDI.

My opinion, FWIW, is that WPRT will continue to grow, and get its technology into enginees sold by a rather large number of vendors. Margins will compress, however, and will not be sufficient to support the current price.

Anyway, thanks again for the link.

Brian

Mandatory political PS: Looks like Romney has gained some ground following debate performance. Republicans need to ask themselves - do they really want to win this Presidential election? Voters will blame them when things start to go badly pear-shaped in 2013, as I'm convinced they will.
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