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No. of Recommendations: 22
Investor Alert

Micro CAP ($182.71M) penny stock ($3.45), Profire Energy, Inc. (PFIE).


Start here

This is what got me started, a POD

Why Did I Buy a Bunch of PFIE Today?

Why did I buy a bunch more PFIE today? Well first of all, they had a very good earnings report.

Total revenues increased 68% to record $15.7 million.
Gross profit up 54% to a record $8.5 million.

Here’s what I thought about the earnings: “I think it's hard to ask for better. Revenue up 68% from last year, and up 19.4% sequentially(!), and raised estimates. They are also hiring sales and R&D people to expand and solidify their lead in a previously labor-intense area which they have automated. Think of the trouble a company faces when one of their employees gets injured or killed in an explosion (forms to fill out, insurance going up, investigators coming by, etc etc.). It's in the drilling company's interest to install the PFIE system. Then they don't even need the guy who comes around to check the flames. And PFIE is growing all this out and staying profitable”.


http://caps.fool.com/Blogs/why-did-i-buy-a-bunch-of-pfie/101...


What they do

Their name gives them away: "Pro Fire." They found a tiny unserved niche in the oil service industry and they moved to fill it. Oil and gas won't flow well in pipes at the wrong temperature or if the pipes are clogged with gunk. One solution is to heat the pipes which requires furnaces and fire. Another issue is the flaring of noxious gasses, they need to be burned at high temperatures to convert then to less harmful gasses. This also requires fire. The use of furnaces and fire goes a long way back but it was a dangerous and poorly managed process. People got killed igniting the fires and many furnaces ran 24/7 needed or not, wasting fuel.

Profire's solution is the "Burner Management System" (BMS). It monitors temperatures and other variables and ignites, regulates and turns off burners eliminating a dangerous field job, increasing the efficiency of the piping and saving on fuel. I should point out that Profire does not just sell and service hardware, the hardware is operated by proprietary software developed by Profire. They think of themselves as a technology company.

Their potential market in the USA alone is approximately 2 million units, an average of two units per oil or gas well. There are approximately 1 million producing wells in the USA today that need to be retrofitted. To date (April 2014) they have sold some 20,000 units (recent commentary suggest it's up to 40,000 units). Assuming one product in one country, the 40 thousand units are 2% of the market. Profire says they have three smaller competitors: "They include SureFire, Platinum, and ACL (note: Some larger conglomerates, such as Siemens, Honeywell, and others, manufacture BMS for very sophisticated refinery environments and some larger (e.g. forced-air) systems in the oilfield. But they have not, historically, emphasized sales for natural draft smaller- and mid-size oilfield applications)" all private. Let's give the three half the market share. Growth typically follows an "S" curve pattern with the bottom "curve in the hockey stick" occurring between 10% and 20% market penetration. and the top of the "S" curve around 80% to 90% market penetration. Should the EPA or some other agency make BMS mandatory as in Canada. adoption would be faster. Assuming less than 5% market penetration, BMS is very early in the game but the game seems less risky than other innovations.


From 2011

SINCE MARCH OF 2002, WHEN PROFIRE COMBUSTION INC. WAS CONCEIVED, WE HAVE HAD A VISION OF THE BURNER INDUSTRY AND ITS FUTURE. WE SOUGHT TO PROVIDE A SERVICE AS COMBUSTION EXPERTS THAT WAS UNMATCHED BY ANY OF OUR COUNTERPARTS. WE FEEL WE CAN CLAIM GREAT SUCCESS IN THIS ENDEAVOR.

Soon after Profire's inception, we developed a control panel for the management of burners, a system we called the Profire 1100. This attained unparalleled success, quickly becoming the leading Burner Management System on the market. Annually, our sales climbed, our service department grew, and our company expanded. With our team of highly qualified personnel, we were able to stake our position in this rapidly growing market. Soon Profire Combustion expanded to a point where the prospects of going public became a reality, and after the acquisition of a public shell corporation, Profire Energy Inc. was born. This entity became the medium for furthering corporate growth. The company continued to grow with the economic boom, then sustained even further growth in the face of a recession.


http://investorshub.advfn.com/Profire-Energy-Inc-PFIE-17296/...


One reference from 2011

Hi. New here. I found this board when looking for some PFIE info and saw there were some questions on why there is a need for heaters in the oil field. I do work in the oil field and the company I work for uses Profire units so I hope to answer some questions, I don't want to get into big detail so I will keep this fairly simple. So here is my $0.02.

http://investorshub.advfn.com/boards/read_msg.aspx?message_i...


The Players

Identifying the insiders is particularly pertinent in view of the short attack published on Seeking Alpha on November 21. The attack starts off with the reverse merger and tries to discredit the CFO.

Profire Energy - A Classic Pump And Dump, Sell Before You Get Burned, Stock Worth $1.00M/B>
http://seekingalpha.com/article/2701275-profire-energy-a-cla...

The company was started by Brenton Hatch (CEO) and Harold Albert (COO) in 2002 in the oil fields of Western Canada. By 2010 they were ready to go public and did so via a reverse merger. Unfortunately they dealt with a shady company, Belsen Getty, LLC, where they met Andrew Limpert (CFO) who became the company's CFO. The SEC did charge the principals of Belsen Getty with major offenses and Andrew Limpert with minor ones which were disclosed in the company's 10K (page 41).

As discussed in previous company reports, during 2012 Mr. Limpert entered into a settlement agreement with the Commission in connection with administrative proceedings commenced against him in 2011 for alleged events occurring between 2004 and 2008. After a comprehensive investigation and full cooperation with the Commission, Mr. Limpert, based on the advice of his private SEC counsel, believed the settlement was in his best interest under the circumstances. While not admitting to or denying the Commission’s findings, Mr. Limpert consented to disgorgement, penalties and interest for certain fees earned. The penalties assessed were within the lowest tier statutorily allowed. Mr. Limpert also agreed not to engage in violations of U.S. securities laws and to be temporarily barred from certain specific activities such as association or employment with any broker, dealer, investment adviser, investment company, etc., and from participating in an offering of penny stock as an unrelated collateral bar. The settlement agreement provides that Mr. Limpert may reapply for licensure for any of the above after one calendar year, subject to compliance with the terms and conditions set out in the settlement agreement. None of the violations alleged against Mr. Limpert related to his involvement with the Company.

The Board of Directors believes Mr. Limpert continues to be capable to serve on the Company’s Board of Directors and as the Company’s CFO, which entails the following responsibilities:


http://secfilings.nasdaq.com/filingFrameset.asp?FileName=000...


The short attack pretends to prove that Profire Energy is a fraud because Limpert had some problems with the SEC. What they fail to mention is that Limpert was named "Utah Business CFO of the Year" in 2012, after the SEC proceedings.

http://www.marketwired.com/press-release/profire-energys-and...

With that out of the way, the three insiders own 60% of the company which is generally a good sign for shareholders. Institutions own 18.3% while retail investors own the remaining 21.7%. With the low float any institutional accumulation will drive the price higher quite strongly.

Shareholder Shares %

Hatch Brenton W (CEO) 14,450,000 27.5
Albert Harold (COO) 14,025,000 26.7
Limpert Andrew (CFO) 3,021,937 5.8
Total Insiders 31,496,937 60.0

Institutions 9,618,802 18.3
Retail 11,367,084 21.7
Shares outstanding (9/2014) 52,482,823 100.0



In March 2014 the stock was moved from OTCQB and OTCBB to NASDAQ (same symbol). At that time there were fewer shares outstanding, only around 4% institutional investors and the insiders controlled 72% of the shares (this from memory from the Limpert video presentation!). The insiders have filed to sell up to 2.8 million shares over the next year in quarterly installments.


The company's response to the short bashing:

"We've received a few questions recently about a disparaging online article that was published last week by a paid antagonist and short-seller of the Company's stock. We believe most of our stakeholders know the article contains many inaccuracies, and we simply want to emphasize that we believe the best indicator of performance is performance itself. Our history shows the simple, straightforward story of Profire of disciplined growth and management to deliver long-term stakeholder value. If a stakeholder has genuine concerns about management, we invite you to report such to the proper regulatory body—not a self-serving online platform."

"We do not plan to publicly address this article further, and encourage stakeholders to do their own due diligence and contact us anytime with relevant, genuine questions about the Company. We will gladly discuss any concerns or questions with you."

http://finance.yahoo.com/news/profire-energy-releases-holida...


The Industry

The oil service industry is highly fragmented with leviathans like Schlumberger (Mkt Cap: 125.94B) and minnows like Profire Energy (Mkt Cap: 182.71M). The small players thrive when they service a niche that has otherwise been overlooked or under-served by the rest of the industry, clearly the case with Profire.

The question always comes up, why can't a bigger player eat their lunch. Of course they could but it is not likely. The oil service industry is highly fragmented for good reason, the smaller players specializing in something too small for the big players to take an interest in. Please note that the difference in market CAP between Schlumberger and Profire is three orders of magnitude, one thousand fold. But should that interest develop, they are as likely to buy out the small competitor as to start from scratch.


Investing Metrics

Market CAP $182.71M
Price $3.45
EPS (1st half 2015) $0.08
P/E 21.6


Maybe our fearless leader, MonsterFluff, wants to take a crack at taking the financials apart. I'm worn out! ;)

BTW, I shopped the idea around elsewhere and a respected former frecuent poster replied that PFIR was one of his larger positions.

Denny Schlesinger
No position yet.
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