IPO Update: CW Petroleum Readies IPO Uplisting Plan (OTCMKTS:CWPE)

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Ron and Patty Thomas

A Quick Take On CW Petroleum

CW Petroleum Corp (OTCPK:CWPE) has filed to lift $15 million in gross proceeds from the sale of its widespread stock and warrants in an IPO, in keeping with an amended registration assertion.

The firm offers gasoline product mixing and supply companies within the southern U.S. area.

The firm’s topline income has primarily plateaued and it operates in a low margin enterprise.

Although the IPO could appeal to volatility-seeking day merchants, it isn’t low-cost on valuation multiples, so I’m on Hold for CWPE.

CW Petroleum Overview

Katy, Texas-based CW was based to ship non-branded, blended and non-blended diesel gasoline and gasoline merchandise to U.S. prospects.

Management is headed by president and Chairman Christopher Williams, who has been with the agency since inception in 2013 and was beforehand an govt at Platts/Mc-Graw-Hill Financial, a petroleum business supply for monetary and commodities analysis.

The firm delivers its main choices to:

  • Independent gasoline retailers

  • Independent and chain comfort shops

  • Boating marinas

  • Other gasoline distributors

CW has booked truthful market worth funding of $1.8 million as of March 31, 2022 from buyers.

The firm operates primarily within the market space of Houston-Galveston-Brazoria and far of its gasoline offered is mixed to burn extra cleanly than typical merchandise.

CW additionally operates a truck terminal and mixing facility.

CW’s Market & Competition

According to a 2021 market research report by IBISWorld, the U.S. market for gasoline and petroleum wholesaling will attain an estimated $717 billion by the top of 2022

This represents a 6.5% progress over 2021’s stage.

If it achieves this price of progress in 2022, the business could have grown at a mean of three% per 12 months from 2017 to 2022.

The foremost drivers for this anticipated progress are a pointy rise within the value of fuels, which will increase business income as a complete.

Also, an increase in oil costs will increase business buy prices which has the potential to cut back revenue margins.

Major aggressive or different business members embody:

  • Texas TransEastern

  • United Petroleum Transports

  • Dupre Logistics

  • Ag Processing

  • Archer Daniels Midland

  • Cargill

  • Louis Dreyfus Commodities

  • Smaller companies

CW Petroleum Financial Performance

The firm’s current monetary outcomes might be summarized as follows:

  • Upward trending topline income

  • Uneven gross revenue and variable gross margin

  • Variable working loss

  • A swing to money utilized in operations.

Below are related monetary outcomes derived from the agency’s registration assertion:

Total Revenue

Period

Total Revenue

% Variance vs. Prior

Three Mos. Ended March 31, 2022

$ 1,693,968

0.7%

2021

$ 8,269,909

17.4%

2020

$ 7,043,926

Gross Profit (Loss)

Period

Gross Profit (Loss)

% Variance vs. Prior

Three Mos. Ended March 31, 2022

$ 295,959

-0.3%

2021

$ 1,071,321

3.1%

2020

$ 1,039,201

Gross Margin

Period

Gross Margin

Three Mos. Ended March 31, 2022

17.47%

2021

12.95%

2020

14.75%

Operating Profit (Loss)

Period

Operating Profit (Loss)

Operating Margin

Three Mos. Ended March 31, 2022

$ (59,457)

-3.5%

2021

$ (1,475,413)

-17.8%

2020

$ 63,096

0.9%

Net Income (Loss)

Period

Net Income (Loss)

Net Margin

Three Mos. Ended March 31, 2022

$ (75,056)

-4.4%

2021

$ (1,542,938)

-91.1%

2020

$ 106,839

6.3%

Cash Flow From Operations

Period

Cash Flow From Operations

Three Mos. Ended March 31, 2022

$ (44,565)

2021

$ 224,095

2020

$ 677,441

(Glossary Of Terms)

(Source – SEC)

As of March 31, 2022, CW had $202,447 in money and $918,383 in complete liabilities.

Free money movement in the course of the twelve months ended March 31, 2022, was $123,552.

CW’s IPO Details

CWPE intends to promote 3 million items consisting of widespread stock and one warrant to buy one share of widespread stock on the IPO value, at a proposed midpoint value of $5.00 per share for gross proceeds of roughly $15.0 million, not together with the sale of customary underwriter choices.

No current shareholders have indicated an curiosity to buy shares on the IPO value.

The firm’s stock is at present quoted on the OTC beneath the image “CWPE.”

Assuming a profitable IPO on the midpoint of the proposed value vary, the corporate’s enterprise worth at IPO (excluding underwriter choices) would approximate $32.4 million.

The float to excellent shares ratio (excluding underwriter choices) shall be roughly 32.7%. A determine beneath 10% is mostly thought-about a “low float” stock which might be topic to important value volatility.

Per the agency’s most up-to-date regulatory submitting, it plans to make use of the web proceeds as follows:

Proposed Use Of Proceeds

Proposed Use Of Proceeds (SEC EDGAR)

Management’s presentation of the corporate roadshow just isn’t out there.

Regarding excellent authorized proceedings, administration says the corporate just isn’t celebration to any authorized motion that may have a fabric antagonistic impact on its operations or monetary situation.

The sole listed bookrunner of the IPO is EF Hutton.

Valuation Metrics For CW Petroleum

Below is a desk of the agency’s related capitalization and valuation metrics at IPO, excluding the results of underwriter choices:

Measure [TTM]

Amount

Market Capitalization at IPO

$45,886,475

Enterprise Value

$32,445,901

Price / Sales

5.54

EV / Revenue

3.92

EV / EBITDA

-20.56

Earnings Per Share

-$0.17

Operating Margin

-19.06%

Net Margin

-19.86%

Float To Outstanding Shares Ratio

32.69%

Proposed IPO Midpoint Price per Share

$5.00

Net Free Cash Flow

$123,552

Free Cash Flow Yield Per Share

0.27%

Debt / EBITDA Multiple

-0.16

CapEx Ratio

-309.88

Revenue Growth Rate

0.66%

(Glossary Of Terms)

(Source – SEC)

Commentary About CW Petroleum

CWPE is in search of public capital market funding to increase its operations into Baltimore and Chicago, open a specialty mixing facility and to amass two comfort shops because it hopes to increase into retail operations with gasoline stations to serve areas close to the Gulf of Mexico and boat house owners there.

The agency’s financials have produced barely rising topline income (Q1 2022), variable gross revenue and gross margin, uneven working loss and a swing to money utilized in operations.

Free money movement for the twelve months ended March 31, 2022, was $123,552.

The agency at present plans to pay no dividends on its shares and anticipates that it’s going to use any future earnings to reinvest again into its progress efforts.

The market alternative for distributing gasoline merchandise to wholesale prospects within the U.S. is massive and anticipated to develop as the value of gasoline merchandise has risen.

EF Hutton is the lead underwriter and IPOs led by the agency over the past 12-month interval have generated a mean return of destructive (65.4%) since their IPO. This is a bottom-tier efficiency for all main underwriters in the course of the interval.

The main danger to the corporate’s outlook is the volatility of oil costs which may expose CW to short-term losses.

As for valuation, administration is asking buyers to pay an EV/Revenue a number of of round 3.9x, which is larger than a basket of publicly held oil & gasoline distribution firms which had a a number of of three.6x as of January 2022.

CWPE is a tiny firm that’s uncovered to cost volatility within the oil & gasoline sector, which has been unstable just lately.

The firm’s topline income has primarily plateaued and it operates in a low margin enterprise.

Although the low nominal value for the shares could appeal to day merchants in search of volatility, the IPO isn’t low-cost on valuation multiples, so I’m on Hold for CWPE.

Expected IPO Pricing Date: To be introduced



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