Think Equity’s David Woodburn Weighs in on Verenium (Nasdaq:VRNM) BP Joint Venture
Posted on Thursday, February 19th, 2009 | In Small & Micro CapFebruary 19, 2009 ndash; Analyst Comments ndash; Think Equityrsquo;s David Woodburn weighed in on Verenium (Nasdaq:VRNM) this morning, rating it at BUY with a $3 price target (stock is trading around $1.02).
Yesterday Verenium announced a 50/50 JV with British Petroleum to develop and commercialize cellulosic ethanol. This is the second phase of the Verenium/BP partnership, and the JV will act as the commercial arm for the distribution of the companiesrsquo; technology being developed. The companies are collectively committing $45 million to the JV, which will build a 36 million gallon-per-year cellulosic ethanol facility in Florida at a total cost of about $250 to $300 million. Production from the plant is slotted to begin in 2012. Woodburn said the announcement of a second agreement with British Petroleum is a strong validation of Vereniumrsquo;s cellulosic ethanol technology and of the cellulosic market in general.
Woodburn anticipates some softness in Vereniumrsquo;s Q4 revenues to account for deterioration in the corn ethanol industry and softening in phosphate prices. His estimate of $14.2 million in revenue is below the consensus estimate of $15 million (not including the $7.5 million/quarter from BP). Woodburn expects a loss of $0.25 per share. His price target of $3 (previously $3.50) reflects a DCF valuation of the specialty enzymes business ($2.30) and an EV/revenue multiple of potential ldquo;ownedrdquo; cellulosic revenues from the first commercial facility ($0.52).
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