Founder, BWS Financial Inc

Hamed Khorsand

Founder

Independent Stock Specific Research

BWS Financial Inc

BWS provides independent stock specific research focused on companies with distinct value that are going through a special situation where there is a tangible catalyst not priced in. The catalyst can be anything from new product, restructuring, M&A, management change, change in business strategy, etc. BWS’s focus is to understand the change and evaluate the potential return for investors.

BWS utilizes a self formed proprietary approach in discovering stocks by putting great emphasis on deep research. BWS does generate short recommendations following a similar criteria.

Equity Bottom-Up

Renewable Energy Group / Equity Bottom-Up

<ul>
<li>REGI is increasing its downstream business through the acquisition of Amber Resources. The commercial distributor gives REGI a foothold within one of REGI’s most important renewable diesel markets, California</li>
<li>REGI’s management has been trying to broaden the Company’s downstream reach to capture more of the margin in selling renewable and biomass-based diesel.</li>
<li>The more than 60 million gallons of diesel sold per year by Amber Resources would fuel a margin expansion opportunity</li>
</ul>


REGI is increasing its downstream business through the acquisition of Amber Resources. The commercial distributor gives REGI a foothold within one of REGI’s most important renewable diesel markets, California
REGI’s management has been trying to broaden the Company’s downstream reach to capture more of the margin in selling renewable and biomass-based diesel.
The more than 60 million gallons of diesel sold per year by Amber Resources would fuel a margin expansion opportunity


<ul type="disc"><li>
Renewable Energy Group (REGI) reported third quarter results supporting our forecast of continued improving margins. The positive traction in margins enables REGI to sustain its capital expansion plans for its Geismar facility without seeking additional outside capital.</li></ul> <ul type="disc"><li>The third quarter included the impact of Hurricane Ida forcing the closure of Geismar for two weeks. The reduced output is expected to have an impact on gallons sold in the fourth quarter.</li></ul> <ul type="disc"><li>REGI’s management is projecting a broader customer base for renewable diesel that could result in wider profit margins in the coming year. The marine industry has turned from its IMO 2020 mandate of reducing sulfur to also consider reducing carbon emissions. The railroad industry is also evaluating using renewable diesel.</li></ul> <ul type="disc"><li>Our expectation for REGI to post adjusted EBITDA of $336.1 million in 2022 compared to $298.4 million in 2021 helps sustain our reasoning of why we continue to believe the shares should be trading above our price target of $100.</li></ul>


Renewable Energy Group (REGI) reported third quarter results supporting our forecast of continued improving margins. The positive traction in margins enables REGI to sustain its capital expansion plans for its Geismar facility without seeking additional outside capital. The third quarter included the impact of Hurricane Ida forcing the closure of Geismar for two weeks. The reduced output is expected to have an impact on gallons sold in the fourth quarter. REGI’s management is projecting a broader customer base for renewable diesel that could result in wider profit margins in the coming year. The marine industry has turned from its IMO 2020 mandate of reducing sulfur to also consider reducing carbon emissions. The railroad industry is also evaluating using renewable diesel. Our expectation for REGI to post adjusted EBITDA of $336.1 million in 2022 compared to $298.4 million in 2021 helps sustain our reasoning of why we continue to believe the shares should be trading above our price target of $100.

Fundamental Short Selling Research

Eric Fernandez, CFA

TwoRiversAnalytics

We issue in-process short research ideas periodically.  Our formal recommendations will likely come from this list, although not all will make the final cut.  Here we introduce a series of names that look interesting.Atkore Inc (ATKR), Producer Manufacturing, Grocery Outlet Holding Corp. (GO) Food Retail, PBF Energy, Inc. Class A (PBF), Oil Refining/Marketing, Ping Identity Holding Corp. (PING) Packaged Software, Renewable Energy Group, (REGI) Chemicals: Specialty, Blink Charging Co (BLNK) Other Consumer Services.

We issue in-process short research ideas periodically.  Our formal recommendations will likely come from this list, although not all will make the final cut.  Here we introduce a series of names that look interesting.Atkore Inc (ATKR), Producer Manufacturing, Grocery Outlet Holding Corp. (GO) Food Retail, PBF Energy, Inc. Class A (PBF), Oil Refining/Marketing, Ping Identity Holding Corp. (PING) Packaged Software, Renewable Energy Group, (REGI) Chemicals: Specialty, Blink Charging Co (BLNK) Other Consumer Services.  

Short Ideas "On the Workbench" - Promising Shorts Under Our Research Microscope.

<ul type="disc"><li>Headline risk to what the new EPA renewable fuel mandate could be for 2020 and 2021 has caused many investors to ignore the basic barometer in the health of Renewable Energy Group (REGI) gross margin.</li></ul> <ul type="disc"><li>The heating oil soybean oil (“HOBO”) spread has narrowed to levels not seen since the beginning of March, which allows for the HOBO plus renewable identification number (“RIN”) to increase to its highest we have seen in many quarters.</li></ul> <ul type="disc"><li>Geismar being offline for approximately two weeks should result in 3.5 million gallons of production being missed. This should mean REGI produces approximately the same gallons as it did in the second quarter.</li></ul> <ul type="disc"><li>We are already the highest earnings and adjusted EBITDA estimates in the consensus and see no reason to lifting our estimates. The wider spreads REGI is experiencing should provide more than ample room for the Company to generate adjusted EBITDA above the current guidance of $70 million to $90 million for the third quarter.</li></ul>

Headline risk to what the new EPA renewable fuel mandate could be for 2020 and 2021 has caused many investors to ignore the basic barometer in the health of Renewable Energy Group (REGI) gross margin. The heating oil soybean oil (“HOBO”) spread has narrowed to levels not seen since the beginning of March, which allows for the HOBO plus renewable identification number (“RIN”) to increase to its highest we have seen in many quarters. Geismar being offline for approximately two weeks should result in 3.5 million gallons of production being missed. This should mean REGI produces approximately the same gallons as it did in the second quarter. We are already the highest earnings and adjusted EBITDA estimates in the consensus and see no reason to lifting our estimates. The wider spreads REGI is experiencing should provide more than ample room for the Company to generate adjusted EBITDA above the current guidance of $70 million to $90 million for the third quarter.

REGI: Widening Margin Fuels Outperformance

<ul type="disc"><li>
Renewable Energy Group (REGI) demonstrated its abilities to use multiple feedstocks in the second quarter to widen its gross margin. Like we had prognosticated in our earlier research updates, REGI reported a larger than expected gross margin in the second quarter easily exceeding our forecasts and consensus estimates.</li></ul> <ul type="disc"><li>REGI’s management has continuously asserted their ability to use multiple feedstocks in their production process to offset the rising price of soybean oil. REGI’s ability to quickly change feedstocks gives the Company an edge when there is price volatility.</li></ul> <ul type="disc"><li>REGI reported second quarter revenue of $816.2 million, which was a derivative of the increase in B100 prices. The highlight of the quarter was REGI’s gross margin of 15.1 percent leading to REGI reporting operating income of $87.6 million.</li></ul> <ul type="disc"><li>The second quarter results should create investor interest in the shares as REGI could now post adjusted EBITDA of more than $300 million in 2021. With underlying demand rising, and REGI putting greater attention downstream, REGI’s 2022 gross margin could expand even though gallons produced remains flat.</li></ul>


Renewable Energy Group (REGI) demonstrated its abilities to use multiple feedstocks in the second quarter to widen its gross margin. Like we had prognosticated in our earlier research updates, REGI reported a larger than expected gross margin in the second quarter easily exceeding our forecasts and consensus estimates. REGI’s management has continuously asserted their ability to use multiple feedstocks in their production process to offset the rising price of soybean oil. REGI’s ability to quickly change feedstocks gives the Company an edge when there is price volatility. REGI reported second quarter revenue of $816.2 million, which was a derivative of the increase in B100 prices. The highlight of the quarter was REGI’s gross margin of 15.1 percent leading to REGI reporting operating income of $87.6 million. The second quarter results should create investor interest in the shares as REGI could now post adjusted EBITDA of more than $300 million in 2021. With underlying demand rising, and REGI putting greater attention downstream, REGI’s 2022 gross margin could expand even though gallons produced remains flat.

United States

Renewable Energy Group Inc. produces biofuels and renewable chemicals. The Company develops, distributes, sells, and provides logistics for biodiesel and renewable chemical production. Renewable Energy Group serves companies throughout the United States.

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Renewable Energy Group (REGI US)

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REGI: Renewed Margin Expansion

REGI is managing its feedstock without getting duly credited by investors. Gross margin remains ahead of consensus estimates, but stock continues...

BWS Financial Inc

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