Stock Sonar #77 - 10/16/2024

Enterprise Group (TSX:E) — mrkt cap $140mm; Price $2.41; EV/EBITDA 10

STARTER POSITION INITIATED. We typically avoid companies with significant commodity exposure; however, we are making an exception with Enterprise Group. E.TO/ETOLF (dual listing) is a profitable oilfield services company based in Canada that has recently signed an exclusive agreement with FlexEnergy to be a provider of their modular natural gas turbines. These turbines, deployed at well sites, generate energy for operators with nearly zero emissions, offering a cleaner alternative to the widely-used diesel generators, which are substantially more expensive and emit substantial pollutants. Enterprise Group has strong growth potential, with opportunities to expand into sectors such as mining and edge data centers. The turbines have a payback period of approximately 16 months and Enterprise Group has already deployed about thirty of them at well sites. It is not unreasonable that within five years, E.TO could potentially generate profits of ~$50 million annually. Additionally, the Canadian natural gas market is poised for growth as the country expands its export capabilities through new LNG facilities, several of which are expected to be completed in 2025.

Bit Digital (NAS: BTBT) — mrkt cap $526mm; Price $3.56; EV/EBITDA 56

PASS. After taking a position in Applied Digital, we have been evaluating other crypto miners with significant power capacity and fiber connectivity. AI data centers in the U.S. are constrained by the high power loads required, making these facilities scarce and greatly increasing the value of miners who possess them. Bit Digital came onto our radar, possessing data centers and touting their AI customers. However, these customers are only in their Iceland data centers and consist of smaller companies rather than the hyperscalers that drive the majority of demand. Additionally, BTBT has shifted toward acquiring HPC Tier 3 data centers rather than expanding their existing facilities, as companies like CORZ and APLD have done. We do not believe BTBT holds assets of the same caliber.

Airship AI (NAS:AISP) — mrkt cap $56mm; Price $2.12; EV/EBITDA NA

PASS. Airship AI offers a suite of video management and data processing tools designed primarily for public safety, law enforcement, and security sectors. They claim to be an AI company but beyond object detection and facial recognition – which are common features in the video analytics space—they do not appear to be doing anything differentiated. They have had some impressive contract wins for such a young company (founded in 2020), but it isn’t enough for us to take a second look. (PSA: we are very interested in evaluating good small cap names in the defense sector. If any readers know of some interesting companies, pls give us a shout.)