Renewable Energy Holdings

Although it is a common complaint from AIM companies, management at burgeoning windpower developer REH are rightly flummoxed by the group's lowly valuation.

Chief executive Mike Proffitt points out that the company’s deal to swap its CETO ocean-power technology for a stake in Australian-listed Carnegie Wave Power – that would be worth over £30m at the present Carnegie price – would on its own dwarf REH’s present market value, meaning the rest of the business is being attributed a negative value. This would be unmerited, as the company has German wind farms with 40.5 megawatt (MW) capacity, which produced £2.1m revenue in the first half year to June, and could be attributed a value, Proffitt suggests, of around 64p per share on its own.

To that can be added a 1MW Welsh landfill gas reclamation project, which generated £199,000 turnover in the half year, and may soon be able to double its capacity thanks to engineering improvements overseen by operations director Jannie Retief. Furthermore, a recent €2m purchase of Polish wind developer Gamar will see a further 30MW commence construction in March next year and be up and running ‘by the third quarter’.

REH does have a chunk of debt, a burden worth just under 40p a share and costing £1.6m of repayments in the period. Overall, with group revenues down 8% to £2.4m due to a less windy time in Germany, the bottom line showed a £2.2m loss before tax.

Looking forward, Proffitt suggests the full year will see the group turn a profit and that the stake in Carnegie should swell in value as CETO trials complete in February and the Australian government continues to help fund its development. Next year’s Polish commission is ‘exciting’ and, further forward, other wind and solar additions are being discussed.

Down from 40.5p to its present value, just above all-time lows, the shares do not seem to have any of its imminent project priced in and could reward a buy.