Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, August 28, 1994 TAG: 9408260040
SECTION: BUSINESS PAGE: F2 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Long
Michael Smith, president of Ferguson, Andrews & Co. in Roanoke, said the company's June merger with the Lyttle Cos. means ETS for the first time has "the revenue base to get this company off the ground."
The merger, he said, was complementary. It brings to Lyttle an in-house environmental testing capability, and Smith expects ETS to open a testing office in Richmond as well.
If the company's patented Limestone Emission Control system is successful, he said, it will "validate the technology and lead to more sales over there [in Asia] and additional sales in the United States."
The company's sales partner in Taiwan, U-Tah, has been aggressive in marketing. The sales arm in the United States, Smith said, "was not the best choice," but its contract will expire soon. He expects a replacement company to push sales of ETS products.
ETS, Smith said, "is a classic example of the company that boot-strapped itself up." Chairman John McKenna, according to Smith, has "by sheer determination" brought the company to the point "where is it going to make some money."
Pat Calby of Orlando, Fla., an independent investment adviser, called ETS "an undiscovered company, in a way" because it has grown 40 percent a year since it went public. It is, he said, trading 1.2 times its current sales, which is a favorable figure.
He called the stock "a good value where it is" because the down side is limited through steady growth in the service end of the business.
Calby said he sees "some really good synergy between the two companies" that recently merged. Acquiring Lyttle, he said, "gives them a greater market."
Calby is telling his clients "to accumulate" the stock of the company.
John Westergaard of Westergaard Research in New York said that "this is a very solid small company. These guys are engineers. ... They are a very solid group. It's a very basic company."
Two issues face ETS right now, Westergaard said.
One is the success of the Limestone Emission Control System that will go on line next month in Taiwan. The result of that installation won't be known for six months to a year, Westergaard said.
The other, he said, is moving into the infrastructure of the environmental control industry.
In terms of management, Westergaard added, "they have done a truly exceptional job in a difficult time in the environmental laboratory business."
In 1970, when the Clean Air Act passed, he said, ETS was cautious in building up for the growth in business. Many other competitors, he said, built up for a big boom that was slow to materialize.
Now ETS has the perspective of 20 years in business, he said, and is ready for the growing demand in air-pollution control. Many people, Westergaard said, are betting on "the Clinton thing" in expecting the government to crack down on polluters.
Tom Byer of PaineWebber in Richmond said he believes "the company has come a long way," mainly by surviving the downturns in the economy and in enforcement. During the recession, he said, the Environmental Protection Agency was lax in enforcement, choosing jobs over protection.
Now that the economy has turned around, he predicted, regulators will pay more attention to the environment. ETS should, therefore, enhance its service business.
"They have a good reputation," Byer said of ETS, and "people like them." ETS also boasts many years of management continuity.
Byer is encouraged by the merger with Lyttle, which also has "an excellent reputation." He believes ETS will acquire other companies with the same synergy so it will continue to grow. He believes ETS will grow 25 to 30 percent a year internally.
"It's a real clean company. They're totally unrecognized," Byer said. But that level of recognition will change when ETS achieves a place on the regular listing of the American Stock Exchange.
Byer said ETS is more than a technology company, which have been "beaten to death" on the stock exchanges. That's because ETS has built up its service side, giving it a base on which to build.
That will enable it to bring the technology to fruition, Byer said. If the technology works, he said, it will send the company into a new dimension.
ETS, Byer said, "has a good strategy for survival. That's why you have such an exciting story. I have faith in the company."
Dick Denecker, vice president of investments for Advest Inc. in Richmond, said ETS "has got very good long-term potential."
ETS, he explained, is in the right industry because air-pollution control is a priority. During the downturn, he said, ETS never hyped its investors and "has been realistic about what it can and cannot do."
The merger with Lyttle, Denecker said, was "a plus. It added more credibility in terms of size." Lyttle, he said, is profitable and well-known in the Richmond area.
He pointed out that Lyttle's management sold the company for ETS stock rather than for money. That proves, Denecker said, that Lyttle's management was willing to bank their future on ETS.
ETS is willing to grow slowly and surely in the service business, he said, and it will take time to determine whether the Limestone Emission Control system will be a success.
If that system proves feasible, he said, "it should bode very well for the company over the next few years."
by CNB