You Can't Judge a "Green" Book Value by its Cover

By Freddie Mooche - Axcess Business News

Pollution regulations have become a double-edged sword. The Environmental Protection Agency as well as State and Local agencies are attempting to enforce them while communities and industry shirk its costs.

Massachusetts ranks near the bottom in the nation for checking on industry's compliance with environmental laws, especially in minority neighborhoods, according to a new federal website that for the first time allows the public to monitor how anti-pollution laws are enforced.

Only 27 percent of facilities holding major environmental permits have been inspected by state or federal regulators in the past two years, a rate lower than all but three other states, according to the US Environmental Protection Agency.

In Hartford Illinois residents have been having problems with local oil refineries. The Illinois Environmental Protection Agency, responding to the latest complaint found benzene in four different levels of between 10 and 12 parts per billion in effected houses. The release prompted local reports finding's of the existence of 3.8 million gallons of gasoline in the local water table.

Dennis Bedwell, a Hartford resident, summed it up this way, 'I have a daughter living at home and I'll fight for my family." Mr. Bedwell lives directly across from Premcor Refinery, who has had more than one problem in that community. In response to the complaints, the Illinois Attorney General told Premcor that they had to increase the rate at which they have been removing this gasoline over the last ten years. Premcor refused.

A series of class action suits have been filed against Premcor refinery by Illinois attorney, Mary Ann Pohl, who says the courts have certified three classes in an action against Premcor.

In Pennsylvania, with much fanfare in July 1998, Lehigh, Northampton, Monroe and Schuylkill counties began the curbside collection of leftover household paints, solvents, motor oil, pesticides and other hazardous wastes, offering residents a convenient way to help protect the environment.

But after 41/2 years, the popular program has been scrapped, and it isn't likely to return in the curbside collection format that's resulted in more than 6,300 pickups over the past two years.

'"We could not afford to do it at this rate,'" said Lehigh County Planning Director Robert E. Korp, noting that the county's budget crunch for 2003 helped kill the program.

Even the military is feeling the crunch of environmental regulations, attempting to assuage the White House to give government bases exempt status.

Within all these communities one common cry is heard; cost. While costs run high to remove hazardous waste industry and government are turning to technology to find ways of not only cleaning up hazardous waste but also ways to dispose of it. This has spawned a surge in newer technology applications being deployed by environmental companies.

Cleaning Up In Green Investments
(environmental stocks, by the numbers)

Axcess Business News looked at several of these smaller hazardous waste companies and compared them by the numbers. Our findings were interesting. The Environmental Services Industry is expected to see 13.9% annual growth over the next five years, according to Charles Schwab's "Equity Snapshot Report." MarketWatch had given those figures to be more like 25.93% according to their Nov 17, 2002 Waste Management Services Fundamentals. Regardless of whose figures are more accurate, in either case the consensus is one of double-digit growth over the next five years.

But according to comments made to Axcess Business News by a Charles Schwab representative in their Reno Nevada office, "Schwab does not provide investor advice" and their reports are purchased from third-parties. However in the fine print it states, "this report report may include the Schwab Equity Research Department's Schwab Equity Rating," Nice try Chuck. Axcess Business News noted discrepancies in MarketWatch's report as well, leaving the true figures somewhere in between those estimates.

Axcess Business News examined three companies, whose links to their individual write-up can be found below. In looking at these newer technology driven companies each was classified a Micro Cap Stock, each had unique stories on their business and the technology they offer.

Clean Harbor (Nasdaq: CLHB) provides environmental services to customers in the United States and Puerto Rico and recently completed the acquisition of Safety-Kleen's Chemical Services Division (CSD) on September 10, which accounted for 25% of its revenue. Shares of Clean Harbor have risen sharply in the last three months while its value to investors fundamentally has fallen. Shares closed Friday January 24 at $14.18. We noted that insiders during this time have been selling. Clean Harbor's 52 week high is $17.82. By the numbers, while this company has shown good growth for its shareholders, at its present levels other opportunities might fair better. Clean Harbor's insiders must have thought that as well.

Axcess Business News added Clean Harbor (CLHB) to its Small Cap Stocks Guide January 24 in its "worst picks" column and will be following this stocks performance for our members.

Perma Fix Enviro Services (NASDAQ: PESI) treats, stores and disposes of hazardous industrial and commercial wastes. PESI had recorded an increase in revenue of 39% for 3Q primarily attributed to its nuclear waste segment. Revenues for the nuclear segment were $13.5 million for the quarter, reflecting an increase of 140% over the same quarter of 2001. This increase is principally a result of the growth in the mixed waste revenues due to the Company's continued buildup of this new strategic market.

These favorable results for the nuclear segment were negatively impacted by the industrial segment which experienced an overall slowing principally due to the current economic downturn, according to the Company.

Axcess Business News noted that while PESI has had a good year, its sales per employee ($149,570) was near the industry average ($186,000), suggesting its potential to continue showing robust growth could be curtailed without higher expenditures in its G&A expenses. We suspect that this could stall future earnings growth and have a "wait and see" view towards this company. Apparently Wall Street shares that view as PESI stock price showed little to no reaction following its November 11, 2002 announcement of improved earnings.

Environmental stocks are typically sensitive to news when newer technologies or applications are involved. PESI closed January 24 at $2.47. Its 52 week is $3.50 which it hasn't seen since April 2002. CBSMarketWatch columnist, Mark Hulbert, began touting PESI in his column January 15. Hulbert's MarketWatch story discloses that he publishes the Hulbert Financial Digest that most likely also featured PESI.

Axcess Business News added PESI to its Small Cap Stock Guide Jan 24 in its "Best Picks" column and will be following this stocks performance for our members. While adding it to our column our view is more wait and see than anything else. While PESI had a good quarter in its Nuclear segment, we do not expect those kinds of improvements to continue as rapidly although long-term PESI seems to be a safe bet, or Green Investment.

KBF Pollution Management (OTCBB: KBFP) owns the patented technology for separating toxic and heavy metals from waste water and hazardous materials. The Company's Selective Separation Technology boasts the ability to virtually eliminate hazardous waste. KBFP boasts that it can clean up toxic waste to the point of eliminating landfills.

Of the three Micro Cap companies examined, KBFP is no stranger to Axcess Business News. We had featured it in a top story Nov 25, "Green or Mean Returns," shortly after adding it to our Small Cap Stocks Guide "best picks" column on Nov 18. That story and stock pick selection were prompted by a news release KBFP had made Nov 14 announcing a 50% increase in sales, verses PESI's 32% increase. Another company featured in that Nov 25 article, Greenman Technologies, Inc. (AMEX: GRN) was not included in this story as its core business is recycling tires not hazardous waste treatment. Greenman Technology had been interviewed in our Inside Wall Street column following its listing to the AMEX. Mr. Chuck Coppa, GRN's CFO was featured in that interview.

Axcess Business News received lots of queries on KBFP following that Nov 25 news article, prompting us to interview its President, Mr. Kevin Kreisler, on the company's recent news and its plans. That interview appeared in our Spotlight column, hosted by Armando Duke, December 9, 2002.

KBFP had climbed from $0.05 on Nov 18 to close on Jan 24 at $0.06. Shares had traded over $0.07 before settling back on Jan 24. Like PESI, KBF Pollution Management Inc had a great 3Q but unlike PESI its stock price reacted positively to its news. In addition, the Company's sales per employee was only $82,000 verses an industry average of $186,000. Axcess Business News believes this to be a positive figure for KBFP and suggests that its improvements are likely to continue unhindered by personnel constraints that would otherwise push up costs parallel to growth. KBFP remains in our Small Cap Stock Guide "best picks" column and is viewed to be "very positive" in expectations of continued improved revenue and earnings.

Of note was a letter of intent KBFP had announced on Dec 19, 200l to acquire Jones & Co., a Connecticut based hazardous waste business. Axcess Business News believes KBFP may be positioning itself to far outperform its peers should that acquisition be completed. The company had made significant plant expansions in 2002 in anticipation of that acquisition being completed.

To view these companies individual numbers, click on any of the links below.

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