Chairman and CEO: Saagar Govil
WSA: Good day from Wall Street. This is Juan Costello, Senior Analyst with the Wall Street Analyzer. Joining us today is Saagar Govil the CEO of Cemtrex Incorporated. The company trades on the bulletin board ticker symbol CTEI. Thanks for joining us today Saagar.
Saagar Govil: Happy to be here.
WSA: Great. Great to have you on. Now, starting off, give us a history and overview of the company for some of our listeners that didn’t catch our last interview.
Saagar Govil: Sure, sure. Cemtrex was founded in 2001. You know, basically we started out as an emissions monitoring technology company. We’ve gradually grown from, one small product line into a broader based emissions monitoring technology company. And over the years we made a few different acquisitions to arrive at the point where we are now. In 2006, we acquired an industrial air filtration company which was sort of peripheral to the kind of technology offering we were at — we had at that time. And, you know, around 2010, 2011, we were able to expand significantly into overseas markets with our environmental technology offering.
We also recently acquired another business in the electronics manufacturing space last October. So we’ve made a couple of different acquisitions and also grown organically, and that’s kind of how we’ve gotten into this point today where we basically have two business operations right now which is the environmental technologies group and the electronics manufacturing business of ours. And so as we sit today, we’re looking to grow both of these businesses both organically and inorganically and we see a lot of opportunity and potential to continue building the company from where we are.
WSA: Right. So, what are some of the drivers behind the company’s recent Q3 results which were particularly strong?
Saagar Govil: Well, basically we have a strong activity in the market. This Q3 is actually our fiscal Q4. So, these were our year end numbers basically. We finished the year with the–our fiscal year with about 47 million in sales which was up from about 13.5 million the previous period. So, it’s been a big dramatic jump in sales and, you know, that’s largely because we acquired a much larger company than us last October which I just briefly mentioned, which is the electronics manufacturing business. In addition to that we’ve also seen strong organic growth in our business.
There’s been a strong demand internationally to implement different types of environmental technologies and equipment. And, we’re continuing to see strong demand for these products that we offer. So, that’s our primary driver for why we were able to grow our revenues so dramatically almost 250% and we are continuing to try to keep up that momentum and build, and be a growth-oriented company.
WSA: So, what are some of the key trends that you are seeing right now in your sector, and how are you positioning the company to capitalize?
Saagar Govil: Well basically our environmental business, there are strong prospects for. I mean recently the US and China came to an agreement about cutting different types of CO2 and greenhouse gas emissions, and this is the big initiative because previous efforts on the international forum were sort of hindered because China and the US couldn’t come to an agreement. And this new agreement really marks a new precedence in overall environmental, you know, controls efforts.
And so, I think these two major economies start to adopt more and more technology and there’s a growing awareness in China, and India, and Southeast Asia where there’s so much growth happening that we’re going to see consistent growth for our business because we sell directly into those markets. Almost I think 90% of our environmental technology business comes from overseas project whether it’s the Middle East, Indonesia, South East Asia, India, China, and other places in the world. So as that market continues to flourish because of the growing demand for healthier environments for the local population, we’re able to sell into those markets. So, we’re excited about those opportunities for the next couple of years.
And then, on the electronics manufacturing business for us we sell heavily into the medical devices space. So, our electronics is used with a lot of major medical OEMs. And one of the key trends that’s really happening right now is medical device manufacturers are seeing growth in sales due to innovation and technology but also because there’s new patients in America under the new Affordable Healthcare Act.
So, as new patients are under — are able to undergo different types of procedures that they couldn’t pay for before, medical device manufacturers are able to increase those sales. And we sell directly into the OEMs because the electronics are a major component of these products. And so, we’re seeing, we have several OEMs who are key strategic players in this market and as their sales continue to grow our sales will continue to grow.
So, we have formed strong partnerships and that’s really where our sales efforts are focused these days. So for both of these businesses, we see a lot of strong prospects. And then one other point I’d like to make is that right now because of the interest rates and there’s a strong desire to–you know, for companies to lend, and we’re finding that we can go out and make acquisitions because there’s capital available in the market these days for acquisitions. And growing through acquisition has been a pillar of one of our growth strategies.
And so we’re constantly looking at different types of acquisition opportunities, and that availability of capital to do these types of deals makes it more feasible for us to go out and buy another company like we did last year. So that’s another reason why we’re excited because we can get good interest rates and continue to build through strategic acquisitions.
WSA: Right, certainly, just lead to my next question, can you talk a little bit about the acquisitions strategy? I guess you had a company that you’re going to acquire a couple of months ago but didn’t because it didn’t fit some of the synergy there.
Saagar Govil: Yeah, yeah. I mean, you know, we find that sometimes getting over hurdles, whether in terms of scale can be achieved by acquiring certain companies rather than trying to build that within our organization. You know that certainly if you find the right company and at the right price, we think that a lot of deals can make sense. So we’re constantly evaluating different types of companies both for our environmental technology business as well as for the electronics manufacturing business and something that can fit sort of strategically and give us a more competitive edge as we continue to grow and thrive.
So we’re constantly looking for deals and we’ve come to terms with a company over the summer. And as we went through the due diligence process, there was some issues that came up, and that unfortunately we just weren’t able to come to any kind of resolution. And so, that deal, unfortunately, was not able to go through but we also are looking at other opportunities, and I’m optimistic, and one of our goals this year is to get another acquisition done, you know, of a decent size in terms of revenue and income. So we think that that’s a good way for us to continue growing and we’re going to continue pursuing that strategy.
WSA: And what are some of the other key factors that you feel make the company unique from some of the other players in the sector?
Saagar Govil: Well, I think, you know, commitment to quality and service is really how we stand out. We have gotten different types of supplier awards for being able to deliver on time and being able to deliver consistent quality. And so, I think that’s one of the things that we really pride ourselves on and focus on heavily here at Cemtrex. So, sometimes it’s hard to differentiate yourself in these kinds of industries whether you’re in the environmental business where a lot of your products are based on government regulations.
So, companies have to buy a product, and so, why do they come to us? They come to us because we’re going to be able to meet their mission critical requirements in a timely manager and timely fashion and basically manage the entire process for them. So I think costumer service is really where we focus on and try to stand. And same goes for the electronics business where we’ve been able to get a supplier award over the last couple of years.
WSA: Great. And perhaps you can walk us through your background and experience there, Saagar, and talk about the management team. You recently had an award, Top 40 Over Forty.
Saagar Govil: Yeah, Top 40 Under Forty.
WSA: I mean Under Forty, right.
Saagar Govil: Yeah, well, you know, I had been working at Cemtrex for many years. I actually worked at the company while I was actually even in high school. So, I have a lot of familiarity with the products and the organization, right, when I actually started working here full time five or six years ago. So, I started out as a field engineer going into the field and working at different sites to help install the products. So, I have an intimate knowledge of how they work, and what are the issues, and what it takes to provide a good level of service to our customers. So, I think that’s given me a perspective to really put that into our entire organization from the ground up. And, gradually I got into the sales and the business side of the operations, and I’ve been here for about six years now, and in the CEO role for last three.
So, then my background is materials engineering from Stony Brook University. Some of the other key management, you know, Ravi Narayan who handles most of the monitoring and emissions division. His background is over 20 years of experience in the monitoring and instrumentation industry, working for several companies in India, Europe, and in the US. And he’s been able to consistently help us build that group up. And with our electronics manufacturing side we have another individual Frank Bittighofer who has been with the company over there for about more than 20 years and he’s got a tremendous amount of experience to go in that company from almost two million in sales to, what, about 60 million in sales back in 2011 at that time which is where it peaked at. And so, he has a tremendous experience both in engineering level as well as with an MBA. And he’s definitely qualified to really take that company to the next level which is what we’re looking to do for the next five years.
So, and then of course our CFO Renato Dela Rama has an MBA and Masters in Accounting. And so, he’s been with the company for over ten years and he’s got a considerable amount of financial expertise particularly when it comes to different types of international accounting. We have an organization that is international and as a result you need talent that understands different types of reporting standards and how to deal with a lot of logistical issues that arrives when you have different types of reporting standards and tax issues and those kinds of complexities that naturally occur. So we’ve had one year with this large international operation and it is run very smoothly because of how qualified our team has been. So, we’re really excited and think that we have the right people in place to continue growing.
WSA: And do you believe that the Cemtrex message and upside potential are completely understood and appreciated by that financial community and if not, what do you wish investors better understood about your company?
Saagar Govil: Well I think awareness, general awareness about the company’s–what we’re lacking, I think is we need to get more people to just hear the story. I think, generally, when we are able to tell people the story, they get excited about it and they see the inherent value of what we’re trying to do. I think fundamentally we believe in, you know, just being in industries with high or strong economic prospects, and that’s really important to us that there’s going to be a long term economic growth that’s, you know, above the, sort of average Industry. And that’s what we’ve been able to do by being in these two sectors that we’re in.
And I think as we continue to tell our story that different types of investors will see what we’re doing and continue to buy into what we’re doing. I think we’ve also demonstrated a commitment to building shareholder value, and I think sometimes it’s not so easy to see just from looking at a financial statement or a press release. And I think¸ if you looked at the return on equity and the fact that we’re able to do a massive deal without any dilution, shareholders will really appreciate that. We’ve able to grow so rapidly without compromising their holding in the company. And so, I think if were go get across that, that message would be what I would want to convey the most, is that we’re committed to driving shareholder value and I think the results over the last 12 to 18 months demonstrate that. And so, we’re looking to continue doing more of that over the next 12 months and beyond.
WSA: Well¸good. And once again, joining us today is Saagar Govil, CEO of Cemtrex Incorporated which trades on the bulletin board, ticker symbol CTEI, sharing at 69 cents a share and market capital of about 28 million. And before we conclude to recap some of your key points, why do you believe investors should consider the company as a good investment opportunity today? What else can investors look forward too?
Saagar Govil: Well, We delivered about 2.6 million in earnings that I think based on the market cap, if you look at comparable companies, were are certainly undervalued with that respect. So we’ve been able to achieve significant growth and I think over the next two to three years we’re going to continue to try to repeat that process and really grow, and that’s what we demonstrated in the past and that’s what we’re committed to doing in the future. And I think as shareholders go through our reports and really look at the company in our whole entirety, they’ll be pleased with what they see and what we can do here.
WSA: Well, we certainly look forward to continue to track the company’s growth and report on your upcoming progress. And we like to thank you for taking the time to join us today and update our investor audience on Cemtrex. It’s great to have you on.
Saagar Govil: Thanks a lot Juan. I appreciate the time.