LAST WEEK, Transcu Group, which appeared on the top volume list daily, rose almost 13% to close at 13 cents today. So, it was with anticipation when a bunch of dealers, analysts and media met up with CEO Akihiko Matsumura, and his younger brother Takehiko, CEO of Nanomizer Pte Ltd. Both brothers launched into an hour-long presentation of Nanomizer’s technology and its potential. Nanomizer is a private company, 100% owned by the Matsumuras. Transcu has an option to acquire 10% of Nanomizer, something that could be useful if Nanomizer lists. “Listing is on the horizon. If possible, Singapore would be good but in terms of valuation, Hong Kong or the US is better,” says the elder Matusumura, who owns 24.4% of Transcu.

Nanomizer has developed a machine capable of forming an emulsion fuel of oil and water, saving on oil and cutting down emissions substantially. The system is known as Nano-Emulsion Fuel System. Nanomizer has intellectual property rights over this technology, and it has an agreement with Transcu to distribute these machines to companies with boilers such as CNOOC and Sinopec as well as ship owners like Universal Shipping. In January this year, Transcu signed an MOU with Shanghai Timeast Offshore Oil Engineering and Technology Company to distribute the Nano-Emulsion Fuel System in China for three years. Shanghai Timeast will pay US$500,000 ($667,000) for the distribution rights in total.

 

For all the promise, three years after a reverse takeover of Eng Wah Organsiation, Transcu Group continues to struggle. In August, the company announced a non-renounceable rights issue of two cents per share, with free warrants, to raise $9 million. If the warrants are converted at the conversion price of four cents per share, the company would be able to raise $36 million. Based on its year end results to March 31 2010, the company’s net cash outflow per quarter is around US$2.6 million. The net loss for the full year was $28.9 million. The rights money will run out by June 2011 if cash flow continues to be negative.

 

But all is not lost. As the two brothers explained, they are on the verge of “something great”. Once the Nanomizer system is approved by the Japanese authorities, and the IMO – International Maritime Organisation – they will be able to install the system on some 200 ships. There are 5,000 new ships being built which will also want to install the system, Matsumura says. Each system costs between US$1 million to US$2 million. Analysts reckon the distribution fee could be between 5-10%. That would give the company some $10 to $14 million of earnings.

 

In the meantime, the company continues with its two current businesses — a pharmaceutical product which delivers drugs through a skin patch, and cosmetics products. The skin patch, also known as a transdermal drug delivery stystme is pain-free and non-invasive. However, it has yet to gain wide acceptance. The cosmetics brand Electore, has developed a serum to get rid of wrinkles. Despite the innovations, the stock continues to be a concept stock with no concrete profit figures yet.

 

The STI (3,076) made another new two-year high yesterday. In the short term, indicators look somewhat fatigued, and a retreat early next week should not be ruled out. Support appears at 3,030 initially, and 3,000 subsequently. An earlier break above 2,900 indicated a target of 3,120, and this looks attainable. The break above 3,000 indicates a further upside of 3,400, but this is potential at present, much like Transcu’s Nano-Fuel Emulsion System.