From Niche to National? Exploring the Growth Potential of a Upcoming Integrated Propane Provider

EDM Media 27-Feb-2024 8:39 AM

Propane, often overshadowed by flashier clean energy alternatives, remains a vital fuel
source for millions of households and businesses across North America. Major players
like Superior Plus Corp (TSX:SPB)(OTC:SUUIF), Suburban Propane Partners (NYSE:
SPH), and Ferrellgas (OTC:FGPR) dominate the market, but a smaller player, Titan
NRG (OTC:TTNN), is quietly making strides and raising questions: can it reach the
scale of its larger counterparts?

The Propane Landscape: Reliable and Versatile

Propane, a clean-burning and versatile fuel, powers everything from home heating and
cooking to industrial applications and even transportation. Its appeal lies in its:

? Reliability: Unlike electricity or natural gas, propane is stored on-site, ensuring
consistent supply even during outages.

? Versatility: Propane can be used for various applications, making it a dependable
choice for diverse needs.

? Environmental benefits: Compared to other fossil fuels, propane burns cleaner,
emitting fewer pollutants.

Superior Plus, with a market cap exceeding $2 billion, and Suburban and Ferrellgas,
each boasting a market cap of over $1 billion, are the established giants in the North
American propane distribution landscape. These companies share many similarities,
including extensive infrastructure and distribution networks, diversified customer base,
and brand recognition, attributes that allow them to control about 20 percent or so of the
market. The remaining market share is divided amongst numerous smaller players,
each with varying market presence and qualities that could make them of interest to the
incumbents, as they look to expand the breadth of their domain and capitalize on
economies of scale.

Titan NRG: A Rising Star with Growth Potential

While smaller, Titan NRG presents intriguing growth prospects 1) by serving specific
regions and customer segments that larger players don't control, and 2) executing a
valuable vertical integration strategy. The Tuscan, Arizona-based company has
established a solid footprint in its home state with its fleet of MC-331 tankers delivering
energy in eight additional states to generate cashflow and fund plans to become a full-
scale integrated powerhouse complete with a state-of-the-art LPG rail terminal.

Titan presently serves more than 2,500 residential customers. Further, the company is
no stranger to the industry juggernauts. In fact, Ferrellgas, Blue Rhino (the popuar
brand of Ferrellgas), Marathon (NYSE:MAR), AmeriGas, a unit of UGI Corp. (NYSE:
UGI), and more are partners of Titan NRG and its family of companies.

Titan NRG is led by industry veteran Alex Majalca Jr., who has 20+ years in the
propane industry, including vehicle and commercial applications, retail operations,
wholesale, transportation, and rail. Majalca is spearheading the terminal project, which
will provide transloader services as it completes construction of the terminal that is
already permitted for 1.2 million gallons of gas storage and 18 rail terminal spots.

Record Profits in Q3

Earlier this month, Titan NRG released results from its third quarter of fiscal 2023,
ending December 31, 2023. Despite unseasonably warm weather impacting the
industry during the quarter, Titan NRG delivered a strong performance, highlighting its
resilience, efficiency, and promising growth trajectory.

Of particular note, the company had record gross profit of $1.04 million and net profit of
$130,624 on revenue of $2.3 million. The company reported capital assets of $6.3
million before depreciation and cash on hand of $905,520 through the end of the
quarter. Speaking to his company's performance during challenging market conditions,
Majalca commented, "[O]ur cash on hand jumped by nearly $300,000, another benefit
of our efficiency that has a direct positive impact on our bottom line."

The company transported in excess of 15 million gallons of liquified petroleum gas
during Q3, pushing its 2023 total to over 40 million gallons.

The Road Ahead: A Marathon, Not a Sprint

Driven by factors like population increase and infrastructure limitations in certain
regions, the demand for propane is projected to rise in the coming years. By catering to
specific customer segments and geographic regions, Titan is in an enviable position to
keep carving out a profitable niche within the broader market. Plus, the company
embraces technology - its NRG Dynamics division is 100% cloud-based - leveraging
tech for efficient distribution and customer service, which can give it a competitive edge
in addition to the value of its rail terminal that would make more sense as a bolt-on,
rather than a build for bigger peers.

While the road ahead presents challenges, the rising demand for propane and Titans
strategic approach position them for potential future success. Investors looking for
exposure to the propane market should carefully consider the risk-reward profile of
individuals in the space, including Titan NRG, alongside established players like
Superior Plus, Suburban Partners, and Ferrellgas.

The post From Niche to National? Exploring the Growth Potential of a Upcoming Integrated Propane Provider appeared first on Wall Street PR.

COMTEX_448422481/2770/2024-02-27T08:25:39