TEG ENVIRONMENTAL (TGE)

Previous Stock Tip

These companies are all previous recommendations from the Red Hot Portfolio that I have subsequently recommended and then sold from the portfolio at a later date. By no means are these companies intended to be buy recommendations for you to go out and invest money towards their shares. For the opportunity to start making serious money from the recommendations I am making now, just start your no obligation trial!

TEG ENVIRONMENTAL (TGE): We Profit From Waste - Sep 2007

RHPS Recommendation - SELL

TEG is to build a £1.5m composting plant for Gwynedd Council. This will have a capacity of 6,000 tonnes per annum and will process green and kitchen waste collected form households. All being well the plant will be built by next April. At the time of going to press the shares have almost doubled since my original tip, so we sold on 30 August.

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TEG ENVIRONMENTAL (TGE): Joint Venture With Parkwood - Aug 2007

RHPS Recommendation - HOLD

TEG has formed a joint venture company with Parkwood Holdings, called Verdia Horticulture Limited. TEG will build and operate its Silo Cage Composting facilities that turn organic wastes into commercial horticultural compost products. Parkwood's Glendale subsidiary will source the horticultural waste and buy some of the fertilizer byproduct. Verdia intends to build and operate between six to eight medium-scale organic waste conversion facilities over the next two to three years, with the first two planned for Exeter and for Clayland's Corner in Somerset . DEFRA has estimated that the amount of Biodegradable Municipal Waste requiring non-landfill disposal will approximately triple by 2020 to an estimated 28m tonnes. HOLD

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TEG ENVIRONMENTAL (TGE): Mixed Bag - Jul 2007

RHPS Recommendation - HOLD

TEG has reported a "'sluggish uptake"' of capacity at its waste treatment plant in Perthshire, while the start of its major project with Greater Manchester has been delayed by three months. Elsewhere, however, things are going well and TEG has reported a new contract.

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TEG ENVIRONMENTAL (TGE): Demand Higher than Ever - May 2007

RHPS Recommendation - HOLD

At its AGM, TEG's chairman has reported that "'demand for TEG technology is higher than ever"' and has confirmed that TEG will continue to both sell its composting plants and, in some cases, operate them. TEG reckons that is has the best technology in the business and I expect to hear news of new contracts in the coming months. HOLD

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TEG ENVIRONMENTAL (TGE): Raising £11m for Expansion - Apr 2007

RHPS Recommendation - HOLD

TEG increased its turnover seven-fold last year, and was included in the consortium that was awarded preferred status for the Manchester waste management contract. By installing four plants in 2006, TEG has proved its ability to deliver and the construction of a new facility at Todmorden is ahead of schedule. Gordon Brown announced an £8 per tonne increase in landfill tax in the budget, and soon we will hear results of the trial conducted with Shell to remediate oil-based mud drill cuttings. In anticipation of further growth TEG has raised £11m through a placing of new shares. HOLD.

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TEG ENVIRONMENTAL (TGE): Hands Over Swansea Plant - Mar 2007

RHPS Recommendation - HOLD

TEG has completed the construction of its Silo Cage plant for the City and County of Swansea, and after a period of training and demonstration this has now been handed over to the customer. TEG has demonstrated that it can construct composting plants on time and on budget, and this should stand it in good stead for its new Manchester contract.

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TEG ENVIRONMENTAL (TGE): A Tremendous Leap Forward - Feb 2007

RHPS Recommendation - BUY

TEG is the exclusive supplier of In Vessel Composting (IVC) technology to the Viridor-Laing consortium that has been awarded preferred bidder status for the Greater Manchester Waste PFI contract. Assuming the consortium achieves financial closure TEG expects to build four composting plants from 2007 to 2010 with a combined capacity of 180,000 tonnes per annum, producing 125,000 tonnes of compost product per annum. The plants will all process green waste and kitchen waste collected from households in the Greater Manchester region, and TEG hopes to have some continuing involvement in the operation of the plants.

This PFI contract is the largest waste management contract offered to date in Europe, and the value of the construction projects to TEG will be up to £35m. Chief Executive Mick Fishwick described this as "'a tremendous leap forward for us and it establishes us once and for all as one of the leaders in the composting and recycling sector."' This work will act as a reference and undoubtedly make it easier for TEG to secure more contracts in future. I have raised my target price to 150p and my buy limit to 100p. BUY

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TEG ENVIRONMENTAL (TGE): Change of name - Dec 2006

RHPS Recommendation - BUY

TEG is to change its name to The TEG Group plc, which will be the new parent company of two subsidiaries, TEG Environmental Limited and The Natural Organic Fertiliser Company Ltd. This restructuring should allow TEG to better manage its growth. BUY

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TEG ENVIRONMENTAL (TGE): Unblocking Britain's sewers - Oct 2006

RHPS Recommendation - BUY

TEG is making good progress with its various projects to build and operate composting plants, and is bidding on plenty of new business. Meanwhile, TEG has laboratory tests on the oil-based mud drill cuttings supplied by Shell which are close to completion, and next month will see the start of pilot plant trials. TEG is also to build a pilot plant for United Utilities in Stretford to treat "'things that should not have been flushed down the toilet."'

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TEG ENVIRONMENTAL (TGE): Project with Shell - Aug 2006

RHPS Recommendation - BUY

TEG and Shell UK are to conduct a Research and Development Project to investigate the composting of oil-based mud. This is currently subject to thermal processing with the residue dumped in hazardous waste landfill sites. If successful TEG's composting process would convert a hazardous waste to a non-hazardous end product. The project will be funded by Shell, with full-scale trials at TEG's plant in Scotland. Results are unlikely until next year, but could have exciting implications.

Meanwhile, TEG has signed the contract to supply a composting plant to a subsidiary of Norfolk-based Banham Poultry Ltd. This will have the capacity to process 28,000 tonnes of chicken feathers, and "'other food industry waste streams"'.

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TEG ENVIRONMENTAL (TGE): Raising £8m for expansion - May 2006

RHPS Recommendation - BUY

TEG is to raise £8m through a placing of new shares at 70p. It has "'a pipeline of possible opportunities"' and is going ahead with the £2m purchase of a site near Manchester , where it intends to build and then operate a plant using its Silo Cage composting system. TEG is already negotiating with potential customers including Calderdale Council, Blackburn and Darwen and Bradford Councils, and the majority of the bidders for the Greater Manchester PFI. Furthermore, 180 food manufacturers are within 20 miles of the site. TEG intends to complete construction by May 2007.

The firm is also to upgrade or increase the capacity of its plants in Perth , Sherdley, and Kildare. In Swansea it expects to complete plant installation by September, and it has received planning permission for the development of a new facility in Somerset .

TEG estimates the potential market for compost product at 9 million tonnes, enough to support the development of 640 composting plants, and with legislation limiting landfill starting to bite, gate fees (i.e. the amount paid to dump waste) are rising sharply. I have moved my Buy Limit up to 80p and my target to 120p.

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TEG ENVIRONMENTAL (TGE): Expecting New Contracts - Apr 2006

RHPS Recommendation - HOLD

Local authorities now face fines if they do not meet targets for landfill reduction, and this as resulted in a rise in the number of composting projects that are being put out to tender. At present there are 50 composting plants in the country, but the government has said that 450 could be required by 2020. TEG has one of the best technologies available and could win about one in five of these contracts. It can either just supply and build a composting plant, or else do this and then run it as well. Glendale , which looks after public parks, is now marketing TEG's composting plant to its client list of 100 local authorities.

TEG's Sherdley composting plant is now taking food waste from Heinz, and is operating at full capacity despite never having advertised. I expect TEG to announce new contracts this year, and have set a new 12 month target of 110p with a buy limit of 70p. With the price above that, Hold.

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TEG ENVIRONMENTAL (TGE) : Mar 2006

RHPS Recommendation - HOLD

TEG has signed a collaboration agreement with Glendale Managed Services Ltd, the manager of parks for over 100 local authorities, for the joint bidding of commercial scale composting projects. The shares are above my buy limit.

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TEG ENVIRONMENTAL (TGE): Receives Planning Permits - Jan 2006

RHPS Recommendation - HOLD

TEG has received planning permission for a composting plant in Swansea . It will contribute to profit in 2006. The plant will have the capacity to recycle 7,000 tonnes of biodegradable municipal waster per annum.

Meanwhile, there will be no third party appeals against the planning permission granted for its plant in Kildare. From the second quarter of 2006 TEG plans to be processing up to 15,000 tonnes of food and green waste.

For its Sherdley Plant farm in Cheshire , TEG has secured a three year contract to compost waste from the local Schwan pizza production plant. Broker Canaccord believes that TEG is being paid a 'gate fee' of £43 per tonne, which is ahead of the £40 per tonne assumed in its own forecasts.

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TEG ENVIRONMENTAL (TGE): Planning Approval Gained - Dec 2005

RHPS Recommendation - BUY

TEG has been granted full Animal By-Product approval by the State Veterinary Service for its TEG Silo Cage. This should allow it to operate its test facility in Cheshire on a commercial basis. TEG has also received planning approval for its waste treatment plant in County Kildare. This was built in 2002 to process sewage sludge, but TEG now plans to process food waste and green waste materials using the 24 Silo Cage Unit.

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TEG ENVIRONMENTAL (TGE): Confident Directors - Oct 2005

RHPS Recommendation - HOLD

TEG's Chairman, Nigel Moore, Deputy Chairman, John Hough, and Technical Director and inventor of the TEG composting prices, Dr Alan Heyworth, all bought shares in the placing on 18 August.

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TEG ENVIRONMENTAL (TGE): How to turn old pizza and sewage sludge into a 45% gain in the next 12 months - Sep 2005

RHPS Recommendation - BUY

With a slogan like 'right for the Legal Environment, Right for thr Natural Environment, Right for the Economic Environment', you would think that TEG Environmental is standing for parliament. But actually it does something much more useful. It turns chicken carcasses, sewage sludge and bits of old pizza into fertiliser. And next time you are striding across the green fairways of your golf club, you might just be enjoying the benefits of this miraculous technology.

Every now and then I come across a product which is of such obvious benefit that it surely must succeed.

And having seen for myself one of TEG's composting silos in action, I reckon this is a good instance. But before I describe it to you, let's go back a stage.

In the course of researching TEG I have been told some pretty unpleasant stories. Such of a person, driving innocently along a country lane, whose windscreen was suddenly splattered with blood - courtesy of a farmer scattering animal remains over the adjacent meadow. Such as the tale of breakfast cereal, past its sell by date, being spread across the fields of Norfolk .

Apart from being disgusting, such reckless treatment of waste can contaminate the soil, poison grazing animals and pollute the air. From the end of this year, though, it will be illegal to dump untreated organic material on the land or into landfill. And one of the most attractive alternative methods of disposal, and one favoured by Friends of the Earth, is composting.

Composting, as I am sure you know, is the process of natural and biological decomposition which breaks down organic materials and leaves a humus-rich residue. It is not new. But up till now it has required a large area of land on which to spread the waste, and in order to allow the air to get at it, it has needed to be mechanically turned. This agitation uses both energy and releases dust and odour into the environment.

TEG's innovative composting system is at the cutting-edge of green technology

Twelve years ago, Dr Alan Heyworth, a scientist from the University of Wales, began some experiments on farm waste to try to develop a composting process that would happen entirely naturally and without the need for any intervention.

When I visited TEG's site near Preston, I met Dr Heyworth, a man described to me by former Chief Executive Dick Bilborough as "'steeped in the science of composting"'. His belief in invention is undimmed by the passage of time. "'When we started out"' he recalled, "'we were promised orders straight away. We though things would move along much quicker. It has been frustrating."'

"'But,"' he continued, alluding to the legal, regulatory and environmental imperatives driving the industry, "'it must happen now. It has got to."'

We were standing alongside his invention, the TEG Silo-Cage, housed in a building the size of a large barn, and operated by just one man. Imperceptibly and in complete silence it was processing chicken bones, whelks and old pizzas into compost. Eight silos stood in a line, each about 15ft high. Waste material, mixed with 'amendment materials' such as wood chippings or garden waste, is mechanically lifted and dropped into the top of each one.

The trick is to get exactly the right mix of ingredients to produce vigorous microbial activity, which stimulates air to be drawn passively into the silos from the base of the system via a 'chimney effect'. This is extraordinarily effective. TEG's Technical Sales Manager, Fiona Maudsley, thrust a thermometer some two feet into the top of the silo and it registered a temperature of 80°C.

Fourteen days after it has been fed in at the top, the material emerges at the bottom, 30% reduced in volume after the release of water and carbon dioxide (other gases such as ammonia are reabsorbed) and in the form of rich, crumbly compost. The process requires very little energy, and having stood right next to it I can promise you that it produces virtually no smell or dust.

Changes in planning rules mean that local authorities are being forced to turn to greener waste disposal methods

Despite its obvious attractions, TEG has struggled to sell its siol-cage, partly because up until now landfill has always been cheaper, partly through the sheer intransigence of its potential customers, and partly because of the inflexibility of local authority planning offices. An application for a TEG plant in Gloucester was refused on planning grounds, despite the fact that it was wanted by the waste disposal department - although you may think that incentive enough would be provided by the hefty fines that will fail to meet targets for environmentally friendly waste disposal.

Driven by new legislation and the changing economics of waste treatment, customers are at last knocking at TEG's door. It will sell its silo cages, manufactured by engineering subcontractors, to local authorities, waste management companies, utilities, farmers or food processors. Or else it will Build Own and Operate (BOO).

Customers are now flooding in

In February, Swansea County Council accepted a proposal for a composting plant worth £925,000, capable of processing 7,000 tonnes of waste per annum, while another application for a plant in Kildare in Ireland is going through the planning process. In Norfolk , Banham Poultry ordered a 56-silo plant for £2m, TEG's first deal with a private entity. Banham wants to process the waste from its own operations, but also sees a commercial opportunity by accepting waste form other local businesses. And last month TEG announced its largest deal yet, worth £14m. It is to take over a composting operation in Perthshire, dealing with 35,000 tonnes of material per annum, from the existing operator, Binn Skips. It will install its silo-cages, at a cost of £1.5m and then operate them for 11 years. The cost will be met out of the £3.4m that TEG has raised on the stock market last month.

TEG will receive revenue form the Perthshire operation from this month, and it will also be launching full commercial operations from its pilot plant at Preston next year, for which it has a waste management licence, a 15-year planning permit, Animal By-Products Positive Release Approval and no shortage of demand from local food businesses.

Recent contracts will be the first of many

These projects should be the first of many. TEG reckons that a total of 42m tonnes of waste per year is suitable for composting, including agricultural waste, sludge form paper mills, ready meals, tannery waste and the sweeping form fish and meat processors. Banham's 56-silo cage will be able to treat up to 35,000 tonnes of waste per year, barely scratching the surface of the potential market. No wonder TEG reports 'a pipeline of possible opportunities, including the sale of plant and several Build Own and Operate projects'.

And what of the end product, that rich fertiliser? Already it is sold to golf clubs and local authorities and enriches both the Eden Project and the Manchester United training ground. In its calculations and prices TEG does not assume any revenue form compost sales which are, so to speak, the icing on the cake. It does, though, have a brand name, Envigro, and a potential market for compost product of 9m tonnes per year.

RHPS Verdict: Waste producers and waste management companies have been dragging their feet, but with legislation tightening and landfill costs rising, they can afford to do so no longer. Dr Heyworth's vision is at last being fulfilled. The shares jumped on news of the Perthshire contract and the equity fund-raising and I expect more of the same to propel the shares higher.

To take advantage of the recommendations RHPS is making today, start your no obligation trial now!

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The figures refer to the past and past performance is not a reliable indicator of future results. The past recommendation highlighted here is a small company share.By their nature, such investments can be relatively illiquid and, as a result, hard to trade. This makes such shares more risky than other investments. Please seek independent financial advice if necessary. These figures do not include the bid-offer spread, unless otherwise stated. Since the service began on 01/12/98 running through to 31/07/07, the average overall performance of the shares recommended is up 19.91%.All gains exclude dividend payments and dealing costs, unless otherwise stated. Profits from share dealing are a form of income and subject to taxation. Levels and bases of, and reliefs from, taxation are subject to change, and depend on individual circumstances. Full portfolio available on request. Fleet Street Publications Ltd is authorised and regulated by the Financial Services Authority. FSA No. 115234.

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