Honeywell: Detecting And Cleansing
The Air Of COVID-19
- There is growing evidence that COVID-19 can spread through the
air. This is concerning as society tries to get back to normal and
open schools, stores and restaurants.
- Honeywell has produced its Healthy Buildings solutions to help
manage virus outbreaks within an enclosed space.
- Two microcap companies named Kontrol Energy and Manganese X are
also developing their own solutions for detecting and cleansing
COVID-19.
Much of the focus of traders and investors with respect to
managing the COVID-19 pandemic has been on developing a vaccine,
testing, hand hygiene, personal protective equipment and contact
tracing. But one area that I believe might be relatively overlooked
is building management. The Centers for Disease Control revised its
COVID-19 guidelines earlier this month. The CDC has announced that the
virus “can linger in the air for minutes to hours and travel
farther than six feet". This poses serious issues for containing
the virus, particularly as society tries to get back to normal with
schools, retail outlets and bars and restaurants opening up. This
also presents an opportunity for companies that are developing HVAC
COVID management solutions.
Honeywell International Inc. (HON)
recognized this problem and opportunity months ago, launching its Healthy
Buildings solutions in May. The company is able to combine its air
quality, safety and security products with advanced analytics in
order to provide building managers with personalized service to
monitor for and minimize any potential virus outbreak. The stock
has underperformed the market since the virus outbreak despite the
launch of this solution and its heavy involvement in distributing
PPE. So investors who are looking for an under-the-radar stock that
has benefited from the coronavirus economy might have one in
HON.
Data by YCharts
A temporary win on virus management could lead to permanent new
revenue streams in a variety of industries
Honeywell's opportunity is enormous and varied, as evidenced by
a recently
announced collaboration with the Carolina Panthers NFL
team to manage the safe return of fans back to the team's home
stadium. The Healthy Buildings solutions will continuously monitor
the air quality within Bank Of America Stadium and Honeywell will
provide fans with Panthers-branded hygiene and protective gear such
as masks, hand gel and cleaning wipes. Given the resistance of some
people in the United States to obeying safety protocols which has
led to further spread of the virus, the branded gear might help to
encourage proper use.
Once the threat of COVID-19 subsides, the Honeywell solution can
morph into an IoT building management service. In addition to
monitoring for the virus, it will identify and correct building
controls issues such as carbon dioxide levels, temperature and
humidity. The Healthy Buildings dashboard can manage aspects of
building management like fan capacity and cleaning tracking. This
can lead to cost savings and service improvements as resources and
employees such as janitors can be more timely and efficiently
deployed. The virus acts like a door-opener for Honeywell's
building management solutions that could lead to permanent new
business that might otherwise have been a harder sell without the
immediate urgency.
Other companies looking to capitalize by detecting and
cleansing the air of COVID-19
While Honeywell will be a major benefactor in this sector, there
are smaller companies that offer a more "pure play" speculative
upside approach to COVID building management than a $100 billion
company.
Kontrol Energy Corp. (OTCQB:KNRLF) (KNR.C) recently created what
it calls BioCloud technology in order to manage the pandemic. This
wall-mounted unit detects the presence of COVID-19 in the air and
triggers an alert system to warn building managers so moves can be
made to control an outbreak before it occurs.
Last month, the company was featured in an
article by the CBC (Canada's government-owned national
news media outlet), causing the stock to more than double in price
after it already had a good run. It currently has a market cap of
approximately $110 million. The immediate target market will be
schools, hospitals, long-term care homes and mass transit. The
company estimates a $12,000 price tag for each unit and says it has
secured the manufacturing capacity to produce up to 20,000 units
per month. The technology was independently tested so the next step
would be securing contracts.
In addition to BioCloud, the company recently procured a new
order for its SmartSuite® smart building technology across four
apartment buildings located in Ontario, Canada. So much like how
Honeywell is able to leverage its virus management solutions into
an IoT building management contract, Kontrol may be able to do the
same thing on a smaller scale.
While Kontrol has developed a virus tracker and early warning
system, Manganese X Energy Corp. (OTCPK:MNXXF) (MN.V) is looking to go
one step further and outright kill the virus once detected in a
building. Earlier this month, its subsidiary Disruptive Battery
Corp. signed an MOU with
PureBiotics to acquire a significant equity share of up to 50% in a
PureBiotics Environmental Air Quality Control Company. Even though
it's still in the MOU phase, PureBiotics' CEO Lino
Morris recently joined the
company's Advisory Board.
The two companies are combining forces to develop a product that
will circulate air disinfection agents through a building's HVAC
distribution system. It leverages Manganese X's patented
disinfection apparatus system with PureBiotics' existing product
lines and technologies in order to cleanse buildings of COVID-19
and any other pathogens. Lino Morris has over 40 years experience
in the pharmaceutical industry. That experience will come in handy
as he will be the one spearheading additional testing and
validation of the product. He is reaching out to universities to
test the air quality control delivery system. Just like Kontrol,
Manganese X wants that third party validation of its product.
Manganese X sits at around a $25 million market cap, a fraction
of Kontrol's valuation as the additional hurdle of validation needs
to take place. If validation is successful, Kontrol represents a
demonstrated upside for Manganese X shareholders. The stock has
already moved up healthily over summer prices and has experienced
volatility recently. Hype over Tesla's (TSLA) recent inclusion of Manganese in
its battery and desire to source battery materials is the primary
reason for the increase. Manganese X owns the Battery Hill
Manganese project situated just north of the U.S. border in New
Brunswick. I briefly outlined it and the company's familial
connection to Tesla in a previous article.
Manganese X shareholders have a reduced risk from diversification
built in due to these two disparate lines of business. Should one
not pan out, that has absolutely no impact on the probability of
success for the other.
Without getting too heavily into speculation, assuming that both
solutions from Kontrol and Manganese X progress as hoped, it would
make a lot of sense for a building manager to have both products on
hand. BioCloud to detect COVID-19 and the Manganese X solution to
cleanse the virus through the HVAC system.
While Honeywell offers a virus building management play for
conservative investors, these type of small cap companies are more
attractive to risk-tolerant small cap investors such as myself.
Both Kontrol and Manganese X have moved up a lot in the past few
months, so speculative investors are no longer "buying low" and
have to be prepared for volatility. Early stage investors who are
in at lower prices might choose to take their profits along the
way. But based on Kontrol's market cap of approximately $110
million and Manganese X's market cap of approximately $25 million,
they leave a lot of room for upside. I will continue to monitor the
small cap sector for indoor virus management opportunities such as
Kontrol Energy and Manganese X.
Disclosure: I am/we are
long MNXXF. I wrote this article myself, and it expresses my
own opinions. I am not receiving compensation for it (other than
from Seeking Alpha). I have no business relationship with any
company whose stock is mentioned in this article.
Edward Vranic, CFA
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