NOT and FNC in Toronto Globe and Mail

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Report on TSX Venture 50: THE RANKINGS

Clean tech: the new kid on the block

'Next wave' category of companies that produce clean power and help reduce emissions added to ranking of top performers

BOYD ERMAN

CAPITAL MARKETS REPORTER

June 19, 2008

The argument rages over global warming - is it happening or not? - but there's no argument about the performance of stocks in the clean technology industry: They are hot.

So hot, that companies focused on cleaner ways to produce power and other goods now warrant their own sector in the third annual TSX Venture 50. The 50 is a ranking of the top 10 performers in five industries on the TSX Venture Exchange from 2007: clean tech, mining, diversified industries, oil and gas, and technology and life sciences.

"It's a growing sector and we're seeing more of it all the time, so it's something that we thought the investment community would appreciate us focusing on," says Kevan Cowan, who heads the TSX Venture Exchange. "Certainly behind the scenes a lot of institutions are telling us they really see that as the next wave or one of the next waves."

There are now almost 100 clean tech companies listed on the TSX Venture and the senior TSX exchange, with a market value of more than $13-billion as of the end of 2007. And Mr. Cowan is working on drumming up more.

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Investors are interested in the steady returns from companies that produce power from wind farms and other clean sources such as geothermal and water, and in the big gains possible from bets on companies with new technologies that can help reduce emissions in other sectors.

The biggest winners in 2007 fell into the latter category. The top performer was Zongshen PEM Power Systems Inc., a Chinese company that's listed on the Venture Exchange. Zongshen makes electric bikes, which have become a big hit as soaring gas prices push commuters to seek other ways of getting around. Questor Technology Inc., the No. 2 finisher, makes incinerators that burn waste gases.

Naikun Wind Energy Group Inc., which plans a wind farm off the coast of British Columbia, had the third-best return.

Those performances are starting to draw notice from investors here in Canada. Until recent years, almost all of the investors in Canadian-listed clean-tech companies came from Europe, where there are dedicated funds that seek out environmentally friendly plays.

But of late, that's starting to shift, said Sasha Jacob, an investment banker whose firm, Jacob & Company Securities, has a focus on clean tech.

"The U.S. are very big buyers with dedicated funds focused on the sector," said Mr. Jacob. "And finally you're getting Canadian interest."

Still, 2008 may be a tougher year for smaller companies in all sectors than 2007. Even with commodity prices booming and oil soaring, concerns abound.

Worries about the financial system's stability have made some investors leery of the kind of junior company in which the Venture exchange specializes.

The Venture exchange's benchmark index, which soared in the early part of 2007, slumped amid the credit crunch and has yet to recover. So far this year, the Standard & Poor's/TSX Venture Composite Index is down more than 7 per cent.

"2007 was just hitting the ball out of the park in every single category, so that's a tough benchmark to meet again, but it does show how far the Venture Exchange has come," said Mr. Cowan.

To ensure growth, the TSX Venture continues to look abroad for new companies to list.

Along with Zongshen, two other companies in the Venture 50 are from China, a fertile ground for the TMX Group Inc., which owns the Venture and senior TSX exchange.

Chinese companies "have really latched on to the idea of the Venture as a training ground to understand public markets in the West," said Mr. Cowan.

By the numbers

2,244

Number of companies listed on TSX Venture Exchange, as of April, 2008.

$50.6-billion

Total market capitalization

18

Number of companies that graduated to TSX, January-April, 2008.

Source: TSX Venture Exchange

2008 TSX Venture 50

The TSX Venture Exchange, Canada's public venture capital marketplace for emerging companies, is now home to more than 2,200 listed companies. This 2008 TSX Venture 50 list ranks the top 10 companies in each of five major industry sectors for the year ended Dec. 31, 2007. The ranking is based on a weighted average formula with four criteria, as described below.

HOW RANKING WAS COMPILED

Data and final ranking for the 2008 TSX Venture 50 was gathered, compiled and calculated by Irevna LLC, a market research firm based in New York City.

FILTER:

Starting with the 2,176 TSX Venture Exchange listed companies as of Dec. 31, 2007, the following filters were applied:

- Listed on the TSX Venture Exchange (not NEX, a separate TSX Venture Exchange board) on Dec. 31, 2007;

- Share price of at least $0.15 (Cdn.) on Dec. 31, 2006;

- Market capitalization greater than $5-million on Dec. 31, 2007;

- Closing share price greater than $0.50 on Dec. 31, 2007;

- Listed on TSX Venture Exchange more than one year as of Dec. 31, 2007; and

- Share price did not drop by more than 50 per cent between Dec. 31, 2007 and April 30, 2008.

After the filtering, 542 companies qualified for ranking.

FORMULA:

Calculations were based on a weighted average formula with four criteria; each criterion was given an equal weighting of 25 per cent. The formula was applied on a sectoral basis.

Revenue: Last reported 12 months of revenue, as of Dec. 31, 2007. (If financial statements for company with fiscal year end on Dec. 31 or Nov. 30 were not available as of May 16, 2008, revenues for latest four quarters reported were used.)

Return on investment: One-year share price growth as of Dec. 31, 2007 (last four quarters' dividends included in calculation).

Trading: One-year trading volume as of Dec. 31, 2007.

Market capitalization growth: One-year growth as of Dec. 31, 2007.

Historical share prices adjusted for stock consolidation. All currencies in Canadian dollars. For companies that do not originally report in Canadian dollars, the average daily exchange rate for Dec. 31, 2006 - Dec. 31, 2007 was applied.

LEGEND:

* Top overall company, meaning it ranked highest of all 50 companies based on the four criteria.

¤ Graduated to Toronto Stock Exchange (Jan.-May, 2008).

§ Went public via the Venture Exchange's Capital Pool Company program.

DOUGLAS COULL/THE GLOBE AND MAIL

SOURCE: TSX VENTURE EXCHANGE