Westport Innovations Inc. Continue To AVOID

WPRT : NASDAQ : US$16.91 WPT : TSX
AVOID

 Target: US$20.00

We have written about the research company that walks like an investment – and said avoid from – was it $40 down- despite the enthusiasm of Motley Fools- better to engage as a client of Jack A. Bass Managed funds is the lesson here.

COMPANY DESCRIPTION: Westport Innovations is a leading developer of technologies that allow engines to operate on gaseous fuels such as natural gas across light, medium, heavy and high horse power market applications.

Investment recommendation

AVOID

Macro challenges keep share volatility high, while the company works to introduce engine platforms and book orders in ‘14. The recent follow-on offering helps alleviate cash issues near-term ($210.6M cash at year-end vs. burn of $26.9M in Q4). While we continue to favor the strategy (and the nat gas macro), risk/reward stays balanced.
Investment highlights

 Few changes this quarter, as Westport finishes a challenging 2013 and looks to transition from R&D phase to increased product adoption in 2014 (with heightened focus on cost optimization and prioritized investments  goal of breakeven adjusted EBITDA for all three units by year-end).
 The outlook for 2014 implies solid growth (~7-13%), despite a ~$25M headwind from discontinuation of first generation HPDI (as focus turns to roll-out of HPDI 2.0 and expectation of improved warranty accruals – work underway with several OEMs currently).
 CWI and Weichai continue to grow nicely, with both JVs reporting record volumes for the year (2014 expected to benefit from ramp of ISX12G and build-out of additional capacity at Weichai). Early opportunities in rail/mining/marine also continue to progress nicely.
 Our 2014 revenue/EPS estimates go to $184M/$(1.80) from $241M/$(1.90); F2015 is introduced at $300M/$(0.90).
Valuation Our $20 price target (from $28) is derived by applying a 4x multiple to our 2015 sales estimate of $300M

Toyota

English: Early_one_yen_banknote_front_and_reverse

English: Early_one_yen_banknote_front_and_reverse (Photo credit: Wikipedia)

Toyota

(TM : NYSE : US$98.86)
Toyota on Tuesday raised its full-year outlook, as it posted a 23% jump in net profit for the most recent quarter, buoyed by a favourable shift in foreign exchange rates and strong sales of its sedans and SUVs in North America. “Our loyal customers in the U.S. have come back to the fold now that we have plenty of inventory on hand,” Toyota senior managing officer Takahiro Ijichi said.

For the three months ended in December, Toyota posted a net profit of 99.9 billion yen, up from 80.9 billion yen last year but below a mean estimate of 152.81 billion yen in a survey of analysts compiled by data provider Quick. Revenue rose 9.3% to 5.319 trillion yen in the quarter from 4.865 trillion yen. Toyota also raised its full year outlook for operating profit at the parent company level-a measure of its exports from Japan and domestic sales-to 150 billion yen, up from a previous forecast of a 20 billion yen loss.

That would be the first black ink in five business years-and largely reflects a steep jump in profitability as the yen has backed off swiftly from a record highs against the dollar. “We’ve improved our competitiveness to the point we can make a profit even at 79 yen to the dollar on a parent basis,” Ijichi said. He added the Japanese currency‘s decline may allow Toyota to ramp up production of export models that became unprofitable as the yen
surged last year.

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