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AKAM : NASDAQ : US$46.12
Akamai provides content delivery and cloud infrastructure services for accelerating and improving the delivery of content and applications over the Internet, ranging from live and on-demand streaming videos to conventional web content, to c-commerce tools. The company is headquartered in Cambridge, Massachusetts.
With strong volume momentum in the underlying business and continued improvements in the company’s cost structure as spelled out in the 10-Q, we increasingly believe Akamai is once again set to deliver impressive results for the balance of the year despite the incremental investments in the business this and next year. Accordingly, we are increasing our estimates and our price target to $51 from $46 on the belief of an upward bias to estimates and the recognition that volume growth might offset the incremental margin pressures associated with investments announced earlier this year.
Strong growth likely sustainable – With multiple companies in the sector reporting similar trends, we believe the surprisingly accelerating revenue growth reported by AKAM in Q1/13 is sustainable throughout the year. We believe guidance remains conservative.
Cost improvements continue – Based upon details reported in the company’s 10-Q, we believe it is likely that key fixed components of the company’s cost structure will continue to improve. Although additional investments are likely in Q2/13, we expect margins could improve starting in 2014.
AKAM remains a BUY-rated stock – Even though the stock has recovered from the lows of the year, we continue to recommend the shares for purchase. Although volatile, we continue to believe shares represent an attractive risk/reward for investors
Posted by jackbassteam on May 24, 2013
Official seal of Lloydminster (Photo credit: Wikipedia)
TBE : TSX : C$2.12
Twin Butte Energy Ltd. is an intermediate producer focused on heavy oil development along the Lloydminster fairway of Alberta and Saskatchewan. The company adopted a yield plus modest growth strategy upon closing its acquisition of Emerge Oil & Gas in early 2012.
Twin Butte released first quarter results largely in line with its guidance and CG/consensus estimates. Despite headwinds from wide heavy oil differentials, strong condensate prices that factor in its blending costs, adverse weather, and isolated production challenges at Primate, Twin Butte maintained a payout ratio below 100% with average production down only 1.6% QoQ. We have maintained our BUY rating on the stock and target price of C$3.20, based on a 1.0x multiple to NAV and reflecting a 2013 EV/DACF multiple of 6.8 times.
Q1 in line, no surprises. Production averaged 17,254 boe/d, in line with our estimate of 17,326 boe/d and consensus of 17,190 boe/d. CFPS of $0.13 was also in line with our $0.13 and consensus of $0.12.
Prudently scaled back CAPEX in January but narrowing differentials could enable re-acceleration in H2/13. Capital spending was previously scaled to $85 million (from $110 million) given isolated issues at Primate and widening heavy oil differentials. Given an improved differential outlook, we see potential for a H2/13 CAPEX increase of $5 to $10 million.
Payout ratio remains best in class; current dividend is solid. Twin Butte maintains one of the lowest total payout ratios amongst the high yield Intermediate E&P group with a total payout ratio pre/post DRIP of 100/95% on our 2013 estimates.
Twin Butte trades at a 0.7x multiple to CNAV, a 5.2x EV/DACF multiple and $41,800 per BOEPD based on our 2013 estimates, compared to peer group averages of 0.7x CNAV, 7.8x EV/DACF and $64,400/BOEPD.
Posted by jackbassteam on May 16, 2013
Official Sod Turning Ceremony for Extendicare Long-Term Care Home, Port Stanley, 1976 (Photo credit: Elgin County Archives)
LW : TSX : C$12.98
Leisureworld is an operator of Long-Term Care homes and seniors living facilities. The company owns and operates 26 LTC homes, representing a total of 4,134 beds and primarily located in the Greater Toronto Area. In addition, Leisureworld’s portfolio includes one retirement home, one independent living home, and two luxury retirement living residences. Beyond its core operations, Leisureworld also runs an accredited home healthcare business.
Leisureworld has entered into an agreement to acquire a portfolio of 1,235 LTC beds, 326 retirement home suites, and a third-party management business from Speciality Care Inc. (SCI) for a purchase price of $254.2 million. We expect that the acquisition will be immediately accretive – and 8.1% accretive to 2014 AFFO.
Increasing high quality LTC assets – Class A beds make up 85% of the acquired LTC portfolio. We believe that the improvement in overall Class A mix (from 54.1% to 60.8%) will optimize revenue from this segment and somewhat mitigates capital renewal risk.
Retirement home expertise – We believe that the addition of Speciality Care’s Retirement Home management business brings in expertise to improve occupancy levels at existing homes and grow this higher-margin piece of the business.
Appointment of new CEO –The extensive LTC and retirement home management experience that incoming CEO Lois Cormack (formerly
President of Specialty Care) brings to the table should be valuable in executing Leisureworld’s growth strategy.
We value Leisureworld using an average of three methodologies; following inclusion of the Specialty Care acquisition, our models yield an
average valuation of $15.10 per share. Together with a projected yield of 6.0%, our revised C$15.00 target (increased from C$14.00) suggests a
12-month return of 21.6%, which supports our BUY rating.
Posted by jackbassteam on May 14, 2013
Agriculture (Photo credit: thegreenpages)
AGU : NYSE : US$94.99
AGU : TSX
Agrium Inc. is a leading global producer and marketer of agricultural nutrients, industrial products, specialty fertilizers, and a major retail supplier of agricultural products and services in North America, South America and Australia.
All amounts in US$ unless otherwise noted.
Although the mid-point of Agrium’s guidance was below expectations, we don’t believe the market agreed with consensus given the spring planting delays to date and as a result, we see the guidance as a only a slight negative. The slow progress of the US spring planting has impacted the company’s outlook for the second quarter but not by as much as it could have been, as the weather has turned for the better.
Given Agrium’s earnings growth potential over the next few years, its relatively less volatile earnings profile and its exposure to a wide array of agricultural product offerings, we believe the overall demand across the agriculture input market will allow the stock to be a relative outperformer in the sector. Monsanto remains our top pick due to its earnings growth, market share increases and new product offerings. We continue to rank Agrium as our second preferred equity to own. We would then follow that with Mosaic and Potash Corp (in that order). We remain with our neutral view on the potash producers, as we believe the potash market lacks sufficient catalysts regarding an upside surprise in industry volumes or pricing in 2013. However, we believe Mosaic offers opportunities for a significant amount of cash to be returned to shareholders in the near term.
Agrium reported adjusted Q1/13 EPS of US$1.03 versus our and consensus estimate of US$1.08. Total gross margin was weaker than expected at US$716 million versus our expectation of US$791 million. Softer nitrogen gross profit (US$173 million versus our US$197 million) and a weaker retail segment (US$376 million versus US$413 million) were responsible for the discrepancy. Management guided Q2 EPS to a range of US$4.60-5.40. The company also announced an NCIB bid.
We continue to rate the shares of Agrium a BUY but have lowered our target price to US$118 from US$120, based upon a 12x multiple to our blended 2013E/2014E EPS.
Posted by jackbassteam on May 13, 2013
Posted by jackbassteam on May 11, 2013
C-3PO vs. Data (137/365) (Photo credit: JD Hancock)
XOMA : NASDAQ : US$3.13
XOMA, Ltd. operates as a biopharmaceutical company that discovers and develops commercialization antibodies, and other genetically-engineered protein products to treat immunological and inflammatory disorders, cancer, and infectious diseases.
UPGRADING TO BUY, RAISING TARGET TO $8
Upgrading to BUY, raising target to $8 on increased confidence of gevokizumab (gevo) succes in non-infectious uveitis based on new supportive Ph2 data released yesterday. This data resembles earlier Ph1/2 data supporting gevo’s potential benefit in Behcet’s and noninfectious uveitis. We are raising our pNPV-based target to $8 based on increased chances of gevo’s success in inflammatory eye disease.
$(0.30) GAAP EPS missed our estimate/consensus of $(0.20)
Top-line Ph2 Servier data of gevo in 15 Behcet’s uveitis patients gives us increased confidence in Ph.3 success. Yesterday XOMA discussed this new top-line data on its call and anticipates partner Servier will present and publish the full data in the near future.
Catalyst-rich Q4/13 and H1/14 with data from three pivotal NIU trials coming. We see positive read-through for all three from yesterday’s new Servier data.
Posted by jackbassteam on May 10, 2013
RDA : NASDAQ : US$9.98
RDA Microelectronics designs, distributes, and markets RFIC, connectivity, and baseband solutions primarily to Chinese handset OEMs and ODMs. While RDA’s sales are primarily into the 2G market, RDA has introduced 3G power amplifier products and has EDGE and 3G baseband products on its 2013 roadmap to address the growing smartphone market.
All amounts in US$ unless otherwise noted.
PRODUCTS SHOULD CONTINUE GM EXPANSION
RDA reported strong Q1/13 results and guided Q2/13 sales and gross margin slightly above our estimates.
Following the acquisition of Coolsand, we believe RDA’s baseband portfolio has significantly increased its addressable market as evidenced by strong recent sales results. Further, we believe RDA’s roadmap that integrates its connectivity and RFIC solutions with its baseband platform
is well positioned in low- and mid-tier handset markets, and this should expand RDA’s dollar content share per handset in the near 1B unit
Chinese OEM handset market. In addition, we believe RDA remains on track to achieve volume sales of both EDGE baseband and 3G PA solutions in 2H/13 that should drive sales growth and steadily improving gross margin.
We maintain our BUY rating and increase our PT to $17.
RDA reported Q1/13 sales of $97.2M and pro forma EPS of $0.28 versus our $96.6M/$0.25 estimates. RDA posted strong sales of the higher margin 8851 baseband solution, including record baseband sales during March post Chinese New Year. In fact, RDA management shared a 40% 2G baseband market share goal for 2013 within the Chinese OEM market, and we estimate RDA will ship roughly 200M baseband chips in 2013, up over 100% Y/Y.
With an improving mix of higher-margin baseband and connectivity products, including a new cost optimized solution to help offset
persistent pricing pressure in the 2G PA market, we anticipate modestly improving gross margin trends throughout 2013 with 35% remaining RDA’s medium-term target post the Coolsand acquisition.
Given RDA’s market exposure and strong product roadmap, we have increased our 2013/14 operating expense estimates we expect will remain roughly 16% of sales. However, strong sales trends still result in an increase to our 2013 pro forma EPS estimate from $1.50 to $1.56 and our 2014 estimate from $1.80 to $1.87.
Our $17 (was $16) price target is based on shares trading at roughly 9x our 2014 pro forma EPS estimate
Posted by jackbassteam on May 9, 2013
Black Diamond Bullet (Photo credit: Boris Lau)
BDE : NASDAQ : US$9.92
Black Diamond Inc. is a leading provider of outdoor recreation equipment and lifestyle products. BDE also develops, manufactures and distributes a broad range of products used for climbing, mountaineering, backpacking, skiing, and various other outdoor recreation activities under the Black Diamond and Gregory brands
BDE reported 1Q EPS of -10c (-9c adjusted) vs. our/cons. +6c/+4c estimates. The shortfall relative to our model was both sales (-$4M) and
gross margin (-260bps) driven. Not surprisingly, the extended winter season helped clear excess inventory, however, spring deliveries were
pushed out to Q2. The Gregory Japan transition also hurt Q1 as sales are now spread out over 1Q-3Q vs. historically being weighted to Q1.
Clearance activity and FX (yen hurt 30-40bps) pressured margins.
Looking forward, Q2 deliveries are strong and sales/margin guidance for the year is unchanged ($216-221M in sales, 40%-41% GM). While
anomalous Q1 weather disrupted the cadence of sales/earnings, our growth thesis is unchanged and the drivers toward building a much
larger company are intact. We reiterate our BUY rating.
BDE will deliver apparel in Aug./Sept. for which we anticipate a high degree of retailer support. The positive feedback on the spring ’14 line is promising as it continues to validate BDE’s opportunity to generate $250M in sales by 2020.
POC/PIEPS integration is tracking to plan. In addition, POC’s entry into the road bike category should provide incremental door expansion opportunity that we estimate could double to ~6000 doors over time.
Our $13.50 target is derived by DCF analysis.
Posted by jackbassteam on May 8, 2013
Image via CrunchBase
ENOC : NASDAQ : US$17.68
EnerNOC is a leading developer of clean and intelligent power solutions designed for commercial, industrial and institutional end users of electricity. The company’s proprietary demand response technology platform remotely monitors and reduces peak load demand across its diverse installed base.
With good cash flow, a healthy balance sheet, and growth initiatives aggressively moving ahead (water, international, big data), we maintain
our BUY rating into the important ‘16/’17 PJM auction (open May 13).
As expected, EnerNOC delivered a solid report in the seasonally slower Q1 period. Gross margins (+830bps y/y) and new application
and service offerings continue to impress, while 2013 stays on track with positive market developments (expected PJM reserve margin
shortfalls) and key new “tech” hires in place.
Guidance for ’13 is reiterated (revs $360-400M, adjusted EBITDA $62-77M), while international markets continue to progress nicely
(Australia/New Zealand/UK/Japan), and domestic opportunities (TX, irrigation, etc.) look to offer potential upside in ~’14.
Our 2013 GAAP estimates adjust to $391M/$0.60 from $380M/ $0.72, while 2014 estimates go to $485M/$1.07 from $475M/$1.02.
Pro forma EPS estimates for ‘13/14 are $1.46 and $2.00, respectively (from $1.44 and $1.75).
Our $20 target is based on a 4.7x EV/adjusted EBITDA multiple on our 2014 adjusted EBITDA estimate of ~$90.9M (from 83.0M).
Regulated end-markets, increased competition within the DR and EE markets and share price volatility.
Posted by jackbassteam on May 8, 2013