A petroleum drilling rig capable of drilling thousands of feet (Photo credit: Wikipedia)
TDG : TSX : C$7.06
TDG.DB : TSX
Trinidad Drilling Ltd. is a Canadian based drilling contractor with operations in western Canada, southern US and Mexico. Trinidad’s rig portfolio is largely comprised of deeper rigs. The company also operates coring rigs, surface hole rigs and barge rigs.
All amounts in C$ unless otherwise noted.
EPS (ex-FX gain) of 29c came in ahead of consensus of 26c. EBITDA of $85 million beat consensus of $80 million but was just shy of our $88 million forecast. The consensus beat is attributed to better than expected results from the company’s Canadian drilling division. TDG’s Canadian fleet realized 73% utilization vs the industry average of 58%, due to both high demand for the company’s relatively high performance fleet and management’s ability to crew virtually all of its rigs in a seasonally busy period. The division’s result drove overall company outperformance, as TDG’s -3% y-y decline in total company revenues and -8% y-y decline in total company EBITDA represented outperformance vs peers (other drillers active in both Canada and the US reported flat to -21% y-y declines in revenues and -10% to -27% y-y declines in EBITDA over the quarter).
However, we note that in order to satisfy high customer demand, TDG pushed the repairs and maintenance costs it typically incurs in the first quarter into the remainder of the year. Considering this near-term cost reallocation, but also our belief that TDG has a higher performance rig fleet that should continue to outperform longer term, we have revised our 2013/14E EPS from 60c/75c to 57c/80c. Rolling forward the estimates used to derive our target price from 2013 to 2014, our target price increases from C$8.10 to C$8.50. We note our revised target price reflects 4.5x 2014E EV/EBITDA and 10.6x 2014E P/E target multiples.
Divergence between higher vs lower performance fleets continues to surface:
On TDG’s 1Q13 results call, management noted that “older style equipment is being particularly impacted” during softer pockets of demand. We note not only are higher-performance rigs competing for the same work as lower-performance ones, but also that the ownership of NAM oil and gas assets is generally shifting towards larger-cap E&Ps, NOCs and supermajors who place higher value on top-tier equipment vs their small-mid cap E&P peers.
Posted by jackbassteam on May 13, 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
Progressive Waste Solutions (Photo credit: Wikipedia)
BIN : NYSE : US$22.79
BIN : TSX
Progressive Waste Solutions is currently the third largest fully integrated North American waste management firm by sales. The company operates in Canada and the United States with approximately 6,500 employees
Q1/13 beat driven by Superstorm Sandy cleanup. Progressive Waste (BIN) reported strong Q1/13 EPS of $0.24, beating our and the consensus $0.20 estimate. The beat was driven by a surge in revenues related to the cleanup of Superstorm Sandy; as these are not expected to continue, we do not ascribe much significance to the Q1/13 beat.
2013 guidance maintained.
Despite an outperformance in the quarter, BIN maintained its guidance for 2013. We continue to expect little growth in 2013E, followed by a much stronger performance in 2014E driven by easing competition, performance improvements, and the benefits of the ongoing infrastructure improvements.
Beyond 2013E, our thesis is unchanged. We continue to expect strong EPS growth and share price gains from: 1) stable organic revenue growth, 2) considerable acquired growth, and 3) solid margin expansion.
Maintaining BUY rating and increasing one-year target to US$25.50
We are increasing our target to US$25.50 from US$24.25 as a result of our usual one-quarter valuation period roll forward on our recovery
forecast. We have maintained our 7.25x EV to NTM EBITDA multiple in one year (in line with the current multiple) to reflect what we believe is a
valuation period that does not reflect the earnings potential of the company.
We are maintaining our BUY rating for the potential 14.3% ROR to our target, which includes the C$0.56 dividend (2.4% yield).
Posted by jackbassteam on May 3, 2013
Image via CrunchBase
REGI : NASDAQ : US$9.91
Renewable Energy Group is the largest producer of biodiesel in the United States. As a fully integrated producer, Renewable Energy‘s capabilities include feedstock acquisition, facility construction management, facility operations and biodiesel marketing.
While we expect shares to remain volatile given the commodity-driven economics, we stay constructive as trends remain very favorable for RIN
prices thus far in ‘13. Maintain BUY, raise target to $12.
REGI reported Q1/13 results above guidance (adjusted EBITDA of ~$5- 15M), reporting revs/adjusted EBITDA of $211.4M/$22M (on 38.9M
gallons) vs. our $201.0M/$14.7M estimates (normalized for reinstatement of blender’s credit, revenue ~$339.3M w/ credit).
Management execution stays strong, as “blender’s bounty” gets recognized (following careful contract negotiations) and capacity/distribution continue to increase. The balance sheet also stays strong, even with strategic inventory build of higher cloud point product ahead of warmer months.
RVO and favorable RIN pricing drive a strong outlook, with Q2 adjusted EBITDA expected at ~$35-50M (~55-65M gallons) and Q3 at ~$25-40M
Our ‘13 rev/adjusted EBITDA estimates go to $1.28B/$130M from $1.1B/$101.9M, while’14E goes to $1.18B/112M from $1.07B/$70.6M.
We derive our $12 target (from $9.00) by applying a 4.0x EV/EBITDA multiple to our ’14 adjusted EBITDA estimate of $111.6M.
Commodity price movements, future financing needs, project execution.
Posted by jackbassteam on May 3, 2013
Roper Industries (Photo credit: Wikipedia)
ROP : NYSE : US$118.68
Roper is a diversified growth company focused on the design, manufacturing and distribution of products and software for segments of multiple specialty end markets including energy, radio frequency (RF) technology, water, security, research/medical and education, among others.
Management execution is impressive, as margin expansion and cash generation continue to outperform. Recent investments (Sunquest, MHA)
look to drive even stronger returns, even as ’13 growth stays more H2 weighted. While we find a premium warranted given a track record of
value creation, we find nearer-term risk/reward more balanced.
Record order flow (particular strength in RF) drives good visibility (b2b 1.07, backlog >$1B), while comps get much easier in H2/13.
The accretive MHA acquisition is expected to close May 1, as next major M&A investment likely materializes in ’14.
Margin expansion continues (across all segments), with consolidated GM +240bps y/y to 57.4%. FCF also stays impressive ($160M, 128%
NI conversion), with full-year OCF expected >$800M. Guidance gets adjusted for MHA (organic growth unchanged), though more backend
loaded vs. the Street.
Our revenue/adjusted EPS estimates update to account for the addition of MHA as follows: F2013E to $$3.31B/$5.83 (from $3.29B/$5.72); F2014E to $3.58B/$6.45 (from $3.46B/$6.30).
Our 12-month target of $128 equates to ~11.5x our 2014 adjusted EBITDA estimate of $1.26B.
M&A integration, competition, macro conditions, FX fluctuations,
commodity costs, and leadership succession.
Posted by jackbassteam on May 1, 2013
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ITRI : NASDAQ : US$39.85
Itron is a leading provider of advanced metering systems and intelligent infrastructure solutions for electric, gas and water utilities worldwide
PERFORMANCE DOESN’T MATCH POTENTIAL; BUY, TARGET TO $48.00
We expect that Itron will extend its leadership in the international advanced metering market over the next few years. 2013 looks to be a transition year as a new executive strategy, enhanced R&D plan and building order pipeline are geared to show results in 2014+ time frame.
An ugly start to the year, with a more challenging macro environment (Europe), project-specific issues and restructuring actions leading to a much weaker than expected Q1. While issues persist near term (austerity, competition, etc.), core business trends stay intact (b2b 1.0x), volumes continue to rebound in April and ~$47M in buyback dry powder helps to support shares.
With management talking down (but not yet updating) the outlook, we go ahead and drop below guidance ($3.00-3.25) as shares will likely remain range-bound through the summer on this issue. We stay constructive on improved trends and cash flow metrics longer term and find the current risk/reward more favorable.
Our 2013 revenue/non-GAAP EPS estimates adjust to $2.0B/$2.85 from $2.06B/$3.05 while our 2014 estimates remain $2.18B/$3.60.
Our $48 price target (from $50) is calculated using a 7.7x EV/EBITDA multiple off of our 2014 EBITDA estimate of $286M.
Utility-centric sales cycles are long, lumpy and subject to regulatory review, along with increased competition.
Posted by jackbassteam on April 30, 2013
English: Tembec mill in Kapuskasing, Ontario, Canada (Photo credit: Wikipedia)
TMB : TSX : C$3.35
Tembec Inc. produces forest products, pulp, paper, paperboard, and chemicals. The company’s Forest Products division produces softwood lumber, hardwood lumber, hardwood flooring, etc. The Pulp division manufactures various types of pulps, while the Paper division produces newsprint and paperboard including coated covers, bleached paperboard for packaging, and bleached linerboard.
Tembec announced the sale of its Skookumchuck NBSK mill for $89 million, including working capital, to Paper Excellence. The transaction
is expected to close in Q2/13 and is subject to certain conditions and approvals. The Skookumchuck mill has capacity of 255,000 tonnes of
NBSK with its pulp shipped to North American and Asian customers.
The transaction implies a price per tonne of $350/t. Tembec management disclosed on its Q1/F13 conference call in late January that it had intended to sell the NBSK mill within the next 12 months. The Skookumchuck mill is the only NBSK mill that Tembec was operating, therefore, not a core asset within its portfolio. We expect that most of the proceeds from this transaction will go toward the boiler/turbine upgrade project at Tembec’s Temiscaming facility.
As of the last conference call, Tembec indicated that the project’s schedule has been pushed back, and that it is currently re-evaluating the project’s timeline and capex requirements. Overall, we had expected this announcement in the first half of 2013 to improve the liquidity toward the funding of its green energy initiative. We view the announced transaction as moderately positive as it should improve the company’s liquidity
position and enable it to move forward on the green energy project. We are reiterating our BUY rating and raising our target price to C$4.00
We have revised our estimates assuming that the transaction closes in late Q3/F13 with proceeds of $89 million. We will revisit our estimates as necessary following the update on the Temiscaming project timing expected with the Q2/F13 results in late April.
Our 12-month target price of C$4.00 represents an EV/EBITDA multiple of 5.4x our F2014 EBITDA estimate.
Posted by jackbassteam on March 28, 2013
University of Texas Permian Basin Seal (Photo credit: Wikipedia)
ROSE : NASDAQ : US$46.56
Rosetta Resources is an exploration and production company with operations in south Texas and northern Montana
The former CEO Randy Limbacher built a deep bench as to executive management, and Jim Craddock (Texas A&M engineer) should capably
move the company forward. Randy’s departure was specific to his own interests and not a reflection of Rosetta’s business prospects.
An equity component to finance the Permian deal is unnecessary, unlikely Pro forma Rosetta’s property acquisition in the Permian Basin for $768
million in cash, the company’s year-end ’13E net debt-to-EBITDA increases from ~0.7x to ~2x, which is in line with the industry median, and should stabilize thereafter assuming ~$1 billion per annum capital plan. Given the company’s latent debt capacity, Rosetta can comfortably
debt finance the acquisition, which is underscored by the company’s ability to access term debt capital at 6%-7%, whereas Rosetta’s current
cost of equity capital is 20%-25%.
Doubling the WTI/condensate spread only has 5-6% equity value impact
Concerns abound as to the deterioration in the WTI/ condensate spread,
with analogies drawn from the erosion in NGLs pricing relative to WTI. The theory of an overabundance of natural gasoline (i.e., condensate)
rests upon the outlook for declining US motor gasoline demand and growing US condensate production. Yet, the condensate discount relative to WTI/LLS this past year has remained steady as lower gasoline imports and demand for condensate to dilute heavier crudes (≤31º API) has sufficiently counteracted this perceived market imbalance. Pro forma the Permian acquisition, condensate comprises ~25% of ROSE’s production.
Even assuming the WTI/condensate spread doubles only lowers ROSE equity fair valve 5-6%.
Posted by jackbassteam on March 27, 2013