Enercare, Inc. CSUWF

Scotia maintains $9.50 target..

[gwplant]

 

EnerCare Inc. (ECI-T C$8.93) George Doumet - [phone]
(Scotia Capital Inc. - Canada)
Q4/12 in Line; 2% Dividend Bump
Event
¦ EnerCare (ECI-T) reported Q4/12 Adjusted EBITDA of $39.8M vs. our estimate of $40.5M
and consensus of $38.4M.
Implications
¦ Legacy revenues flat; sub-metering revenues up 22%. Q4/12 revenues were up 5.2% driven
mainly by a 22% increase in sub-metering revenues. Legacy revenues were flat at $46.1M
due to a reduction in installed assets (1,171K vs. 1,216K last year) offset by rental rate
increases.
¦ 2% dividend bump; sustainable through 2014. EnerCare increased its monthly dividend by
1.8% to $0.057 per share ($0.684 per share yearly [7.9% dividend yield]). This marks the
third dividend increase in 18 months. We estimate this dividend represents a payout of
~46% on 2013 and 2014 AFFO.
¦ Debt refinance leading to savings and flexibility. Following the refinancing of the
company's 2009-1 and 2009-2 notes, EnerCare was able to: (1) decrease its interest expense
by an estimated $12.8M per year and (2) increase its financial flexibility by laddering
maturities.
Recommendation
¦ We would like to see: (1) continued declines in attrition setting the "new normal" at 15k
units per quarter, (2) a positive resolution of the Notice of Action, and (3) limited to no
intervention from the Competition Tribunal before we get more positive. Furthermore, we
remain cautious on the likelihood of a material correction in the Ontario housing market.