OTCPK:CSUWF - Post by User
Post by
maypeterson Mar 31, 2017 10:56am
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Post# 26057881
Note from TD
Note from TDEnercare Inc. (ECI-T) C$20.02 Sale of Reliance Home Comfort Highlights Potential Takeout Value Damir Gunja Paul Bilenki, (Associate)
Event Alinda Capital Partners, a U.S.-based private investment firm, has agreed to sell Reliance Home Comfort to CKP (Canada) Holdings Ltd.
Impact: POSITIVE
In our view, this sale highlights a potential takeout value for Enercare, as Reliance Home Comfort is the primary competitor to Enercare's core Home Services business in Ontario (~1.7mm rental customers versus ~1.1mm rental customers at Enercare).
The equity value of the transaction is ~C$2.8bln and we estimate that the total enterprise value for Reliance Home Comfort is ~C$4.6bln (~$1.8bln of consolidated debt as of December 31, 2015, the most recently available data point; source: DBRS).
In F2015, Reliance generated EBITDA of $313mm (source: DBRS) and, assuming annual EBITDA growth of 4-8%, we estimate F2017 EBITDA for the company of ~ $338-365mm. This implies an EV/F2017E EBITDA multiple for the transaction of ~12.7-13.7x.
Recall that Alinda Capital Partners purchased Just Energy's NHS waterheater rentals business in June 2014 for ~11.7x LTM EBITDA and purchase the UE Waterheater Income Fund in April 2007 for ~10.6x LTM EBITDA.
Using the implied estimated sale price for Reliance Home Comfort we estimate a takeout valuation for Enercare of ~$29.00-$32.00.
Our $22.00 target price is based on 9.5x our F2018 EBITDA estimate. While the current and precedent takeout multiples in the sector are positive indicators of the potential value of Enercare in a takeout scenario, we would be cautious applying these multiples as we do not anticipate a takeout of the company in the near-term.