Bullboard - Stock Discussion Forum Enercare, Inc. CSUWF

Industrials Rental & Leasing Services

"EnerCare Inc is a provider of essential home and commercial services and energy solutions. The company offers rental services of water heaters, water treatment, furnaces, air conditioners, and other HVAC rental products. EnerCare is also in the business of plumbing, protection plans, and related services. The company operates in Canada and the United States of America."

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OTCPK:CSUWF - Post Discussion

Enercare, Inc. > TD Upgrade

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Post by retiredcf on Jan 18, 2017 8:25am

TD Upgrade

Enercare Inc.

(ECI-T) C$17.95

Upgrading to BUY After Recent Share Price Pullback

Event

We are upgrading Enercare to BUY (from Hold).
We are rolling forward our valuation, and as a result, our target price has increased to $21.00 (from $20.00).

Impact: NEUTRAL

Enercare shares performed admirably in 2016, returning a total of 17.3% during the year (11.8% share price return plus a 5.6% dividend yield), as 2016 saw the acquisition of Service Experts, a 10% increase in the dividend rate, and an investor day that highlighted the growth opportunities in each business segment.
We had downgraded the stock in November 2016 following the announcement of the company's Q3/16 results as we felt that, at that time, that the company was nearing fair value and offered limited upside. However, since our downgrade, the shares have fallen by 8.3% and, in our view, the shares once again offer an attractive return for the relatively low risk profile of the company. As a result, we are upgrading Enercare to BUY (from Hold) at this time.
We have also fine-tuned our estimates ahead of the Q4/16 results to reflect the colder weather experienced in Ontario in December (which we believe should drive higher furnace sales in the quarter) and have modestly adjusted our cost assumptions. Our target price has increased to $21.00 (from $20.00) as a result of our slightly higher EBITDA estimates and as we have rolled forward our valuation to 9.5x our F2018 EBITDA estimate (previously 9.5x the midpoint of our F2017 and F2018 EBITDA estimates).

TD Investment Conclusion

Enercare is a well-run and stable company with a portfolio of rental assets that generate reliable cash flows supportive of the attractive dividend. We believe that the company has good opportunities for growth from protection plans, HVAC rentals, sub-metering, and new product launches, and that the Service Experts business offers upside from cost and revenue synergies. Following a recent pullback, we believe that the current share price offers investors an attractive entry point.