TSX:EFX - Post Discussion
Post by
retiredcf on Feb 24, 2022 8:07am
TD (Looking for a Double)
Currently have a $15.00 target. GLTA
Enerflex Ltd.
(EFX-T) C$7.46
Q4/21 Results
Event
Enerflex reported Q4/21 results.
Impact: POSITIVE
Q4/21 Results: Enerflex reported Q4/21 Revenue and EBITDAS of $321.3 million, and $42.9 million, above our estimates of $251.9 million and $34.6 million, respectively. The EPSD loss of $0.36/share was below our estimate for positive earnings of $0.06/share due to a $45 million non-cash derecognition of deferred tax assets. Top line revenues were up ~40% sequentially, primarily due to higher U.S. Engineered Systems revenues (+93% or $46.0 million sequentially). See page 2.
Update on Energy Transition Initiatives: Enerflex highlighted that it has several CCUS opportunities in its pipeline, booked several hydrogen compression units, progressed several RNG-related projects, and started the construction of three large ultra-low-methane-emitting electrified rental units for its U.S. compression fleet.
No Updates on Exterran: On January 24, 2022 (full report), Enerflex announced the acquisition of Exterran. Given the recency of the announcement, there were no meaningful updates with the quarter.
Estimate Changes: With Q4/21 results exceeding our estimates and 2023 guidance maintained, we are increasing our 2022 EBITDAS estimate by 2%, with no material changes to our forecast in 2023. Details on page 3.
TD Investment Conclusion
Based on our conversations with investors subsequent to the announcement of the Exterran transaction, the negative reaction to the deal was a result of 2022 capital commitments (guidance: >US$450 million) that are expected to meaningfully exceed EBITDA (2022 guidance: US$320 million-US$370 million). We believe that this remains a meaningful overhang on the stock. We also believe that Enerflex's management received this feedback, and expect the company to prioritize shareholder-friendly capital allocation initiatives (debt reduction, dividends, share buybacks) over its historical focus on organic growth in 2023 and beyond. We believe that a more definitive discussion of 2023 capital spending could be provided as early as the close of the transaction (late-Q2/21/early-Q3/21), and view the announcement and subsequent follow-through as a meaningful catalyst. To this end, we believe that the current valuation provides a compelling entry point and are maintaining our BUY rating and $15.00 target price with the quarter. Management will host a conference call at 10:00 a.m. ET, dial: 1-844-231-9067.
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