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First Republic Bank T.FRC


Primary Symbol: FRCB Alternate Symbol(s):  FRCHL | FRCIL | FRCJL | FRCKL | FRCLL | FRCCL

First Republic Bank (the Bank) is a commercial bank and trust company. The Bank specializes in providing services, including private banking, private business banking, real estate lending and wealth management services, including trust and custody services, to clients in selected metropolitan areas in the United States. It operates through two segments: Commercial Banking and Wealth Management. The principal business activities of the Commercial Banking segment are gathering deposits, originating and servicing loans and investing in investment securities. The principal business activities of the Wealth Management segment include the investment management activities of First Republic Investment Management, Inc. (FRIM), which manages investments for individuals and institutions; money market mutual fund activities through third-party providers and the brokerage activities of First Republic Securities Company, LLC (FRSC) and its foreign exchange activities conducted on behalf of clients.


GREY:FRCB - Post by User

Post by retiredcfon May 27, 2014 1:44pm
245 Views
Post# 22602155

RBC

RBCMost impressive is that their upside scenario target is a whopping $33.00. GLTA

May 7, 2014

Canyon Services Group Inc.

The Frac Train Begins to Roll Again

Our view: FRC's Q1/14 results highlight the recovery is already underway

in the Canadian pressure pumping market, with full utilization for most

of Q1 driving sizable margin gains (~400 bps q/q). These results, and

management commentary that points to strong customer demand post

spring break-up backstop our bullish outlook for FRC and the Canadian

pressure pumping market as a whole. We reiterate our Outperform

recommendation.

Key points:

Price target increased to $20, up $3 (~18%). While our 2015 estimates do

not change materially, we would note our 2015 estimates were already

~10% above consensus prior to the results and we see these results as

backstopping our bullish outlook. Our 2014 estimates rise to account for

faster than anticipated margin expansion. Our target price multiple has

increased to 7.8x, which is at the high end of the historical range of its

peers. We expect continued strong execution by FRC in 2H14, against a

backdrop of improving industry demand/pricing levels, to drive further

multiple expansion in the stock.

Operating leverage impressive; backstops our margin expansion

forecast. On the back of full utilization through both March and April,

FRC was able to grow EBITDA ~90% q/q on the back of an ~28% rise in

revenues, with margins rising ~920bps. This placed margins at ~19.9%,

well ahead of our 15.8% estimate. This level is actually in-line with our

prior forecast for Q3, highlighting the margin recovery appears ahead of

our expectations.

Visibility for next 12 months drives strong outlook. Management noted

it has visibility through next winter's drilling season and confidence in this

visibility steadily improved through Q1/14. Current client indications point

to a very busy summer drilling season, post spring break-up.

Spot pricing set to move for Q3, FRC ~50% exposed. FRC pointed to

expectations for 10% increases to spot pricing for Q3, with a portion of

this for cost recoveries (2-3%). Approximately 50% of FRC's equipment

is exposed to spot market dynamics. Pricing remains 30-35% below last

cycle's peak levels. Further pricing increases would be a late Q3/early Q4

time-line, assuming industry demand remains strong.

Balance sheet to fund further growth. With 2015 FCF estimated at

$67MM(post dividends), FRC can fund both organic fleet growth and

potential dividend growth. Management has indicated that fleet growth

beyond 10% per year is challenging due to the difficulty sourcing skilled

labour. We estimate 10% fleet growth would utilize less than 50% of our

FCF estimate in 2015.
 

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