Tidewater Renewables Ltd. is a “pure-play renewable fuels platform with an early mover advantage that has catalyst-rich valuation qualities, including an immense growth portfolio and positive regulatory exposure,” according to ATB Capital Markets analyst Nate Heywood.
He initiated coverage of the Calgary-based company, a wholly owned subsidiary of Tidewater Midstream and Infrastructure Ltd. that began trading on the Toronto Stock Exchange on Aug. 18, with an “outperform” recommendation on Wednesday, expressing confidence in its “project execution and the ability to secure future growth initiatives.”
“TWR is focused on positioning for the energy transition by providing local access to renewable fuels that align with regulatory objectives and support Canada’s efforts to reduce carbon intensity (CI),” said Mr. Heywood. “The Renewable Diesel and Renewable Hydrogen Complex represents the flagship asset and will be the first of its kind in Canada, providing a first-mover advantage for securing feedstock and government support. With growth at the forefront and line of sight on free cash flow (FCF) generation, TWR provides exposure to Environmental, Social, and Governance (ESG) momentum without losing sight of attractive return profiles.”
Projecting its EBITDA to quadruple by 2023 to $148-million (from $18-million in 2021), the analyst sees “plenty” of catalysts ahead, noting: “First, reaching development milestones on time and budget should lend support for future cash flows and investment return profiles, especially with the renewable diesel investment. The aforementioned growth pipeline could attract investor interest as the scale and ability to develop new product lines should synergistically add value, especially with potential marketing opportunities. As management works to secure feedstocks, any announcements around long-term agreements ahead of ISD could provide further clarity on renewable diesel economics. Finally, an improved regulatory environment or more beneficial fuel standard policies should be monitored closely given the potential margin lift or demand increases.”
Calling it a “a new pure play in renewable fuel with growth on the mind,” Mr. Heywood set a target of $22 per share, exceeding the consensus of $20.63.