Secure Energy Services Inc T.SES

More RBC

[retiredcf]

June 7, 2022

Outperform

TSX: SES; CAD 7.22

Price Target CAD 9.00

Secure Energy

Highlights from the RBC Capital Markets Global Energy, Power & Infrastructure Conference

Secure Energy Services President & CEO Rene Amirault and COO Allen Gransch hosted a breakout session at the RBC Capital Markets Global Energy, Power & Infrastructure Conference. Secure remains focused on asset optimization and synergy realization following its 2021 Tervita merger. Over time, management expects continued cost reduction with margins a focus and excess FCF generation will be focused on continued debt reduction, fixed dividends and share buybacks. We maintain our Outperform rating with a $9.00 price target. Secure is on our Global Energy Best Ideas list.

Highlights

Net debt targets in sight. Secure is on track to meet its 2.0-2.5x debt/EBDITA target YE22 through FCF generation.  Once debt reduction targets are met, Secure will focus on optimizing three main FCF avenues, in addition to growth capital: increasing its fixed dividend, share buybacks, and further debt reduction.

Moving into business optimization phase. Secure focused on fitting its SES- TEV combined business together during first nine months; in the next six months, the company will move into the asset optimization phase, with a focus on businesses where it's a top 1-2 player. Currently, Secure sees 75% recurring revenues, which it expects to generally rise over time and remains focused on delivering value to customers to encourage customers to increase utilization for third-party providers.

Focused on margins. The company expects continued cost reductions, combined with its fixed cost footprint to support margins. The company remains focused on passing higher input costs to customers. Secures main impact items include natural gas, power, labour, repairs & maintenance, diesel and chemicals.

Synergy realization ahead of schedule. Secure remains focused on realizing the full effect of its $75MM annualized merger cost savings, with strong progress to date. The company expects these savings to further enable its debt reduction efforts.