Tricon Residential Inc T.TCN

Tricon Residential Inc. is an owner, operator, and developer of a portfolio of approximately 38,000 single-family rental homes in the United States Sun Belt and multi-family apartments in Canada. The Company provides rental housing options for families across the United States and Canada through its technology-enabled operating platform and on-the-ground operating teams. The Company's segments include Single-Family Rental, Adjacent Businesses, and Strategic Capital. The Single-Family Rental business includes owning and operating single-family rental homes primarily within major cities in the United States Sun Belt. Its Adjacent Businesses include multi-family rental and residential development. Its multi-family rental business segment includes one Class A high-rise property in downtown Toronto known as The Selby. Through its Strategic Capital business, the Company provides asset management, property management and development management services.

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Tricon Residential Inc > RBC

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Post by retiredcfon Aug 08, 2023 6:51am

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Post# 35576979

RBC

Their upside scenario target is $7.00. GLTA

August 2, 2023

Trican Well Service Ltd. 2Q23 - Compounding benefits accrue

Outperform

TSX: TCW; CAD 4.19

Price Target CAD 5.50

Our view: We update our models for Trican's recent 2Q23 results, which were solid and contained relatively few surprises. We believe the company's strong FCF performance and share repurchases are beginning to show in its ability to potentially increase its dividend on a cash-neutral basis over the next year. We adjust our 2023/24 EBITDA estimates by 1/7% and maintain our Outperform rating and $5.50 price target.

Key points:

Compounding is the 8th wonder of the world. At our forecast of $60MM share repurchases over the next 12 months, Trican can effectively raise its quarterly dividend by 9% to $0.045/share in mid-2024 on a cash-neutral basis. This rough math is based on the current share price, though we're happy to be wrong if the stock appreciates. For context, Trican repurchased 8% ($57MM) of its outstanding shares in 1H23 and 41% of outstanding shares since 2017.

Differentiation strategy is an evolution.

Trican has upgraded 5 of its 7 active fleets to Tier 4 DGB in recent years and has begun electrifying its blenders and data vans. When the company started its Tier 4 program, the equipment was considered differentiated in Canada, but the bar for differentiation has moved as competitors performed similar upgrades. As the Tier 4 program slows down, we think it makes sense for some of that capital to be effectively transferred to new efficiency and margin enhancing projects, such as sand handling. We model $100MM capex for FY24.

Solid results. Adj. EBITDA of $31.9MM ($32.9MM before Stock-based comp) was $6.0MM (23%) above our estimate, driven by 391 bps better margins. Effective pumping horsepower utilization for TCW's 7 active fleets was 35%, below 2Q22 at 43%. TCW had 20 cementing crews active (15 in 2Q22) and 7 coiled tubing crews (6 in 2Q22) On a Yr/yr basis, Trican's