Beacon just raised it's price to .70 cents a share:That may seem like a small increase from .60 cents, but is actually 16% higher.
Beacon
Cematrix Corporation (CVX-V) Raising PT to $0.70/sh Following Blowout Q4
Cematrix Corporation (CVX-V) Raising PT to $0.70/sh Following Blowout Q4 Russell Stanley CFA, CMT, MBA | rstanley@beaconsecurities.ca Donangelo Volpe - Associate | dvolpe@beaconsecurities.ca We are raising our PT from $0.60/sh to $0.70/sh as we are increasing our F2025 adjusted EBITDA forecast from $10.3M to $12.6M. For additional background on CVX, please see our recent initiating coverage report. Q4 Revenue 2x, Operating Cash Flow 4x Expectations – Revenue/adjusted EBITDA of $19.6M/$2.9M was well ahead of our $9.5M/$0.5M forecast, and ours is the only active coverage according to FactSet. Revenue improved 135% y/y and slipped a modest 4% q/q. The Q3 performance was a record for the company, and our Q4 forecast contemplated a meaningful q/q decline owing to seasonality. While we suspected our Q4 forecast would prove to be conservative, management reported it saw a push by general contractors to complete work before cold weather arrived, driving the top-line beat. Gross margins were 636 bps ahead of forecast, and improved 457 bps q/q despite a slight decline in revenue. CVX has a largely fixed-cost structure, so the revenue and GM beat translated to adjusted EBITDA margins that were 911 bps stronger than we expected. Operating cash flow (before working capital) was more than 4x our forecast at $2.9M. Revenue Improved 84% in F2023 - F2023 revenue totaled $53M, up 84% from $29M in F2022, while adjusted EBITDA margins swung 1,845 bps from negative 9% to positive 9%. The company produced $4.9M in operating cash flow before working capital and $0.5M net of working capital investments. Operations Drove Improved Cash Position - CVX exited the quarter with $3.3M in cash/equivalents, up from $1.9M in Q3, reflecting operating cash flow of $2.8M after working capital, less CAPEX/investments of $0.6M, and debt/lease/interest of $0.8M. The company was in compliance with all debt covenants at quarter end, and its $3M credit facility with CIBC (CM-T, Not Rated) remains unused. Upward Estimate Revisions Drive PT Increase – As shown in more detail on page 6, we have increased our revenue/adjusted EBITDA/cash flow forecasts for F2024/25. However, we have actually moderated our F2024 top-line growth forecast from 30% to 18%. This looks very conservative against the 84% growth produced in F2023, preceded by 28% in F2022, though to some extent, the F2023 growth reflected some catch-up from the COVID period as well as the pull-forward of some work from F2024. Our modest growth forecast reflects a certain amount of mean reversion rather than any softness in demand, as the backlog recently returned to the $100M level. For F2025, we have revenue growth improving to 30%, which is in line with management’s expected average annual growth. Our revised forecasts translate to a doubling of our free cash flow estimates in F2024/25. Our estimates contemplate organic growth only. While the company continues to identify/evaluate possible acquisitions, management stressed that its near-term focus is execution against the organic growth potential of the company. Now Trading at 59-61% Discount to Peers Despite Recently Making New 52- Week Highs – CVX trades at 4.4x our new F2025 adjusted EBITDA forecast, representing a 59% discount to the 10.7-11.1x average at which infrastructure and cement companies trade. Potential catalysts include additional contract wins/backlog updates, and the Q1 results (expected May 8th).