PSN Morning Coffee Poseidon Concepts* (PSN : TSX : $14.50), Net Change: 0.12, % Change: 0.83%, Volume: 393,067
Everybody into the pool? Poseidon Concepts was mentioned positively in Barron’s over the weekend. Barron's noted, "Its
moniker might lead investors to believe it makes above-ground pools, but Poseidon calls its products fluid management systems
and nobody jumps into them...Poseidon's story isn't completely watertight. There are caveats...Nevertheless, the opportunity
seems there. Poseidon has the first-mover advantage and has finished about 2,500 jobs without an environmental failure. The
exploration industry is receptive to the company's products. Maybe it's time to jump in." The article also featured a portfolio
manager's call for PSN shares to double and raising its dividend within 18 months. Earlier this month, Canaccord Genuity
Oilfield Services Analyst John Tasdemir initiated coverage on PSN, commenting that the company's disruptive large-volume
storage tanks used to accommodate the well-site storage of oilfield fluids, which should allow the company to flourish with the
secular growth market that is frac fluid handling. Tasdemir noted that in just over two years, PSN has advanced from product
development to offering 500 large-volume storage tanks and is on pace to generate over $235 million in sales in 2012, with 34%
year over year revenue growth in 2013. PSN generates mid-80% EBITDA margins and offers a 7.2% dividend yield (based on a
54% payout ratio). Tasdemir also commented that with success comes competition, and PSN is seeing plenty of new entrants.
However, given the company’s first mover advantage, proven track record, new product development initiatives and a sizeable
market opportunity, he believes PSN still has significant earnings growth potential over the next several years. Based on
Canaccord Genuity estimates, PSN trades at a 7.3x 2013E P/E multiple and 4.4x 2013E EV/EBITDA multiple, representing
discounts of 27% and 11%, respectively, to peers. While PSN does not have a pure-play competitor, Tasdemir compared the
company to small to mid-sized Canadian-listed oilfield service companies that either offer a high dividend yield or are in similar
businesses and/or service markets. For Q3/12 Tasdemir expects the company to earn $0.42 per share compared to consensus
estimates of $0.50. Currently, PSN pays a monthly dividend of $0.09 per month, yielding ~7.5% annually. Currently, operations
comfortably cover the dividend with the payout ratio being 54%.