from Scotia Daily Edge ■ Crius Energy Trust reported Q4/13 Adjusted EBITDA of $6.1M vs. our estimate of $5.9M and consensus of $10.3M.
■ Gross margins came in at 19.4% vs. our estimate of 18.4%. This marks the 4th consecutive quarter of YOY decline in margins. We are modelling gross margins of 13.2% (YOY decline of 430 bps) for Q1/14 largely on the back of volumetric risks expected from the Polar Vortex.
■ KWH reported net RCE adds of +4.9k vs. our estimate of +13.6k (vs. +14.5k last quarter and +12.8k in Q2/13). This marks the first quarter of negative RCE adds in electricity. We are modelling net RCE adds of +1k in 2014 and +74k in 2015 leading to a payout ratio of 117% and
81%, respectively. Management is looking to pass through higher variable rates in 2014, potentially leading to a spike in attrition. Assuming monthly attrition rises to 6.25% in 2H/14 (vs. our 4.25% estimate) our 2015 payout ratio estimate rises above 100%.
■ We estimate KWH's cash and cash availability position at $49.3M in Q1/14 and $50.9M in 2014 (vs. $63.6M currently). Assuming Crius makes an 80k RCE customer-centric acquisition in Q4/14 at $120/RCE, the trust's 2015 payout ratio will decrease to 65% from 81%.
■ While we believe KWH has ample liquidity to weather Q1/14 and make tuck-in acquisitions in 2014, we are on the sidelines until we get more visibility on the attrition profile following expected material price hikes.
■ We have made modest adjustments to our 2014 and 2015 estimates (including the addition of Solar’s EBITDA contribution) and maintained our valuation multiple of 4.0x EV/EBITDA (15). Our one-year target remains unchanged at $4.50/share.