Enercare, Inc. CSUWF

Globe & Mail Article

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Wednesday’s analyst upgrades and downgrades

DAVID LEEDER Wednesday, September 16, 2015 Inside the Market’s roundup of some of today’s key analyst actions. This file will be updated often during the trading day so check back for new details. Shares of EnerCare Inc. (ECI-T) are currently attractively priced and investors should stay in “accumulation mode,” said Desjardins Securities analyst Chase Bethel. Following a meeting with the company’s executive management, Mr. Bethel said the repetition of the phrase “our customers” stood out. “Furthermore, not only are newly implemented customer-focused initiatives building trust, but they are mostly beneficial to costs/efficiency. We like the course being set,” he said. According to Mr. Bethel, EnerCare is aiming to increase organic revenue growth to 8 to 10 per cent annually, with its heating, ventilating, and air conditioning (HVAC) strategy seen as the most important driver of that objective. “ECI’s business is now calibrated such that management expects to have an [approximately] 80-per-cent probability of entering into a recurring revenue relationship with an HVAC customer,” said Mr. Bethel. “This is because it offers rentals, financing and extended protection plans on the units. The HVAC market is also quite fragmented, leaving room for growth in the number of transactions completed by ECI. We estimate that the [approximately] 17,000 transactions undertaken by ECI each year represent 10 per cent of the replacement market in Ontario.” He is also encouraged by the recent continuity in the company’s rental assets, and he expects it will be proven not to be a “flash in the pan.” “Management reiterated that, in the month of July, unit additions exceeded gross attrition for the first time since 2008,” he said. “This provides a good set-up for [the second half of 2015], in our view, given that door-to-door sales competition is highest during the summer months.” Maintaining his “buy” rating, he raised his 12-month price target to $16 (Canadian) from $15.75. The analyst consensus price target is $16.75. “The company is benefiting from less aggressive competition and favourable regulatory changes in its water heater business, as well as traction stemming from its strategy to add high-value (eg. HVAC) customers,” the analyst said. “In addition, its integration efforts relating to the OHCS acquisition remain on track.”