OTCPK:CSUWF - Post by User
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retiredcfon Jun 10, 2016 8:08am
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Post# 24953744
More RBC
More RBCCurrent and upside targets ($18 and $20) remain the same. GLTA
June 10, 2016
Enercare Inc.
Investor Day: Multiple avenues for growth
Our view: Enercare's Investor Day highlighted multiple growth opportunities over the near-to-medium term in each of its business segments. Management provided additional details on the history and profile of Service Experts, and we feel more comfortable about the potential upside from rolling out the rental program.
Key points:
More room for growth at Service Experts. The current management team was put in place in early 2013 under the ownership of American Capital, and was successful in quickly bringing Service Experts back to growth and profitability within a year (please refer to Exhibit 2). Management expects growth to continue, driven by a combination of marketing initiatives and also the favourable HVAC environment where there is currently pent-up demand after a period of below-average replacement rates during the recession. Service Experts plans to roll-out rentals in Canada and the U.S. and 2016 and 2017, respectively. We believe the high average cost of US $7,500 - 8,000 per installation and the fact that one-third of the customers currently finance the purchase through third parties, would be supportive of a rental offering.
Home Services growth strategy includes expansion of products and sales channels. Enercare was able to grow its Home Services division through shifting its HVAC product mix towards rentals (high-margin recurring revenue stream), and management expects the proportion of HVAC customers choosing to rent will be in the 60-70% range. Additional levers for growth include cross-selling, product expansion (e.g., electrical protection plan, and selling water treatment equipment), using alternative sales channels, and continuing to build on Enercare's brand.
Favourable outlook for sub-metering business. Management highlighted that rising electricity rates should continue to drive both awareness and demand for sub-metering, providing a compelling value proposition to Enercare's clients. Management's growth initiatives will focus on converting contracted units into billable units, market multi-commodity offerings (currently 84% electricity), expand geographies (e.g., the U.S.), and exploring opportunities to offer sub-metering in the commercial real estate sector.
Expecting to realize synergies, and exploring further M&A opportunities.
Management guided towards realizing 5-8 cents/share ($5-8 million) in synergies through lower sourcing costs by the end of 2017. Enercare (together with Service Experts) will also explore M&A opportunities to complement growth. Service Experts completed nine acquisitions since 2013 which had acquisition values in the range of US$1-6 million