OTCPK:CSUWF - Post by User
Post by
retiredcfon Mar 09, 2017 9:19am
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Post# 25956174
TD
TD Enercare Inc.
(ECI-T) C$19.40
Results Beat as Cold December Weather Spurs HVAC Demand Event
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Enercare reported Q4/16 revenue of $293.2mm (up 107% y/y), versus our estimate of $288.2mm and consensus of $287.0mm. Acquisition Adjusted EBITDA for the quarter was $72.7mm (up 25% y/y), versus our estimate of $67.0mm and consensus of $69.5mm.
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The company announced a 4% increase in its dividend to $0.96/share (annualized), from $0.924/share previously.
Impact: POSITIVE
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Overall results came in slightly ahead of our forecast, buoyed by cold weather in December, which helped drive increased HVAC rentals and sales in both the legacy Home Services and Service Experts segments.
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Enercare has begun the roll-out of HVAC and waterheater rentals across the Service Experts footprint, with the Canadian roll-out now completed, pilot programs in two U.S. states currently underway, and roll-out into two additional states planned for H1/17, with the full roll-out expected to be completed over the next two years.
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Management noted that it continues to evaluate acquisition opportunities, primarily residential and commercial HVAC service providers that will provide the Service Experts business with entry into new markets or will enhance its position in existing markets, ranging from ~$1mm-$25mm in size.
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Following the dividend increase, we remain of the view that the dividend is sustainable, with estimated payout ratios on distributable cash (excluding growth capital) in F2017 and F2018 of 55% and 49%, respectively. Including growth capital and excluding the impact of the DRIP, we estimate that the payout ratios for F2017 and F2018 would increase to 113% and 96%, respectively.
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We have fine-tuned our estimates following the quarterly results. Our target price has increased to $22.00 (from $21.00) and we reiterate our BUY recommendation.
TD Investment Conclusion
Enercare is a well-run and stable company with a portfolio of rental assets that generate reliable cash flows supportive of the attractive dividend. We believe that the company has good opportunities for growth from HVAC rentals, sub-metering, and new product launches, and that the Service Experts business offers additional avenues for growth