GREY:CRIUF - Post by User
Post by
retiredcfon Mar 20, 2017 9:21am
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Post# 26001248
RBC
RBCCurrent and upside scenario targets remain at $11 and $13. GLTA
March 20, 2017
Crius Energy Trust
Waiting to see if solar rooftop business gains traction
Our view: Crius finished 2016 with a solid quarter, and was able to reduce its selling and overhead costs, which more than offset a decline in gross margins. The key focus moving forward will be on Crius' efforts to grow its solar rooftop business into a meaningful source of the company's earnings. We have taken a more cautious approach, and believe there could be upside to our forecast.
Key points:
Waiting for solar business to gain traction. Management indicated that Crius was making really good progress in integrating the acquired SunEdison rooftop solar business into its energy retail product offering. Crius' solar installations have been declining every quarter in 2016, and we would look for a reversal in H1/17. We should note that the pending Verengo acquisition that management expects to close in Q2/17 should improve the margins for solar installations rather than improve the pace of solar customer acquisitions.
Building on the Comcast relationship. Crius extended and expanded its relationship with Comcast, agreeing to jointly develop an "Integrated Energy Platform" (IEP) that can be offered to domestic and international service providers that are interested in offering energy products to their customer base. Crius will on-board Rise Broadband as the first service provider on the IEP in Q2/17. We believe the arrangement with Rise Broadband will only have a marginal impact on Crius' customer base. However, if the IEP is successfully rolled out to additional service providers, it can potentially become a meaningful sales channel for Crius.
Modest organic customer growth. Crius Energy had net customer additions of 20,000 RCEs, which was largely consistent with the previous four quarters. Although the net customer additions (excluding acquisitions) have been somewhat modest over the last year (see Exhibit 2) despite implementing various growth initiatives, it compares favourably to some of Crius' peers that have been experiencing net customer attrition. Crius' ability to effectively leverage its sales channels and cross- selling opportunities will be key to improving customer growth in what appears to be an increasingly competitive market. The stable and low energy price environment is also compressing gross margins for many energy retailers.
Estimates largely unchanged. We reduced our estimates for gross margins, which were offset by lower selling and overhead costs, resulting in no change to our overall forecast. We note that we have taken a more cautious approach, and believe there could be upside to our forecast if the solar business gains traction or Crius is successful at leveraging its Comcast partnership to drive customer growth