RE:Haywood Securities: Buy rating and C$0.85 target for GRNThanks for posting this report, the Q2 demonstate continued sucess and positive momentum... ....considering that the world basically shut down for the quarter that was just reported, I think Greenlane did very well indeed. Glad to have invested and will be buying more shares today!!!
Nice to see the overall reccomendation from Haywood is a buy!!!
Maintain our Buy Rating and $0.85/sh Target. We see reasons why Greenlane shares could move higher through H2/20 and 2021. Positive momentum within ESG themed ideas continues while Greenlane has built a healthy sales backlog to backstop valuation for 2021. As demonstrated through Q2, and with new project announcements in Q3, the feedstock for Greenlane’s renewable natural gas projects (i.e. landfills, dairy farms, etc.) do not slow or shutdown, offering insulation through the global uncertainty while the ESG theme continues to attract investors. Well positioned with a 12-month backlog measuring ~$42 MM, we see potential for new project announcements over H2 that would add to our already positive outlook and increase the underlying value of the business. Dude6500 wrote: According to Haywood Securities:
https://clients.haywood.com/uploadfiles/secured_reports/GRNAug262020.pdf
RESEARCH REPORT | August 26, 2020
Greenlane Renewables Inc.
(GRN-V)
RATING: BUY
TARGET PRICE: $0.85
PROJECTED RETURN: 113%
Modest Quarter as Revenue Ramp Continues
Our Take: Greenlane reported Q2/20 results after-market with revenue in-line with consensus. While COVID created uncertainty on Q2 results (like it did for most companies), revenue increased by 45% QoQ to a modest $4.2 MM as Greenlane continued to demonstrate a steady ramp up and capitalize on existing customer orders. While not a blow-out type quarter, the business continues to grow along with a sales pipeline now estimated to be ~$694 MM at the end of Q2/20 (up from ~$680 MM in Q1/20). With a major contract announcement in July that effectively doubled the Company’s sales backlog to ~$41.9 MM (was ~$22.6 MM), we view Q2 results as relatively neutral to our outlook while providing a positive read-through in that as a fairly new public-co (~1 yr public) continued to demonstrate execution and relative robustness amid a challenging period.
• Q2 sees Company continue to ramp up on 2020 growth through COVID. Greenlane recorded revenue of $4.2 MM in the quarter vs. consensus of ~$4 MM. Revenue was up from $2.9 MM in Q1/20 predominantly due to timing of existing customer orders, which are expected to be recognized in full through H2. Gross profit for the quarter came in at $1.1 MM vs. our estimate of $1.3 MM and in line with consensus of $1.1 MM driven by a healthy gross margin of 26% (vs. our 25% estimate and consensus of 27%). We anticipate margins to maintain at the 25%-27% range going forward.
• Sales pipeline increasing, healthy order backlog provides strong visibility. Greenlane maintained its industry sales pipeline at ~$694 MM, up from $680 MM QoQ, demonstrating the longer lead nature of the RNG sector to challenging macro fundamentals. Through H2/20 and into 2021 we see a healthy conversion of contract wins/sales backlog into booked revenue. This trend is planned to continue throughout H2 with the Company’s contract win in Brazil, and the launch of its joint venture with SWEN Impact Fund.
• Finalized joint venture with SWEN Capital Partners for ‘Build, Own, Operate’ model. A reminder that in late July GRN announced signing a definitive joint venture agreement with SWEN Capital Partners, closing the loop on the Company’s ‘Build, Own, Operate’ European partnership. The joint venture company will seek out opportunities for renewable gas upgrading in Europe whereby SWEN will provide financing alternatives to a project developer and the Company will be the sole provider of the upgrading equipment and servicing. We continue to see deployment of the SWEN funds impacting our revenue outlook in 2021 while we see potential for similar partnership announcements for North America possible heading into 2020 year-end.
RECOMMENDED ACTION
We recommend accumulating shares in this high growth ESG-linked company
• Maintain our Buy Rating and $0.85/sh Target. We see reasons why Greenlane shares could move higher through H2/20 and 2021. Positive momentum within ESG themed ideas continues while Greenlane has built a healthy sales backlog to backstop valuation for 2021. As demonstrated through Q2, and with new project announcements in Q3, the feedstock for Greenlane’s renewable natural gas projects (i.e. landfills, dairy farms, etc.) do not slow or shutdown, offering insulation through the global uncertainty while the ESG theme continues to attract investors. Well positioned with a 12-month backlog measuring ~$42 MM, we see potential for new project announcements over H2 that would add to our already positive outlook and increase the underlying value of the business.
CATALYSTS
1. New Build, Own, Operate business model – 2020/21. Look to increased revenues and higher margins as GRN incorporates its new Build, Own Operate business model.
2. New contract announcements - Ongoing. Look to added contracts as GRN secures new customers in the rapidly growing North American and European RNG markets (~30% CAGR).