GREY:XEBEQ - Post by User
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retiredcfon Mar 18, 2022 8:49am
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TD Report
TD Report Xebec Adsorption Inc.
(XBC-T) C$2.03
Q4/21 Results
Event
Xebec reported Q4/21 results.
Impact: NEUTRAL
Q4/21 Results: Xebec reported Q4/21 revenue of $45.9 million, above our estimate of $42.1 million and consensus of $43.7 million. At the EBITDAS level, Xebec reported a loss of $1.1 million, below our estimate of positive $2.0 million and consensus of positive $3.2 million due to lower-than-expected gross margins (18.1% vs. our estimate of 32.6%) as a result of continued inflationary cost pressures that was partially offset by lower-than-expected G&A ($8.4 million vs. our estimate of $11.9 million). Details on page 2.
Outlook and Conference Call Takeaways
RNG Business Experiencing Growth in Quote Activity: Year-to-date, Xebec has quoted on 65 projects, up from 36 proposals over the same time period in 2021. Management expects that this will translate into orders within the next 7-8 months.
Upcoming Strategy Announcement: Xebec's Q4/21 disclosures featured minimal new operational or strategic disclosures. To this end, we note that Xebec will disclose a three-year strategic plan in conjunction with its investor day on March 29, 2022.
CEO Transition Accelerated: Kurt Sorschak is retiring as CEO effective immediately (May 12, 2022 previously) and will not remain on the board of directors beyond the AGM.
Estimate Changes: Management indicated that it expects to face continued headwinds from inflationary costs pressures and supply chain impacts in 2022, which are expected to improve in 2023. We are reducing our 2022 and 2023 gross margin estimates. As a result, our 2022 EBITDA estimate decreases by $1.5 million, while 2023 EBITDA estimate increases by $2.4 million. Details on page 3.
TD Investment Conclusion
On February 3, 2022, we upgraded Xebec to SPECULATIVE BUY (full-report) in a primarily valuation-based call as well as our view that its RNG business represented a potential catalyst in 2022. As noted above, the quarter featured minimal new operational or strategic disclosures and we still believe that it is too early to say with confidence that Xebec will be able to deliver profitable growth. However, we believe that the current valuation provides investors with asymmetric upside potential in the event that it does. As a result, we are maintaining our SPECULATIVE BUY rating with an unchanged $3.00 target price.