RE:RE:RE:RE:What's an MOU???FYI and research.......
In our view, management's three-year plan is ambitious and not without risks.
Should the MOU with SCS translate into a firm order it would support revenue growth
through Q3/2023, in our view. However, once it rolled off it would leave quite a revenue
gap to get to the 2024 target that would have to be bridged with incremental orders.
There is also execution risk, in our view. Manufacturing CO2 reciprocating compression
packages is a new market for Xebec, one management intends to deliver from a new
facility in Colorado. Recall, when this facility was acquired last November management's
plan was to use it to build 150-190 containerized Biostream and Hy.GEN hydrogen units.
Now they want to add 51 CO2 reciprocating compression packages. We hope to get
more details during today's investor day on how this will work.
We are reiterating our HOLD on Xebec. In our view, management has done a
good job positioning the company to potentially benefit from the increased demand for
renewable gases. The ability to execute and hit margin targets, however, needs to be
demonstrated. As such, we feel Xebec should trade at a discount to its peers. Currently,
Xebec trades at 1.8x EV/Sales (2022E) versus industrial gas peers at 2.6x. Our target is
based on 2.0x EV/Sales (2023E).