From Globe and Mail
Globe says James's Quezada boosts Xebec to "outperform"
2022-03-31 08:27 ET - In the News
The Globe and Mail reports in its Thursday edition that Raymond James analyst David Quezada has elevated his recommendation for Xebec Adsorption to "outperform" from "market perform." The Globe's David Leeder writes that Mr. Quezada, however, has left his share target unchanged at $3, which is one cent above the consensus. Mr. Quezada says in a note: "Xebec is targeting a trio of significant energy transition opportunities including RNG, hydrogen, and carbon capture. ... We also believe management projected confidence with respect to the ramp up of the standardized Biostream RNG upgrading unit —something we consider to be a key driver for the business. ... In recent months, we have noted our concerns on cost inflation and supply chain challenges as Xebec looks to significantly increase Biostream manufacturing volumes and roll out its hydrogen hub strategy. That said, we felt management projected confidence on these respective initiatives and believe the company's new CEO and other key members of senior management are experienced operators able to execute on this strategy. In light of this, as well as the magnitude of the above noted opportunities, which we do not believe are reflected in Xebec's valuation."
The discounted multiple is keeping the share price target as is, and gives the analyst flexibility to upgrade the share price.
It's odd to upgrade the rating to outperform (ie. better than the sector) but give it a discounted multiple. VALUATION
Our $3.00/share price target is based on an ~3.0x 2022E EV/sales, a discount to clean tech and
industrial gas peers (Ex. 3) at an average of ~7.0x (excluding outliers).