Anaergia Inc.
(ANRG-T) C$10.64
Q2/22 Results
Event
We are updating our estimates following management's conference call.
Impact: POSITIVE
Conference Call Takeaways
Rialto Update: Despite minor permitting delays, Anaergia's second OREXTM line in the Universal Waste Systems Los Angeles franchise zone is being installed and will contribute somewhere between one-fourth and one-third of Rialto's nameplate capacity in the near future. We continue to expect that Rialto will operate at or near full nameplate capacity.
Project Financing Update: Management believes that it has the project financing in place for its U.S. and Italian facilities, and is working on financing related to its ~ $140.0 million Tonder, Denmark project (majority of spending will occur in 2023).
Additional Q2/22 Details: The Q2/22 EBITDA loss of $3.9 million was below our estimate of positive $1.2 million. Anaergia experienced cost overruns on a couple of projects due to inflationary pressure and supply-chain challenges that are expected to subside in H2/22. SG&A was also elevated due to a non-recurring legal expense.
Estimate Changes: Based on a bottom-up budget analysis, management concluded that emerging opportunities would offset the lost revenues and EBITDA arising from its revised accounting policies (full report). As a result, our 2023 EBITDAS estimate is essentially unchanged and remains at the low end of management's guidance range. Our 2022 estimates decrease to reflect the revised accounting policies and near-term margin pressure.
TD Investment Conclusion
Based on Anaergia's strong share-price performance yesterday (+30%), Anaergia is now trading at the bottom end of the range when compared with its U.S. RNG-producing peers on a 2023E EV/EBITDA basis (Exhibit 3). We continue to believe that Anaergia possesses several high-quality attributes, including its broad intellectual-property portfolio, strategic focus on municipal waste, the pursuit of a growth-focused infrastructure model, as well as a significantly lower risk profile and the most commercial-ready business model in our Clean Technology coverage universe. Based on these attributes, we see a potential path to further multiple expansion as the company executes on its business plan. With no material changes in our 2023 estimates or investment thesis, we are maintaining our SPECULATIVE BUY rating and $30.00 target price. Anaergia remains our top pick in our Clean Technology coverage universe.