Post by
hawk35 on Feb 28, 2018 1:20pm
RBC Comments made 7 days ago
What the shorts are doing should be illegal. Guess there are no corporate morals when it comes to extorting money out of retail investors.
Anyway below is an RBC update from Feb 21 after they met with Crius management. I tend to believe their point of view. It is a speculative risk with RBC target price of 11.00.
Crius Energy Trust
On the road with management; Focusing on growth and profitability
Our view:
We recently hosted meetings with Michael Fallquist (CEO). The
meetings focused on growth, synergies from the USG&E acquisition, and
the recent change in capital allocation priorities. We are reiterating our
Outperform, Speculative Risk rating, and believe the units will trade higher
after the company reports several solid quarters.
Key points:
Several avenues to drive customer growth. One key sales channel
management focused on was the exclusive partnerships with telecom
providers. Crius will be relaunching the sales channel with Comcast this
spring, and plans to add more telecom partners onto its Integrated Energy
Platform developed jointly with Comcast. The door-to-door sales channel
is also another focus, currently operating in 8 markets, and growing to 15
markets by year-end. We note that after baseline distributions, the top
priority for excess cash will be for growth initiatives, which include M&A
opportunities.
Expecting to see some unit repurchases. Last month, Crius announced
that it would implement an NCIB for up to 10% of the public float.
Management indicated that the board will likely adopt a formulaic
approach. Since the NCIB ranks second to growth initiatives for the use of
excess cash, we believe the company will repurchase units, particularly if
there is weakness in the unit price.
Profitability and attrition may increase. After the acquisition of USG&E
in July 2017, management has guided towards realizing G&A synergies of
~$11 million annually (unchanged). Management plans to gradually grow
gross margin/RCE through focusing less on large commercial customers
(very competitive and low margin) , targeting higher value customers, and
pruning (or not renewing) marginally profitable customers. As a result,
Crius may experience higher attrition rates in 2018.
Rooftop solar focuses on profitability. The rooftop solar business will focus on profitability rather than growth. Crius will focus on the California and Massachusetts markets, and management believes the solar panel import tariffs will not materially impact the project economics in the two states.
We expect solid Q4/17 results on March 8 (after market close).
Management did not provide colour on the financial impact from the
extreme cold weather experienced in late December and early January.
Based on the recent results and commentary by a larger peer, we do not
expect a material impact in December, but January could be a headwind.
Investment summary
We believe the units of Crius will outperform its peer group
for the following reasons:
Well positioned for organic growth: Management has been
successful at organically growing the customer base in every
sales channel. The company has also been investing to grow
its sales force, which in turn should drive customer growth.
Attractive distribution yield: We believe the current dividend
is sustainable and attractive. We expect that the market
sentiment will continue to improve as the company delivers
additional quarters of consistent financial results. However,
we do not expect further growth in it is distribution at
this time, as management has recently noted that they will
allocate excess capital toward growth, unit repurchases, and
debt reduction.
Increasingly competitive energy retail market: Low volatility
and weak energy prices have been some factors leading to
more competition in the energy retail market. We expect
realized gross margins will reduce over the medium term.
High earnings volatility: Crius Energy's earnings are sensitive
to weather conditions. The negative financial implications
from recent extreme weather conditions have highlighted the
volatility of the company's earnings, which is the reason for
the Speculative Risk qualifier to our Outperform rating.
Comment by
robnhood on Feb 28, 2018 1:22pm
Saw the same type of BS on other darlings like Poseidon. Turned out the bears were dead right.