TSX:EFX - Post Discussion
Post by
retiredcf on May 04, 2023 10:35am
TD
Enerflex Ltd.
(EFX-T) C$7.74
Q1/23 Results
Event
Enerflex reported Q1/23 results.
Impact: POSITIVE
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12-Month Target Price: C$16.00 |
12-Month Dividend (Est.): C$0.10 |
12-Month Total Return: 108.0% |
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Q1/23 Results: Enerflex reported Q1/23 EBITDAS of $122.7 million, 4.0% above our estimate of $118.0 million and 8.7% above consensus of $112.9 million. Details on Page 2.
Engineered Systems (ES) Bookings Strong, Margins Increasing Despite Commodity Headwinds: Enerflex reported its highest quarterly bookings since 2018 of $516.6 million, 34.0% above our estimate of $385.5 million. ES margins of 15.5% were up from 12.0% in the prior quarter and 9.9% in the prior year. In its outlook commentary, management notes that "sold margins on new ES bookings will continue to expand from current levels". Note that Enerflex derives the majority of its North American ES bookings from associated gas from shale oil plays.
Synergy Capture Progressing: Management suggested that US$50.0 million of its US$60.0 million synergy target has been realized, up from US$40.0 million in the prior quarter. It also noted that it will close its UAE and Singapore manufacturing facilities in 2023. While management is currently assessing costs/synergies, any synergies associated with these closures will be incremental to its US$60.0 million target.
Well-Positioned to Achieve Debt-Reduction Target: Bank-adjusted net debt to TTM EBITDA was 2.9x, and management has insinuated that it will enhance shareholder returns once it hits its year-end debt reduction target of 2.5x.
Estimate Changes: Aside from updating our estimates for actual Q1/23 results, we are not making any material changes to our go-forward estimates. Notably, our 2023 EBITDAS estimate of $517.8 million (~US$384 million) is at the bottom end of management's US$380 million-US$420 million guidance range. Details on Page 3.
TD Investment Conclusion
We view 2023 as a catalyst-rich time period for Enerflex, as it extracts synergies from the recently completed Exterran acquisition and works towards its leverage targets, allowing it to implement a more robust shareholder return framework. Despite these positive factors, Enerflex's valuation is not meaningfully differentiated from companies that typically experience more volatility in financial performance. Enerflex remains a top pick with an unchanged BUY rating and $16.00 target price.
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