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Pason Systems Inc T.PSI

Alternate Symbol(s):  PSYTF

Pason Systems Inc. is a Canada-based provider of specialized data management systems for drilling rigs. The Company develops and delivers hardware, software, and services, primarily for the oil and gas drilling industry in 12 countries. The Company’s solutions include data acquisition, wellsite reporting, remote communications, Web-based information management, and analytics, enabling collaboration between the rig and the office. Its products include AutoDriller, Communications, DAS, DataHub with Pason Live, DataLink, Electronic Choke Actuator (eChoke), Electronic Drilling Recorder (EDR), Gas Analyzer, Hazardous Gas Alarm System (HGAS), Pit Volume Totalizer (PVT) and Toolface Control. Through its subsidiary, Energy Toolbase Software Inc (ETB), the Company provides products and services for the solar power and energy storage industry. ETB’s solutions enable project developers to model, control and monitor the economics and performance of solar energy and storage projects.

TSX:PSI - Post by User

Post by retiredcfon Aug 11, 2023 11:56am
Post# 35583978

TD Raise Target

TD Raise Target

Pason Systems Inc.

(PSI-T) C$13.65

Q2/23 Results


Pason reported Q2/23 results.


Published and distributed by TD Securities Inc.

Energy Services

Aaron MacNeil, CA Aaron MacNeil, CA

Aly Hemraj, CFA, CPA, CA (Associate)

403 292 1222

Aly Hemraj, CFA, CPA, CA (Associate)

403 299 3207

Recommendation: BUY

Risk: HIGH

12-Month Target Price: C$17.00 Prior: C$16.00

12-Month Dividend (Est.): C$0.48

12-Month Total Return: 28.1%

Q2/23 Results: Pason reported Q2/23 EBITDAS of $37.6 million, relatively in line with our estimate of $36.8 million, and consensus of $37.2 million. The primary difference between our estimates and actual results was the greater-than-expected North American gross margin (65.6% vs. our estimate of 64.8%). Details on page 2.

Year-to-Date NCIB Activity: Pason has exhausted ~20% of its NCIB program, having repurchased and cancelled ~1.4 million shares ($17.0 million) in H1/23 (Q2/23: ~0.6 million shares, $7.0 million).

Further Investment in IWS: Subsequent to Q2/23, Pason approved and funded an additional $5.0 million investment in Intelligent Wellhead Systems (IWS) under its preferred share subscription agreement. We note that only $5.0 million remains available under the subscription agreement.

Argentina Hyperinflation Impact: During Q2/23, hyperinflation accounting reduced Pason's International segment revenue and gross margin by ~$0.7 million and ~$0.5 million, respectively.

Estimate Changes: Our 2023 EBITDAS estimate decreases modestly by 2%, primarily due to the impact of hyperinflation accounting for its Argentinean subsidiary, while improvement in North American Average Revenue per Day offset the reduction in U.S. activity levels. Details on page 3.

Conference Call: 11:00 a.m. ET; dial: 1-888-664-6383.

TD Investment Conclusion

We believe Pason offers investors seeking exposure to North American drilling activity several desirable qualities, including a technology-focused, capital-light business, limited competitors, lack of financial leverage, and a long history of providing returns to shareholders. As a result, Pason has historically traded at a premium valuation to the Energy Services coverage universe, and we view its current valuation as attractive in the context of its relative valuation trends. We have increased our terminal multiples in our NAV to 8.0x (7.0x previously), which remains below its historical 5-year average of 9.2x. In this context, we are increasing our target price to $17.00/share and maintaining our BUY rating.

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