Join today and have your say! It’s FREE!

Become a member today, It's free!

We will not release or resell your information to third parties without your permission.
Please Try Again
{{ error }}
By providing my email, I consent to receiving investment related electronic messages from Stockhouse.


Sign In

Please Try Again
{{ error }}
Password Hint : {{passwordHint}}
Forgot Password?


Please Try Again {{ error }}

Send my password

An email was sent with password retrieval instructions. Please go to the link in the email message to retrieve your password.

Become a member today, It's free!

We will not release or resell your information to third parties without your permission.

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 13, 2023 7:02am
Post# 35585807


RBCTheir upside scenario target is $25.00. GLTA

August 11, 2023


TSX: PSI; CAD 13.65

Price Target CAD 17.00

Pason Systems Inc

2Q23 - Strong balance sheet and FCF enable capital allocation juggling act

Our view: Pason reported in-line 2Q23 results. We continue to see value in Pason shares as the company demonstrates strong margins, free cash flow, and financial returns. In our view, Pason is also in a solid position to execute on its three capital allocation priorities including investing in its core drilling business, making incremental investments, and returning cash to shareholders. We maintain our Outperform rating and $17 price target.

Key points:

In-line results. Pason reported revenue and adj. EBITDA of $85MM and $38MM, respectively. Results were in line with our estimates of $83/38MM (Street $84/37MM). EBITDA margin of 44.7% was 40bps below our estimate and increased 260bp y/y. North America revenue per industry day of $910 was 3% above our estimate, and increased 14% y/ y. The improvement reflects higher product adoption and pricing. Pason generated ~$18MM of pre-dividend FCF (CFO-capex).

International revenue to outgrow North America in FY23. In 2023, we forecast Pason's NAM revenue to grow 5%, while International grows 19%. NAM represents about 80% of its revenue, with International slightly under 20%. In 2Q23, NAM revenue grew 13% y/y, versus a flat y/y North American land rig count. International revenue grew 22% y/y.

Funding longer-term growth potential through IWS investment. Pason outlined its three capital allocation priorities, including 1) strengthening its core drilling business, 2) Investing in growth beyond the core, and 3) returning capital to shareholders. Its non-controlling investment in Intelligent Wellhead Systems is an example of priority #2. Pason recently increased its investment via a $25MM preferred share agreement. Of which Pason has approved $20MM and we model the company investing the final tranche in 4Q23.

Estimate changes. We decrease our 2023 EBITDA estimate by 4% to $172MM, as noted in Exhibit 1. The changes are driven by modestly lower NAM revenues and margins. We expect Pason to generate $97MM pre- dividend FCF in 2023, mapping to a 9% yield and 27% margin of revenue.

Favourable relative valuation. Pason currently trades at 2023E/24E EV/ EBITDA multiples of 5.3x and 4.9x. Pason historically has traded at a 3.5x premium (~0.9-1.1x current) to land drilling peers. We expect the premium to be largely restored through the cycle.

Maintaining Outperform rating and $17 price target. Our $17 price target is based o e of our revised 2024 EBITDA estimate. We assign a premium multiple relative to our Canadian OFS coverage group based on stock-specific factors within our valuation framework.


<< Previous
Bullboard Posts
Next >>