Post by
savyinvestor333 on Mar 15, 2021 9:42am
TD Flash Note on the news
Xebec Adsorption Inc. (XBC-T) C$5.46 Hydrogen Partner Announced Aaron MacNeil, CA Event Xebec signed a memorandum of understanding (MOU) with an Australian partner to develop hydrogen infrastructure.
Impact: SLIGHTLY POSITIVE Details: Xebec signed a MOU with Coregas, a Wesfarmers (ASX: WES) subsidiary, to develop hydrogen producing assets in Australia and New Zealand. Coregas is the largest Australian-owned industrial, medical, and specialty gas company with its products including: oxygen, nitrogen and other rare gasses. The partnership is characterized as "long-term" but no specific details on the MOU are provided in the press release.
TD View: Based on the Coregas website, we believe that this subsidiary of Wesfarmers is refocusing its business on hydrogen in a meaningful way, and Xebec is likely to be a primary enabler of its hydrogen-focused growth. Since acquiring HyGear at the end of 2020, Xebec has focused HyGear's efforts on a decentralized production hub strategy, where Xebec owns and operates the asset and generates recurring gas-as-a-service revenues. This partnership will help Xebec accelerate this business model in the Australian and New Zealand market. As we note above, Coregas' legacy business lines include the production of oxygen and nitrogen, and we believe that this partnership highlights the cross-selling opportunities within Xebec's growing platform.
As noted in our recent research reports (here and here), Xebec provided an early warning on its Q4/20 results on Friday March 12, 2021 that related to several RNG-focused projects that were improperly bid and subject to COVID-19-related cost inflation. Following the announcement, the share price reacted negatively. While this news is positive, we believe a concern of investors is Xebec's ability to meet its guidance and pursue profitable growth, and we believe that this will require several quarters of stronger financial performance. As a result, we expect the reaction to this news to be muted.
Comment by
Ciao on Mar 15, 2021 9:46am
Beacon gave XBC's hydrogen business a zero growth premium for 2021 and today's MOU shows that Hygear will do great this year with the Coregas partnership seeing how agressive they want to be.
Comment by
Zipolitemexico on Mar 15, 2021 11:18am
The first BOO will be commissioned in early 2022. According to the company there are several in the pipeline but they typically have a long lead time.... 2 to 3 years if I remember correctly.