Boralex Inc. 

Boralex Inc. (TSX: BLX) is an electric utility company that develops, constructs, and operates renewable energy power facilities across Canada, the United States, France, and the United Kingdom. Most of BLX's plants rely on wind power, while a significant number also employ hydroelectric power.

Key Highlights 

• Rising Power Production and Adjusted EBITDA: On a combined basis, power production in Q3FY21 was 1,238 GWh, up 22% or 221 GWh over the same quarter in 2020. The contribution of recently purchased facilities in the Canadian wind and US solar power segments accounted for most of the increase. As a result of the increased electricity output, the group's adjusted EBITDA increased by 12% to CAD 93 million from CAD 83 million in pcp.
  

• Strategic Plan and Financial Objectives: The company is putting in place strategic procedures based on the potential for growth in the markets in which it operates. Along with strong financial discipline, the group is gaining synergy criteria to build value and earn returns by focusing on initiatives and acquisitions that fit specified growth criteria. As a result, the company's goal for 2025 is to achieve discretionary cash flows in the range of CAD 240 - 260 million and CAD 800 - 850 million of combined EBITDA.

Source: Company 

• Adding Capacity Through New Projects and Good Progress on Development Projects: Over the past five years, the company's installed capacity has more than doubled to 2.5 GW. Furthermore, it is developing a portfolio of more than 3 GW of wind and solar projects and almost 200 MW of storage projects. Along with these projects, BLX is also working on many other projects intending to increase its total installed capacity to 4,400 MW by 2025.

Source: Company

• Diversified Assets at Different Locations: The company remains highly diversified with fully contracted facilities (99%) and located in various geographies. A significant portion of the company's net installed capacity originates from the wind power segment, making it the largest independent producer of onshore wind power in France. We believe this diversification provides an added advantage.

Source: Company

Financial Highlights of Q3FY21

Source: Company 

• In Q3FY21, the company posted consolidated revenues of CAD 130 million, up 20.4% against CAD 108 million in Q3FY20. This increase was mainly attributable to the generation of favorable volumes from Canadian wind and US solar power segments.

• On the back of elevated operating costs, the company managed to post an operating income of CAD 7 million compared to CAD 3 million in the previous corresponding period. The amortization cost increased significantly to CAD 74 million from CAD 59 million in Q3FY20.

• The company posted a net loss of CAD 22 million in the reported period v/s CAD 8 million in the previous corresponding period. The net loss extended mainly due to higher finance costs (CAD 36 million v/s CAD 20 million).
  

Risks Associated with Investment 

In the usual course of business, the company faces a variety of market risks that might impact its profits and cash flows. Reduced demand, lower output, and poor weather conditions are all significant risk concerns. There's also the possibility that its contract counterparties won't fulfill their commitments. Since BLX operates in several locations, it is also exposed to foreign currency fluctuation risk. Also, higher debt in its books portrays a significant risk. 

Valuation Methodology (Illustrative): Price to Cash Flow

Stock Recommendation

Renewable energy is likely to show a substantial and sustained increase in the market share over the next decade as most developed nations are adopting renewable services at mass, which is promising and augers well for the company's long-term growth. In addition, BLX is also looking for organic growth and is increasing its capacity to the next level by 2025, which is a key positive. Also, on the back of this increased capacity, the firm anticipates generating a combined adjusted EBITDA in the range of CAD 800 - 850 million, along with healthy cash flows by 2025. Therefore, based on the above rationale and valuation done using the above methodology, we recommend a "Buy" rating at the closing price of CAD 35.97 as on December 01, 2021.  

One-Year Technical Price Chart (as on December 01, 2021). Source: REFINITIV, Analysis by Kalkine Group 

*The reference data in this report has been partly sourced from REFINITIV.

Wishpond Technologies Ltd. 

Wishpond Technologies Ltd. (TSXV: WISH) provides digital marketing solutions that empower entrepreneurs to achieve success online. The company offers an all-in-one marketing suite that provides companies with marketing, promotion, lead generation, and sales conversion capabilities from one integrated platform.

Key Highlights 

• Registering Sequential Revenue Growth: The company maintained its momentum and had substantial success in its revenue. It works closely with customers, and as a result, its presence is growing in tandem with volume, which is commendable. Compared to the previous similar period, its sales increased by 90% to CAD 3.98 million in the reporting period.

Source: Company

• Launched New Product and Solutions: Marketing Funnels, a new tool that enables progressive lead profiling and upselling opportunities, was just released by the firm. Such tools are a valuable addition to the landing page editor, improving its ability to profile and convert new leads. In addition, PersistIQ, a company subsidiary, recently released a new completely managed Outbound Sales Solution. This new solution includes an improved sales automation platform and a service package that provides B2B small business owners with access to PersistIQ's technology, outbound sales tactics, and a team of specialists to help them develop faster.

• Acquired "Brax.io", a Provider of Ad Management Software Solutions: Brax was recently acquired by the firm for a total price of about USD 2.0 million. It is a fast-growing and successful technology business based in New York that provides a sophisticated advertising platform for managing a company's digital ads across numerous sources. Brax.io's technology and capabilities are projected to grow into the adjacent market for digital ad management software solutions, with a diverse client base that produced roughly USD 1.5 million in sales during the last twelve months. Additionally, its SaaS business model generates predictable recurring revenue, strong gross margins of 80%, and more than 15% EBITDA margins.

• Robust Pipeline of Potential Acquisition: The company has a robust pipeline of potential acquisition opportunities and a strong balance sheet with an undrawn credit facility providing it with ample cash to continue executing the inorganic growth strategy.

Financial overview of Q3FY21 (in CAD)

Source: Company 

• In Q3FY21, the company achieved a record quarterly revenue of CAD 3.98 million compared to CAD 2.10 million in Q3FY20. An increase of 90% in revenue was mainly driven by higher organic growth from WISH's incremental investment in its sales team and acquisitions made by them.
• On the back of higher revenue, it clocked a gross profit of CAD 2.76 million, against CAD 1.52 million in the previous corresponding period.
• In the reported period, the company registered higher operating expenses, which stood at CAD 3.37 million v/s CAD 1.46 million in pcp. Thus, it reported an operating loss at CAD 0.61 million against a profit of CAD 0.05 million in pcp.
• Net loss stood at CAD 1.28 million in Q3FY21, compared to a nominal profit of CAD 0.09 million in pcp.
  

Risks Associated with Investment 

The corporation must create new software products or features and improve its present marketing services to stay competitive. Its business, and operational performance would suffer should it fail to position and/or adequately price its items to satisfy market demand. Moreover, there is limited financial information available as the company was only recently listed. 

Stock Recommendation

The company had a strong quarter, demonstrating that its organic and inorganic growth strategies are effective. Its revenue climbed by 90% year over year in the reported quarter. It forecasts achieving positive adjusted EBITDA by Q4FY21, thanks to the success of its enlarged sales staff, new product introductions, and acquisitions of Invigo, PersistIQ, and Brax. Furthermore, we expect these acquisitions to perform well in the future. Furthermore, on the valuation front, the stock is available at a forward EV/Sales multiple of ~3.12x against an industry (Technology) median of 4.0x. Hence, considering the aforesaid rationale, we have given a "Speculative Buy" rating in the stock at the closing price of CAD 1.38 on December 01, 2021, with lower double-digit (percentage term) upside potential. 

One-Year Technical Price Chart (as on December 01, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Ceapro Inc. 

Ceapro Inc. (TSXV: CZO) is engaged in the development and application of proprietary extraction technology to produce extracts and active ingredients from oats and other renewable plant sources. Its operating segments are the Active ingredient product technology industry and the Cosmeceutical industry. 

Key Highlights 

• Reported Higher Sales: The company posted higher sales of CAD 4.5 million for the third quarter of 2021 and CAD 13.6 million for the first nine months of 2021 compared to CAD 3.5 million and CAD 12.4 million for the comparative periods in 2020. The 10% increase in sales for the first nine months is mainly due to a significant increase in sales of avenanthramides in the US.

• Clocking Elevated Margins: The company's net profit increased in the reporting period, thanks to a higher margin of 65.2% in comparison to 47.8% in 2020. The purchase of outstanding source material and the careful labor of highly skilled staff operating in only one site in 2021 compared to two sites in 2020 resulted in improved profitability.

• Strong Liquidity: On September 30, 2021, the company had cash and cash equivalents of CAD 7.4 million, up from CAD 5.4 million on December 31, 2020, and it manages credit risk on its cash balances by keeping bank accounts with Canadian Chartered Banks and investing in low-risk, high-liquidity investments.

• Positive Outlook for Cosmeceutical Base Business: We expect the company’s cosmeceuticals-based business to continue to grow and provide positive cash flows to support the expansion to a new business model. It is repositioning itself from a contract manufacturer/commodity company to a high-value life science/biopharmaceutical company involved in nutraceuticals and pharmaceuticals. Moreover, it has all the key components for success, including a solid foundation, a healthy balance sheet, and a strong technology and product portfolio with the potential of getting into very large markets.
  

Financial Overview of Q3FY21 (in CAD)

Source: Company

• Total revenue in Q3FY21 increased by 30.1% to CAD 4.5 million compared to CAD 3.5 million in the previous corresponding period. The company benefited from higher sales of avenanthramides in the current quarter.
• Gross profit increased to CAD 2.9 million in the reported period against CAD 1.7 million, mainly due to lower cost of goods sold and higher revenue.
• Income from operations stood at CAD 0.74 million against CAD 0.34 million in Q3FY20, primarily due to higher gross profit, partially offset by increased R&D expenses.
• Its net income for Q3FY21 increased to CAD 0.88 million v/s CAD 0.19 million in pcp.

Risks Associated with Investment 

The company is exposed to a varied range of risks ranging from regulatory risks, uncertainty in product development and related clinical trials and validation studies. Furthermore, the company is exposed to forex risks, and investors are exposed to liquidity risk given the penny-cap market categorization of the company.

Stock Recommendation 

The company has a business model with a highly competent team, a healthy balance sheet, and a strong technology and product portfolio with the potential of getting into very large markets. Further, looking at the recent quarter upsurge in the R&D expenses, we believe the product portfolio is likely to bolster in the near term as higher R&D cost shows that the company is diligently working on new product development and enhancement of the efficacy of the existing product portfolio. On the valuation front, the stock is trading at an EV/Sales multiple of 2.5x on an TTM basis as compared to the industry (Healthcare) median of 8.0x. Hence considering the facts mentioned above and rationales, we recommend a “Speculative Buy” rating on the stock with a lower double-digit upside (in percentage term) at the closing price of CAD 0.58 on December 01, 2021.

One-Year Technical Price Chart (as on December 01, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.