Ballard Power Systems Inc

Ballard Power Systems Inc (TSX: BLDP) is a clean energy growth company, which is engaged in proton exchange membrane fuel cell development and commercialization. The company's main business is the design, development, manufacture, sale, and service of fuel cell products. 

Key highlights

• Entered strategic partnerships: In the truck market, the company progressed its co-development work with the Weichai-Ballard joint venture in China and with MAHLE on a fuel cell engine for the European market. Furthermore, it has established a strategic partnership with Linamar, focusing on powertrains and components for the North American and European class 1 and 2 vehicle markets. It has teamed up with Chart Industries to create integrated liquid hydrogen storage and fuel cell systems for heavy-duty vehicles.

• Focused on technology and product development: On the technology and product development front, it made steady progress on its major initiatives, including continuous collaboration with the Weichai-Ballard joint venture in China. The company’s '3x3' fuel cell stack cost reduction initiative is also on pace, thanks to breakthrough designs and performance from the MEAs and bipolar plates.

• Steady orderbook: The company received USD 11.8 million in new orders in Q1 2021 and delivered orders worth USD 17.6 million, bringing the Order Backlog down by USD 5.8 million from the previous quarter to USD 112.0 million. At the end of Q1 2021, the 12-month Order Book was USD 73.1 million, down USD 10.4 million from the previous quarter.

Financial overview of Q1 2021 (Expressed in thousands of USD)

Source: Company

• In Q1 2021 the total revenue stood at USD 17.6 million, down 26% from USD 23.8 million in pcp, primarily due to lower Power Products and Technology Solutions revenue.
• The company reported gross margin at USD 2.6 million compared to USD 5.0 million in the previous corresponding period.
• Total operating expenses in the reported period increased to USD 17.9 million from USD 15.1 million in pcp, primarily due to higher R&D and Sales & Marketing expenses.
• Net loss increased to USD 17.6 million against USD 13.5 million in pcp.
  

Risks associated with investments

The market conditions in which the company operates is full of challenges and might impact the operational performance and reduce financial performance as well. Any change in regulations and government policies could affect the overall business of the company. Further, higher operating costs would likely to hinder profitability. 

Stock recommendation

Supported by a strengthening policy backdrop and increased customer engagement, the company has a clearer line of sight on long-term growth in its core medium- and heavy-duty motive applications of bus, truck, rail and marine. Furthermore, the company intends to increase penetration in the key markets of China, Europe and California. On the financials point of view the company is continuously making losses at operating level, which is an area of concern. Moreover, the stock is trading on a stretched valuations compared to the industry (renewable resources). The stock is available at EV to Sales multiple of 29.17x against the industry median of 22.9x. Therefore, based on the above facts, we recommend a “Watch” rating on the stock at the closing price of CAD 20.62 on July 28, 2021.

One-Year Technical Price Chart (as on July 28, 2021). Source: REFINITIV, Analysis by Kalkine Group

AcuityAds Holdings Inc

AcuityAds Holdings Inc (TSX: AT) is a technology company that enables marketers to connect intelligently with audiences across video, mobile, social and online display advertising campaigns. Its solutions include Illumin, which is its marketing platform; Attention Advertising; and Audience Solutions.

Key Highlights

• Healthy growth in financial numbers: The company reported another strong quarter, with year-over-year increase on both the top and bottom lines. Revenues increased 13.4% to CAD 27.5 million, while adjusted EBITDA increased by nearly 151%. In addition, net income grew 566% to CAD 1.4 million in Q1 2021, compared to CAD 0.2 million in Q1 2020. illumin, which is advertising automation platform is one of the major growth drivers in the first quarter, outperformed the management’s expectations once again, with revenues increasing by more than 100% sequentially.

• Q2 2021 update on Advertising Automation Platform, illumin: The company recently released an update on the effectiveness of its new advertising automation system, illumin, which saw revenue grow by over 60% year over year to CAD 5.2 million in Q1 2021. The platform continues to be in high demand, with a healthy sales pipeline. As a result, the Company anticipates that illumin's sales would increase sequentially in Q3 2021. The firm had 40 illumin customers at the end of the second quarter, up 135% from the first.
  

• Strengthening financial position: Recently, the company announced the closing of its previously announced marketed public offering of common shares in the United States and Canada. A total of 5.66 million common shares were sold at a price of USD 10.15 per share, for the gross proceeds of USD 57.5 million. The company intends to use the proceeds to strengthen its financial position and to pursue its growth strategies in digital advertising and marketing solutions.

• Event update: The company will report its second quarter 2021 financial results before market open on August 10, 2021.

   Financial overview of Q1 2021 (expressed in Canadian dollars)

Source: Company

• In Q1 2021, the company posted higher revenue at CAD 27.4 million against CAD 24.2 million in the previous corresponding period. The growth was driven by the new advertising automation platform, illumin, and newer emerging verticals such as pharmaceutical, technology and direct-to-consumer brands.
• Gross profit increased to CAD 14.3 million against CAD 12.1 million in the previous corresponding period.
• On the back of lower operating expenses at CAD 12.1 million V/s CAD 12.7 million, the company increased its income from operations to CAD 2.23 million against a loss of CAD 0.6 million in pcp.
• Primarily due to higher revenue and higher income from operations the company’s net income also increased to CAD 1.3 million compared to CAD 0.2 million in pcp.

Risks associated with investment

The company operates as a communication service company and therefore change in technology might hinder the company’s performance drastically as they are subject to the high cost of capital.

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

Following a difficult period due to the worldwide pandemic's impact, the company resumed year-over-year growth in both the top and bottom lines, as well as margins, in Q1 2021, which is commendable. During the quarter, the firm generated excellent cash flow and improved its balance sheet. Looking ahead to the second quarter, the business anticipates sales to surpass pre-pandemic levels, increasing by more than 50% year over year. It also offered an update on the recent success of its new advertising automation system, illumin, where revenue rose by more than 60% compared to Q1 2021 to CAD 5.2 million, with an increase in illumin clients, which is a significant positive. Therefore, based on the above rationale and valuation, we recommend a “Hold” rating on the stock at the closing price of CAD 10.54 on July 28, 2021. We have considered Eventbrite Inc, Curiositystream Inc., EQ Inc, etc., as the peer group for the comparison.

One-Year Technical Price Chart (as on July 28, 2021). Source: REFINITIV, Analysis by Kalkine Group

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

Disclaimer

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