Superior Plus Corp

Superior Plus Corp (TSX: SPB) is an Oil & Gas Producers Company based out of Canada. The Company is classified as a diversified business corporation and operates in two businesses, i.e., Specialty Chemicals and Energy Distribution.

Financial Highlights – Q2 and H1 Financial Year 2020 (30 June 2020, CAD, million)

(Source: Quarterly Report, Company Website) 

In the first half of the financial year 2020, due to lower product and services rendering revenue, the revenue declined to CAD 1,291 million (H1 FY2019: CAD 1,581.8 million). The revenue in Q2 FY2020 stood at CAD 450.8 million (Q2 FY2019: CAD 545.8 million). The adjusted EBITDA declined to CAD 287 million in H1 FY2020 (H1 FY2019: CAD 299.6 million), and in Q2 FY2020 adjusted EBITDA increased to CAD 67.7 million (Q2 FY2019: CAD 59.7 million).

The net earnings in Q2 FY2020 stood at CAD 7.5 million (Q2 FY2019: net loss of CAD 29.3 million), reflecting improved adjusted EBITDA and lower operating expenses. The net earnings in H1 FY2020 declined to CAD 18.9 million (H1 FY2019: CAD 127.3 million). The basic and diluted earnings per share stood at $0.11 in H1 FY2020 (H1 FY2019: $0.73), and in Q2 FY2020, the basic and diluted earnings per share stood at $0.04 (Q2 FY2019: basic and diluted loss per share of $0.17).

The operating cash flow increased in Q2 FY2020 to CAD 187.6 million (Q2 FY2019: CAD 163.5 million) and operating cash flow decreased to CAD 272.4 million in H1 FY2020 (H1 FY2019: CAD 275.7 million). The cash balance as on 30 June 2020 stood at CAD 20.8 million (31 December 2019: CAD 26.5 million).

Share Price Performance

SPB 1 Year Daily Technical Chart. Source: Refinitiv, Thomson Reuters

Superior Plus Corp shares closed at CAD 12.17 at the time of writing after the market close on 18 August 2020. Stock's 52 weeks High is CAD 13.04 and Low is CAD 5.97.

Key Risks

Any change in regulations and government policies could affect the overall business of the Company. Liquidity and interest rate risks could affect the operations of the Company. The market conditions in which the Company operates is full of challenges and might impact the operational performance and reduce financial performance as well.

Conclusion

The Company has shown a decline in financial performance in the first half of the financial year 2020 as the revenue and the bottom-line performance declined in H1 FY2020. The revenue from core operations declined with a decline in the cash balance for the period. The Company expects lower sales volumes in Western Canada, which will result in lower EBITDA in FY2020. SPB results were impacted by weaker economic activity and oil and gas sector headwinds. The Group operations are impacted by the outbreak of covid-19 pandemic and have been focusing on strengthening the balance sheet and return with capital discipline and reducing costs to preserve cash.

Based on the above rationale, we have given a “Hold” recommendation at the closing price of CAD 12.17 (as on 18 August 2020).

Ballard Power Systems Inc

Ballard Power Systems Inc (TSX: BLDP) is an alternative energy company based out of Canada. It is engaged in the business of designing, developing, manufacturing, selling, and servicing of PEM (Proton Exchange Membrane) fuel cell for multiple uses including Technology Solutions, Portable Power, Backup Power, Material Handling and Heavy-Duty Motive.

Q2FY20 Financial Highlights: Ballard Power impresses with its top-line number but fails to retain the momentum in the bottom-line. Revenue, during the quarter, stood at USD 25.8 million, reflecting an increase of 9% y-o-y basis. The increment was driven by higher shipments of Heavy-Duty Motive products, and the strong performance of the Power Products platform segment. Backup Power revenue stood at USD 1.3 million, an increase of 232% on y-o-y basis, due to an increase in sales of hydrogen-based backup power fuel cell stacks to Europe and Asia. At the same time, the group recorded a 29% decline in Technology Solutions platform. Cash operating costs and operating expenses were reported higher on y-o-y basis. The Company posted an Adjusted EBITDA loss of USD 8.6 million as compared to USD 5 million in the previous corresponding period (pcp). Net loss stood higher at USD 11.4 million, indicating a decline of 64% on y-o-y basis. During the quarter, the Company received new orders of USD 11.9 million and delivered ordered value of USD 25.8 million.

Q2FY20 Financial Highlights (Source: Company Reports)

Risks: 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: The stock of BLDP soared ~267% in the last one year. During the quarter, the company received follow-on purchase orders from Wrightbus for 15 of Ballard's 85-kilowatt FCveloCity®-HD fuel cell modules in the U.K., which is a key positive. The company reported cash reserves of USD 170.3 million, reflecting an increase of 4% on y-o-y basis. The company witnessed a rise in the operating costs, which has taken a toll on the company's bottom line, which is a drag. The company reported a lower backlog, which is likely to result in lower revenue in the coming quarters. Further, the company entered into a joint venture with Weichai-Ballard and is expected to produce and assemble fuel cell stacks and modules. The company has shown a decline in financial performance in the second quarter of the financial year 2020. Despite an increase in the revenue, the bottom-line performance has declined, and profitability remained in the negative zone for the period. The Group needs to manage its operating expenses unless it results in further deterioration in financial performance in the coming years. Further, the stock has gained exponentially in the recent past, and we believe all the positives are priced in at the current trading level.  Hence, considering the aforementioned facts and current price movement, we recommend a 'Watch' rating on the stock at the closing market price of CAD 20.92 on August 18, 2020.

BLDP Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

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