Polaris Infrastructure Inc. (TSX: PIF), is a Canada-based company, which is engaged in the acquisition, development, and operation of renewable energy projects. It operates energy projects in Central and South America, which includes both Geothermal and Hydroelectric energy projects.

Key highlights

• Declared Quarterly Dividend: Recently, the company declared a quarterly dividend of USD 0.15 per common share outstanding. This dividend will be paid on February 25, 2022 to the shareholders of record at the close of business on February 23, 2022.
  

• Announced Debt Re-Financing: Recently, the company announced its debt structuring program for energy and infrastructure projects in Latin America and the Caribbean. The company has entered into a definitive financing agreement with three Development Financial Institutions (DFI's) for a Senior Debt Facility amounting USD 110 Million for the wholly owned geothermal subsidiary in Nicaragua. This Senior Debt Facility will have a term life of 15 years starting from 2022, with an initial interest rate of 7.0%.
  

• Increased Power Production: Despite sluggish production outlook in the recent past, the company registered total power production of 149,320 MWh in Q3 2021, up from 142,194 MWh in the previous corresponding period. We expect the momentum to continue in the near future due to rising demand scenario.

Source: Company Fillings

• Industry beating margins: The company's strong determination assisted it to leap the industry median margins on several fronts in Q3 2021, which showcased the company's competitive edge within the industry. This can be seen in the graph below.

Source: REFINITIV, Analysis by Kalkine Group

• Reported higher cash balance and minimizing net debts: In Q3 2021, the company reported higher cash balance at USD 99.8 million compared to USD 60.0 million on Dec 31, 2020. Furthermore, it reduced its net long-term debt to USD 152.5 million compared from USD 168.2 million, respectively in the same period. The group is curtailing its debt on a sequential basis, which is a key positive.
  

Risks associated with investment

Due to the inherent nature of the operations, the group might witness setbacks from the global economic trends, risks related to local social, political, environmental, and economic conditions, as well as currency and inflation-related risks within the markets within which it operates. 

Financial overview of Q3 2021 (In 000 of USD)

Source: Company Filing

• PIF announced its quarterly results, wherein the group reported its revenue of USD 14.8 million, lower than USD 17.0 million in the previous corresponding period (pcp). The slide was primarily due to the amended PPA price at San Jacinto.
• Operating income stood at USD 4.2 million, slide from USD 6.6 million in pcp due to lower revenue and an increase in G&A expenses.
• Earnings before income tax stood higher at USD 3.1 million compared to USD 1.9 million in pcp. An increased income was mainly due to higher other gains.
• The group reported a net profit of USD 2.1 million, as compared to USD 1.3 million in pcp.
  

Valuation Methodology (Illustrative): EV to EBITDA based

Analysis by Kalkine Group 

Stock recommendation 

The company has registered strong Q3 FY21 results, revealing its long-term plan by enhancing operational efficiency, generating positive cash flow, and focusing on diversification.  Since, the company is mainly in the utilities industry, where demand for services is unaffected by economic cycles, income consistency is a crucial benefit. The company has a sound balance sheet, with squeezing long-term loans. Moreover, the company is offering a respectable dividend yield of 4.81%, which is a key positive. Hence, considering the aforesaid facts, we give a ‘Speculative Buy’ rating on the stock at the current market price of CAD 15.64 at 01:56 PM Toronto time on February 18, 2022.

One-Year Technical Price Chart (as on February 18, 2022, at 01:56 PM). Source: REFINITIV, Analysis by Kalkine Group 

 Technical Analysis Summary:

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