Boralex Inc. 

Resilient Business Model Acts As a Hedge: Boralex Inc. (TSX: BLX) develops, builds and operates renewable energy power facilities in Canada, France, the United Kingdom and the United States. The company operates through four operating segments, namely, Wind, Hydroelectric and Solar. The company will disclose its Q1FY20 results on May 06, 2020.

The company paid a quarterly dividend of CAD 0.165 per share. Meanwhile, the company paid a dividend of CAD 0.66 per share in FY19, improved from CAD 0.63 per share in FY18. Investors should note that the company has reported a net loss for the last two financial years and simultaneously maintained its dividend growth rate, which is encouraging. Notably, the company derives its revenue from predefined contracts which includes well-defined pre-set conditions and no clauses for price or production alterations during economic uncertainties like COVID-19. Further, the company confirmed that it did not have any supply problems from its suppliers.

FY19 Financial Highlights: BLX came up with its full-year results, wherein the company reported revenue of CAD 564 million, up 20% on y-o-y. The y-o-y growth was driven by higher electricity generation coupled with an increase in its operating asset base. Operating income stood at CAD 484 million, as compared to CAD 412 million in FY18. The increase was supported by healthy revenue growth while higher operating expense remained a drag. Net loss widened to CAD 43 million, as compared to CAD 38 million on account of a substantial increase in finance costs, partly offset by an income tax recovery. The company reported cash from operations at CAD 294 million, significantly higher than CAD 202 million in FY18. The company exited the year with total assets of CAD 4,557 million and a cash balance of CAD 153 million.

FY17-FY19 Yearly Highlights (Source: Company Reports)

Valuation Methodology (Illustrative): Price/Cash Flow Multiple Approach

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock has generated a robust return of ~27% and ~51% during the last six months and one year, respectively. The stock is offering a decent dividend yield of 2.348%, which looks attractive amidst lower interest rate environment. Electricity is considered an essential service and falls within the defensive sector and is immune to the economic cycle. The company benefits from long-term contracts with strong customer base that includes names like EDF, Hydro Quebec, IESO, BC Hydro. Furthermore, Boralex seems to have enough liquidity to weather the current crisis and continue to grow, thanks to its stable and predictable cash flows. We have valued the stock using P/CF-based relative valuation method. We have taken peers like, Northland Power Inc (TSX: NPI), TransAlta Renewables Inc (TSX: RNW), Brookfield Renewable Partners LP (TSX: BEP.UN) etc. and arrived at a target price which implies a low-double digit upside (in % terms) from the current level. Hence, we recommend a ‘Buy’ rating on the stock at the Closing market price of CAD 28.11 as on April 18, 2020.

BLX Daily Price Chart (Source: Thomson Reuters)

Centerra Gold Inc.

Higher Average Price Realization to drive Growth: Centerra Gold Inc. is a Canada-based gold mining company specialized in operating, developing, exploring, and acquiring gold properties in North America, Asia and other markets worldwide.

In response to the pandemic, the company significantly reduced the manpower and lowered mill throughput to 50,000 tonnes per day for 14 days starting from April 6 at the Mount Milligan Mine in British Columbia. Also, the company reduced its workforce at the Öksüt Project from March 31 for two weeks. The company announced a quarterly dividend of CAD 0.04 per share, payable on April 22, 2020.

FY19 Financial Highlights: CG announced its full-year results, wherein the company reported earnings from mine of US$ 450.08 million, as compared to US$ 343.35 million in FY18, aided by increased contribution from gold, copper and molybdenum segments. The company reported a loss on earnings from operations of US$ 85.70 million, as compared to a profit of US$ 98.61 million in the previous financial year. The loss was due to inclusion of impairment expenses and provision for Kyrgyz Republic settlement of US$ 230.50 million and US$ 10 million, respectively followed by significant increase of exploration & business development costs, and corporate administration costs. The company reported a net loss of US$ 93.51 million, as compared to US$ 107.53 million in FY18.

FY19 Income Statement Highlights (Source: Company Reports) 

Valuation Methodology (Illustrative): Price/Cash Flow Multiple Approach

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The Stock of CG has performed well in the recent past delivering a ~38% return in the last year. At current market price, the stock is trading above its 20-day Simple Moving Average (SMA) of CAD 8.94.The company has revised its gold production guidance for FY20 and expects a higher production, amidst the temporary production loss on account of COVID 19. During FY19, most of the gold producing companies has reported top-line growth due to the price appreciation of the gold in the international market. Meanwhile, as the economic uncertainty persists, we believe the price momentum in gold is likely to continue as investors are choosing gold as a safe investment option over equity. We have valued the stock using P/CF-based relative valuation method. We have taken peers like, New Gold Inc(TSX: NGD), Yamana Gold Inc(TSX: YRI), Iamgold Corp(TSX: IMG) etc. and arrived at a target price which implies a low-double digit upside (in % terms) from the current level. Hence, we recommend a ‘Buy’ rating on the stock at the Closing market price of CAD 9.73 as on April 18, 2020.

CG Daily Price Chart (Source: Thomson Reuters)

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.