Acadian Timber Corp

Acadian Timber Corp (TSX: ADN) is a Canada-based supplier of primary forest products in Eastern Canada and the Northeastern United States. The company's operating segments include NB Timberlands and Maine Timberlands and generates maximum revenue from the NB Timberlands segment. Its product includes softwood and hardwood sawlogs, pulpwood and biomass by-products.

Key highlights

• An income play: Despite the tough circumstances, the company continues to distribute dividends, demonstrating its financial health and implying that it is a friend to income investors. Recently, the company paid a quarterly dividend of CAD 0.29 per share. Moreover, the stock carries a dividend yield of ~6.4%, which is lucrative, considering the current interest rate environment.
• Multifold jump in adjusted EBITDA: The company witnessed a huge jump in its Adjusted EBITDA in Q2 2021 which stood at CAD 3.8 million compared to CAD 1.8 million during the prior year period and Adjusted EBITDA margin increased to 26% from 19%, respectively. The increase in Adjusted EBITDA was driven by higher sales volumes and additional revenues from timber services.
• Increase in free cash flow: Backed by higher sales volumes, additional revenues from timber services and healthy adjusted EBITDA, the company clocked higher free cash flows at CAD 2.9 million compared to CAD 0.2 million of negative Free Cash Flow.
• Industry beating margins: The Company maintained its pace and witnessed spirited performance across its margin matrix. In addition, the management’s solid determination helped them leap the industry median margins on many fronts in Q2 2021, which exhibits the competitive advantage of the company within the industry.

Financial overview of Q2 2021 (in thousands of CAD)

Source: Company

• In Q2 2021, the company reported revenues of CAD 18.4 million, against CAD 11.4 million in the previous corresponding period. The rise in revenues was mainly due to higher sales volume and timber services activity.
• The company posted operating income of CAD 3.7 million in the reported period compared to CAD 1.2 million in pcp. Although the company posted higher operating expenses, it managed to elevate its operating income, which was key positive.
• The company reported a decline in the net finance expense at CAD 0.72 million from CAD 1.1 million in pcp.
• Net earnings stood marginally higher at CAD 5.8 million in Q2 2021, compared to CAD 5.2 million in pcp.

Risks associated with investment

Sluggish demand for wood products might result in higher inventory levels, which might restrict the company's capacity utilization. Furthermore, a continuation of the ongoing weak hardwood pulp demand might dampen the sales of the company. 

Stock recommendation

On the back of product diversity, the group retained operational performance in recent times, which is impressive. The company expects strong demand for softwood sawlogs in the North American market in FY 2021, on the back of, lower interest rates and old & underbuilt housing stock with higher housing construction. This improving demand outlook is a big positive for the company. Additionally, the strong end use markets for hardwood lumber and low hardwood sawlog inventories regionally are expected to support continued strong demand and pricing for the company’s hardwood sawlogs. On top of all, the stock delivers a healthy yield of ~6.4%, which is impressive and can be a crucial factor for long-term investors. On the valuation front, the stock is available at a forward EV/Sales multiple of 4.1x, which is significantly lower compared to the industry average of 5.4x. Therefore, considering the above rationale, we recommend a ‘Speculative Buy’ rating on the stock at the last closing price of CAD 18.06 on August 20, 2021.

Technical Analysis Summary

One-Year Technical Price Chart (as on August 20, 2021). Source: REFINITIV, Analysis by Kalkine Group 

Wishpond Technologies Ltd

Wishpond Technologies Ltd (TSXV: WISH) is a provider of marketing-focused online business solutions providing 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: Despite the turbulent year of 2020, the Company maintained its momentum and had a strong success in its revenue. The Company is always working closely with customers, and as a result, its presence is growing in tandem with volume, which is commendable. Compared to the previous similar period, the Company's sales increased by 74% to CAD 2.9 million in the reporting period.

• Made strategic acquisitions:To accelerate growth, the firm made two significant acquisitions of marketing and sales technology firms, having recurring-revenue models. It acquired “Invigo Media Corp.” a profitable and growing marketing technology and services company focused on serving medical clinics. Over the last six months, Invigo achieved an annualized revenue of CAD 2.7 million and EBITDA margins exceeding 20%, and California based “PersistIQ”, which provides sales engagement technologies. It holds a base of approximately 800 clients and has generated recurring revenue of USD1.1 million with EBITDA margins of about 20% in 2020. After these acquisitions cross-selling opportunities and new customer segments will be made available to the company.
• New product development: The company just introduced its Payments Product, a new service that allows merchants to accept payments directly from landing pages instead of referring customers to an external website or payment gateway. We believe that by collecting fees on payments handled through the Company's landing pages and websites, will provide the Company with a new stream of revenue.
  

Financial overview of Q1 2021 (Expressed in Canadian Dollars)

Source: Company 

• In Q1 2021, the company achieved a record quarterly revenue of CAD 2.8 million compared to CAD 1.6 million in Q1 2020. The increase of 74% in revenue was mainly due to acquisitions made by the company.
• On the back of higher revenue, it clocked a gross profit of CAD 1.7 million, against CAD 1.0 million in the previous corresponding period.
• The company registered higher operating expenses in the reported period, which stood at CAD 2.8 million v/s CAD 1.1 million in pcp; thus, its operating loss increased to CAD 1.0 million against CAD 0.1 million in pcp.
• Net loss stood at CAD 1.1 million in Q1 2021, compared to CAD 0.17 million in pcp.
  

Risks associated with investment

To stay competitive, the corporation must create new software products or features and improve its present marketing services. The company's business and operational performance would suffer if it failed to position and/or price its items to satisfy market demand. Moreover, we had limited financial information as the company got recently listed.

Stock recommendation

The first full quarter after being a publicly traded business, Q1 2021, was a watershed moment for the corporation. It produced record revenue and completed two acquisitions during the quarter. The excellent results were fueled by significant organic growth in the quarter as well as contributions from the Invigo and PersistIQ acquisitions. In addition, despite foreign exchange headwinds from a lower US dollar, the firm is on course to deliver significant organic growth in Q2-2021, fueled by greater capacity in the Company's sales force, positive contribution from acquisitions, and new product related revenues. It also plans to boost its Monthly Recurring Revenue (MRR) through organic growth and acquisitions, which is a big plus. Furthermore, on the valuation front, the stock is available at a forward EV/Sales multiple of 3.17x against an industry mean of 8.0x. Hence, considering the aforesaid rationales, we recommend a “Speculative Buy” rating on the stock at the closing price of CAD 1.10 on August 20, 2021, with double-digit (percentage term) upside potential. 

Technical Analysis Summary

One-Year Technical Price Chart (as on August 20, 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.