Boralex Inc.

Impressive Performance, Resilient Business-Model: 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 three operating segments, namely, Wind, Hydroelectric and Solar.

The Group declared a quarterly dividend of CAD 0.1650 per common share, payable on June 15, 2020. Meanwhile, BLX paid a total dividend of CAD 16 million in 1Q20, as compared to CAD 15 million in the previous corresponding period.

Q1FY20 Financial Highlights: BLX announced its quarterly results, wherein the company reported total revenue of CAD 203 million, as compared to CAD 174 million in pcp. The increase in the revenue was driven by strong growth in the wind power segment in France and hydroelectric power segment. For the first quarter, the Company produced 1,533 GWh of electricity, depicting an increase of 19% on y-o-y basis. Operating income soared to CAD 84 million, from CAD 54 million in Q1FY19, thanks to robust revenue growth, while a marginal increase in operating and administrative expenses remained a drag. Net earnings improved to CAD 44 million, as compared to CAD 31 million in Q1FY19. Boralex Inc. exited the quarter with Cash and cash equivalents of CAD 281 million and total assets of CAD 4,724 million.

Q1FY20 income statement Highlights (Source: Company Reports) 

Valuation Methodology (Illustrative):  Price/CF based Relative Valuation 

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

Stock Recommendation: The BLX stock stood resilient in the recent past and generated a tremendous return of ~61% in the last one year. BLX operates in electricity generation and falls under ‘essential services’, which is immune to the economic cycles. Notably, the stock is trading above its 200-day simple moving average of CAD 24.52, shows investor’s confidence in the stock amidst volatility in the broader market. Revenues from energy sales and feed-in premium improved 16%, indicating a margin improvement for the Company, which is impressive. Further, the stock offers an annualized dividend yield of 2.23%, which looks attractive looking at the current interest rate scenario. To weather the COVID 19 crisis, BLX withdrew CAD 40 million from its revolving credit facility to support its near-term liquidity. We have valued the stock using P/CF based relative valuation approach and taken peers like Innergex Renewable Energy Inc (TSX: INE), Northland Power Inc (TSX: NPI), TransAlta Renewables Inc (TSX: RNW) etc. and arrived at a target price offering a double-digit upside potential (in % terms). Hence, we recommend a ‘Buy’ rating on the stock at the closing market price of CAD 29.65 as on May 06, 2020.

BLX One-Year Daily Price Chart (Source: Thomson Reuters).

Waste Connections

Waste Connections (TSX: WCN) is an integrated solid waste services company Operating in the US and Canada. The company provides non-hazardous waste collection, transfer, disposal and recycling services. 

The Management has declared a quarterly cash dividend of US$ 0.185 per common share, payable on May 19, 2020, higher than US$ 0.160 per share distributed in the previous corresponding period.

Q1FY20 Financial Highlights: For the period March 31, 2020, WCN came up with decent numbers and posted an 8.7% y-o-y jump in revenue to US$ 1,352.40 million. The increase was primarily attributed by a combination of price hike and volume growth. Operating income stood higher at US$ 216.96 million, as compared to US$ 184.86 million in the previous corresponding period, supported by higher income and lower impairment costs, while the higher cost of operations, selling, general and administrative and depreciation remained a drag. Net income soared to US$ 142.89 million, as compared to US$ 125.57 million in Q1FY19. The Company exited the quarter with cash and cash equivalent of US$ 1,195.28 million and total assets of US$ 14,279.41 million. To deal with COVID-19 impact, the Company has lowered its FY20 capital expenditure by ~US$ 110 million.

Q1FY20 Financial Highlights (Source: Company Reports)

Valuation Methodology (Illustrative): EV/EBITDA

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

Stock Recommendation: The stock WCN stood resilient amidst the stiff correction in the global indices due to demand destruction on account of the COVID 19 pandemic. The stock reported a decent result. The management stated that it has witnessed a slowdown in volume late march and early April. However, volume started up ticking in late April with over 70% of locations showing improvement. We believe the volume to improve as the governments across the globe are likely to ease the lockdown. WCN witnessed a near-term setback in the volume. While during the second half of April 2020, the Company witnessed a demand recovery across most of the locations, which is commendable. The Company is a leading name across the North American market and with ample liquidity to maintain its working capital levels and dividend distribution, which is impressive. The stock is currently trading above its 200-day simple moving (SMA) of CAD 121.95. The stock is currently trading at a forward EV/EBITDA multiple of ~16x and we expect it to increase in the future. Hence, we recommend a ‘Buy’ rating on the stock at the closing price of CAD 122.10 as on May 06, 2020.

WCN One-Year 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.