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

• Elevated energy production: Regardless of a sluggish production outlook in the recent past, the company reported total power production of 149,320 MWh in Q3 2021, climbed from 142,194 MWh in the previous corresponding period. We expect the momentum to continue in the coming days, supported by an elevated demand scenario.

Source: Company Fillings

• Encouraging macros to support future performances: Apart from North America, the corporation has a presence in Latin America, including Nicaragua and Peru, which is aggressively expanding energy demands, even the governments have declared mandates and economic policies to assist the expansion of local renewable energy sources. Latin America is one of the most active renewable energy markets in the world, with enormous development potential.

• Industry beating margins: The company's strong determination enabled them to outperform the industry median margins on several fronts in Q3 2021, which demonstrates 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

Source: REFINITIV, Analysis by Kalkine Group

 Financial overview of Q3 2021

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.
  

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.

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

The company reported decent third quarter results as it continues to build on the longer-term strategy by delivering operationally, generating strong cash flow and focusing on the diversification. As the company operates in the utilities sector, where demand for services is unaffected by economic cycles, ensuring income stability, which is a key positive. Furthermore, the binary unit contract has been signed, with a commercial operating date of the end of 2022, which is significant. Additionally, it also has a strong balance sheet and has significantly decreased its net long-term debts. Hence, considering the aforesaid facts, we give a ‘Speculative Buy’ rating on the stock at the closing price of CAD 17.00 on December 09, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary:

One-Year Technical Price Chart (as on December 09, 2021). Source: REFINITIV, Analysis by Kalkine Group 

Atico Mining Corp

Atico Mining Corp (TSXV: ATY) is engaged in copper-gold mining and related activities. Its activities include the exploration, development, extraction, and processing in Colombia.  It earns revenue from contracts with customers related to its metals concentrate sales.

Key highlights 

• Robust increase in sales: Sales for the quarter climbed by 126% to USD 31.8 million, compared to USD 14.1 million in Q3 2020. During Q3-2021, copper and gold accounted for 85% and 15% of the 16,184 (Q3-2020 - 9,291) dry metric tonnes delivered and invoiced, respectively. The average realized price per pound of copper on invoicing was USD 4.26 vs. USD 2.98 in Q3 2020, whereas the average realized price of gold fell somewhat to USD 1,782 vs. USD 1,991 in Q3 2020.

• Healthy production guidance: The operation remains on track to deliver on set guidance throughout the remainder of the year. The company expects a production between 9,100 and 9,500 tonnes of copper and the gold production would be in a range of 10,500 and 11,500 ounces.

• Robust cash flow from operations and free cash flows: Company generates significant cash flow through the operation of the El Roble mine and is developing its high-grade La Plata VMS project in Ecuador. On TTM basis, on the back of healthy production and higher average realization price of commodities the company has clocked cash flow from operations of USD 39.5 million while the free cash flow for the same period stood at USD 32.7 million.

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

Source: REFINITIV, Analysis by Kalkine Group 

Financial overview of Q3 2021

Source: Company Filing 

• Sales in the reported period increased 126% to USD 31.8 million against USD 14.0 million in the previous corresponding period. An increase was mainly due to higher provisional invoicing of 16,184 DMT V/s 9,291 DMT in pcp.
• Even on the back of higher G&A expenses and higher share-based payments, the company clocked income from operations at USD 12.1 million against USD 3.7 million in pcp.
• Net income stood at USD 7.5 million compared to a loss of USD 1.8 million in pcp.
  

Risks associated with investment

The company’s financial performance is dependent on the prices of underlying commodities, in which it deals in. Hence, volatility in commodity prices would affect the overall performance. 

Valuation Methodology (Illustrative): EV to Sales 

Stock recommendation

In Q3 2021, the company’s operation improved most of the production metrics relative to the first half of the year, however it witnessed a slight increase in cash cost during this period mainly driven by a lower copper head grade and metal output. On TTM basis the company has clocked free cash flow of USD 32.7 million, which is a key positive. Moreover, the company has shared its FY 2021 production guidance and its operation remains on track to deliver on set guidance. Hence, considering the aforesaid facts, we give a ‘Speculative Buy’ rating on the stock at the closing price of CAD 0.435 on December 09, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

 Technical Analysis Summary:

One-Year Technical Price Chart (as on December 09, 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.