KeyStone’s Your Stock Our Take: Polaris Infrastructure Inc. (PIF:TSX), Star: is Zynex Inc. (ZYXI:NASDAQ) and Boyd Group Income Fund (BYD.UN:TSX).
This week in our Your Stock, Our Take segment we look at Polaris Infrastructure Inc. (PIF:TSX), is engaged in the operation, acquisition and development of renewable energy projects in Latin America. Currently, the company operates a 72 MW geothermal project located in Nicaragua and a 5 MW run-of-river project in Peru. A listener asks what we thought of the company’s recent first quarter financials and if the stock offers value at present? We have two Stars this week – both from our active client only coverage. Our first Star of the week is Zynex Inc. (ZYXI:NASDAQ), which operates currently in one primary business segment, medical devices which include Electrotherapy and Pain Management Products – the stock is up 155% in 2019 alone. Our second Star should be no stranger to KeyStone clients. The company is our longest running recommendation and the best performing stock on the Toronto stock exchange over the past decade Boyd Group Income Fund (BYD.UN:TSX). Boyd released record first quarter numbers this week that smashed expectations and the stock jumped another $12-$14 on the week.
Your Stock, Our Take
Polaris Infrastructure Inc. (PIF:TSX) recently issued financial results. Can you give me your comments on the results and whether or not the stock is good value at present? Is their growth comping online via the new run-of-river projects?
- Will E. – via email.
Your Stock, Our Take
Polaris Infrastructure Inc. (PIF:TSX)
Current Price: $12.50
Market Cap: $196.28 Million
Dividend: Yield: 6.49%
What does the company do?
Polaris Infrastructure is a Toronto-based company engaged in the operation, acquisition and development of renewable energy projects in Latin America. Currently, the company operates a 72 MW geothermal project located in Nicaragua and a 5 MW run-of-river project in Peru. Polaris Infrastructure is also completing the construction of another 28 MW of run-of-river projects also located in Peru.
Up until recently this has been their only producing asset.
They’ve recently taken steps to diversify the business
On October 30th they announced the acquisition of Union Energy Group.
It’s still a higher risk country, based on the existing concentration in Nicaragua.
Until we actually see the projects in Peru produce, as expected, we don’t want to put too much weight on that.
Geothermal power producer primarily in Nicaragua
It is an interesting story, it pays a nice yield, it’s growing, it generates cash flow, and they’re doing a lot of the right things.
Key Points:
Recent Quarterly Financials
Released Q1 results on May 6th.
- Average production of 64.3 MW compared to 53.9 MW.
- Revenue up 26.3% to $18.6 million. Adjusted EBITDA up 28.7% to $15.9 million. Diluted EPS of $0.21 compared to $0.03 in the previous year.
- Ended Q1 with total debt of $184.2 million and cash of $33.0 million (net debt of $151.2 million).
- Trailing twelve month adjusted EBITDA of $61.3 million, cash flow from operations of $35.7 million and EPS of 0.92.
- Debt-to-equity of 0.93 and net debt-to-EBITDA of 2.5.
- The increase in Q1 revenue resulted from the 3% annual tariff increase combined with a 20% increase in net power generation at the San Jacinto project as well as contribution from our newest Peruvian facility Canchayllo.
Conclusion
Valuation of 13.5 times earnings and 5.6 times EV-to-EBITDA.
On October 30, announced the acquisition of Union Energy Group which owns and develops run-of-rivers power projects in Peru. The acquisition includes a single 5MW project (Canchayllo) and 2 late stage projects, El Carmen and 8 de Agosto, which total 28MW and are expected to be commissioned in the third and fourth quarters of 2019, respectively. The acquisition also includes a development stage project (Karpa) with a 20 MW capacity and PPA and an early stage development pipeline consisting of four small scale projects totaling 70MW and one larger project of approximately 119MW.
PIF’s main asset, the San Jacinto Project, is located in Northwest Nicaragua and has capacity of 72MW.
Weekly Star
Zynex Inc. (ZYXI:NASDAQ)
Current Price: USD$7.38
Market Cap: USD$237.96 million
Star Performance:
Zynex is up 45% in the past month, and is up 7% from in just the last week. The stock is up 155% year-to-date.
What does the company do?
Zynex, Inc. (a Nevada corporation) has its headquarters in Englewood, Colorado. It operates one primary business segment, medical devices which include Electrotherapy and Pain Management Products. As of March 31, 2019, the company’s only active subsidiary is Zynex Medical, Inc. through which the company conducts most of its operations. One other subsidiary, Zynex Europe, did not generate material revenues during the three months ended March 31, 2019 and 2018 from international sales and marketing. Zynex Monitoring Solutions, Inc. has developed a blood volume monitoring device, but it is awaiting approval by the FDA as well as CE Marking in Europe, therefore, Zynex Monitoring Solutions has achieved no revenues to date.
Primarily electro therapy devices. Do not picture late night TV with Dr. Ho, where patients have a strange pulsating pad on their shoulders. These are doctor prescribed pain management and rehab devices – used often as a replacement for highly addictive opioids.
What is driving the stock?
On April 30th, the company released its Q1 earnings, surpassing market expectations, and the stock price has increased over 35% since.
Financial Results
Q1 2019 compared to Q1 2018
- Revenue was $9.2 million compared to $6.9 million, up 34%.
- Net income was $2.4 million compared to $1.9 million, up 22%.
- On a diluted per share basis, $0.07 compared to $0.06 up 17%.
- Adjusted EBITDA of $1.8 million compared to $1.9 million, down 2%.
- On a diluted per-share basis, it remained at about $0.05.
Conclusion:
P/E: 27.17
P/EBITDA: 26.75
Current Ratio: 3.21
Cash Ratio: 2.12
Net Cash: $5.9 million
D/E: 0.30
Zynex has been a massive performer over the last 6 months to a year, and the most recent earnings release has continued its momentum. The company’s revenue and net income both had strong growth since Q1 2018 and the company’s balance sheet is very liquid and without much debt. The company has already issued solid growth guidance for its next quarter estimating revenues growth of roughly 28% to between $9.5 million and $10 million, EBITDA between $2.3 million and $2.8 million and earnings per share around $0.07.
The financial growth, and big share price gains make Zynex one of our Stars of the Week – for our US clients. It is has been the star of the year so far….
Weekly Star
Boyd Group Income Fund (BYD.UN:TSX)
Current Price: $163.36
Market Cap: $3.238 billion
Star Performance:
Boyd Group is up over 10% in the last month and have seen its share jump another 50% from the beginning of 2019.
What does the company do?
First off, what does Boyd do? The business is simple, Boyd is one of the largest operators of non-franchised collision repair centres in North America in terms of number of locations and sales. The company currently operates locations in five Canadian provinces under the trade names Boyd Autobody Glass and Assured Automotive, as well as in 27 U.S. states under the trade name Gerber Collision & Glass.
What is driving the stock?
On May 15th, the company released its 1st quarter results that easily beat market expectations, leading to the jump in price we witnessed on Wednesday. This is a continuation of what occurred when the company released its Q4 results, which lead to a similar 9% jump in share price.
Financial Results
Q1 2019 compared to Q1 2018
- Revenue was $557.9 million compared to $453.3 million, up 23%.
- Net income was $21.4 million compared to $18.3 million, up 17%.
- On a diluted per share basis, $0.95 compared to $0.93, up 2%.
- Adjusted EBITDA of $54.2 million compared to $42.1 million, up 29%.
- On a diluted per-share basis, $2.73 compared to $2.12, up 29%.
Conclusion
Boyd continues to execute on its growth strategy. During 2019, the company has added 51 locations, while at the same time achieving organic growth through same-store sales increases in the first quarter of 5.3%. After adjusting for one less selling/production day in the U.S., same-store sales increased 6.6% on a per day basis
Conclusion:
P/E: 46.15
P/EBITDA: 17.49
Current Ratio: 0.61
D/E: 1.53
Boyd has been the best performing stock on the TSX in the last 10 years and an absolute home-run for our clients once again hitting new highs this week. With strong growth, both in terms of same-store sales as well as the addition of new locations, as well as strong revenue and earnings growth, Boyd continues to show solid promise. The current valuations and prices do reflect this – but it is tough to bet against the Boyd team. The massive share price appreciation over the last couple days has earned it one of our Stars of the Week.
