Ameresco Target Price Raised $12.50

AMRC : NYSE : US$10.02
Target: US$12.50

Ameresco is a leading provider of energy efficiency solutions for facilities throughout North America. Principal services include the development, design, engineering, and installation of projects that reduce the energy and operations & maintenance costs of facilities. The company also constructs and operates small-scale renewable energy plants.
All amounts in US$ unless otherwise noted.

Investment recommendation
Visibility gets a bit better in H2/13, as projects finally start to move and funded backlog growth is expected at long last. Given the attractive energy efficiency market (and the owner/operator model), we find the opportunity attractive.
Investment highlights
 We recently hosted a series of investor meetings with Ameresco management. In sum, progress continues to build for improvement later in H2/13, as efficiency projects remain attractive and cash flow from the underlying “concession” business (e.g., landfill gas) stays supportive.
 Near term, the continued federal budgetary stalemate (and likely government shutdown) keeps headline risk elevated (though we don’t expect material impact). In our view, 2013 revenue/net income guidance still looks very achievable at ~$620-640M/$18- 21M.
 Our price target adjusts to $12.50 (from $10.50) as we assign a higher multiple given expected movement in funded backlog and better operating leverage in H2/13.
Our $12.50 target is based on a ~13x (from ~12x) EV/EBITDA off 2014E.
Long & lumpy sales cycles, governmental customer concentration, project financing dependency, insider control.


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