AMRC : NYSE : US$9.31
Ameresco is a leading provider of energy efficiency solutions for facilities throughout North America. Principal services include the development, design, engineering, and installation of projects that reduce the energy and operations & maintenance costs of facilities. The company also constructs and operates small-scale renewable energy plants.
All amounts in US$ unless otherwise noted.
Sustainability — Energy & Power Technologies
FRUSTRATING, BUT FORESHADOWING A CHANGE; MAINTAIN BUY Target $11.50
Market conditions stay challenging, while funded backlog looks to improve further in Q4 (helping visibility in ’14). We stay constructive here as we expect ’14 could bring the launch of a fresh corporate structure (e.g. dividend), along with our much more conservative outlook and underlying valuation (~2.1x TBV) provide support for shares.
Ameresco reported Q3/13 revs/EPS of 161.6M/$0.10 vs. our $177.0M/$0.15 and the Street at $185.0M/$0.18. Contracted backlog increased ~13% q/q to ~$366M (first positive move in 10 quarters, expected to grow in Q4), while full-year rev/net income targets get narrowed to $570-590M/$11-13M on delays (from $620-640M/$18-21M). Guidance now factors a more elongated view of conversion rates for funded projects (~18 months).
Importantly, the balance sheet remains well-positioned to weather this protracted period of variable demand. We note FCF generation of roughly $1.6M in the quarter, supporting the core business.
Our estimates adjust to reflect reported results and conversion delays. F2013 goes to $570.0M/$0.21 (from $620.4M/$0.39); F2014 to $585.0M/$0.25 from $682M/$0.55.
Our $11.50 target (from $12.50) is based on a ~16x EV/EBITDA off CY14.
Long & lumpy sales cycles, governmental customer concentration, project financing dependency, insider control.