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On today's TSX Breakouts report, there are just eight stocks on the positive breakouts list (stocks with positive price momentum), and 52 securities are on the negative breakouts list (stocks with negative price momentum).

Discussed today is a newly listed dividend stock that may appear on the positive breakouts list in the near future once it has more trading history. It was one of the few stocks whose share price increase on Thursday, while the S&P/TSX composite index dropped 275 points or 1.76 per cent. The security highlighted today is Pinnacle Renewable Holdings Inc. (PL-T).

A brief outline is provided below that may serve as a springboard for further fundamental research.

The company

Richmond, B.C.-based Pinnacle is the third largest industrial wood pellet manufacturer worldwide operating seven facilities in western Canada with a new plant under construction. Of note, are its Entwistle facility in Alberta and its Smithers plant in British Columbia. On March 8, initial production began at its Entwistle facility. Management anticipates to complete the commissioning phase of this facility in the second quarter with production slowly ramping up. At its Smithers facility, where it has a partnership with West Fraser Timber Co. Limited who has a 30 per cent interest, production is slated to begin in the second half of this year.

Industrial wood pellets are used by utility companies to produce renewable fuel for electricity generation. The wood pellet market is experiencing strong demand driven by carbon reduction regulations and a transition to renewable energy. According to a report from market consultant Hawkins Wright, demand for industrial wood pellets grew at a 11 per cent compound annual growth rate (CAGR) between 2013 and 2016 and is expected to grow at a 18 per cent CAGR through to 2021.

The company has an attractive revenue growth profile. Revenue was reported at $201-million in 2014, $226-million in 2015, $266-million in 2016 and $293-million in 2017. Pinnacle appears to be on track for further top line growth. The company's backlog, a measure of future revenue, is approximately $3-billion. The company has strong earnings visibility given that has long-term take-or-pay contracts with major utilities in Europe and Asia, the weighted average supply agreement term is 7 years. The company has 100 per cent of its production capacity full contracted through 2021 and nearly 80 per cent contracted through to 2026.

In addition to revenue growth, the company has reported improving operating margins. Adjusted gross margin has increase from 13.4 per cent in 2014 to 22.9 per cent in 2017.

When the company released its record fourth-quarter 2017 results on March 15, Chief Executive Officer Robert McCurdy provided a positive outlook stating, "We expect to meet increasing customer demand in the near term by gradually ramping up production at our new Entwistle production facility and completing construction of the Smithers production facility. We will also continue to evaluate strategic growth opportunities in western Canada and other targeted regions in the U.S. and Canada."

The stock began trading on the Toronto Stock Exchange on Feb. 22. The initial public offering price was $11.25.

Dividend policy

As indicated in the company's initial public offering presentation from January, the company aims at paying its shareholders a quarterly dividend of approximately 15 cents per share or 60 cents per share yearly. This equates to an annualized dividend yield of 4 per cent.

The inaugural dividend is expected to be approximately 9 cents per share as it would not be for the full quarter, the dividend would be from the period between the closing date of the initial public offering and March 30.

Analysts' recommendations

There are four analysts that cover this small-cap stock with a market capitalization of $484-million, of which three analysts have buy recommendations and one analyst has a hold or 'market perform' recommendation (at BMO Capital Markets).

The firms providing research coverage on the stock are as follows in alphabetical order: BMO Capital Markets, CIBC Capital Markets, RBC Capital Markets, and Scotia Capital.

Revised recommendations

All four analysts initiated coverage on the company in late-February and their recommendations and target prices have remained unchanged since initiating coverage.

Financial forecasts

The consensus revenue estimates are $354-million in 2018 and $408-million in 2019. The consensus EBITDA estimates are $64-million in 2018, rising over 25 per cent to $80-million in 2019. Management is forecasting adjusted EBITDA of between $61-million and $65-million in 2018, and between $77-million and $81-million in 2019. The Street is anticipating earnings per share of 49 cents in 2018, rising 82 per cent to 89 cents in 2019.

Valuation

The stock can be valued on an enterprise value-to-EBITDA basis. The consensus one-year target price is $15.83, implying the share price has over 7 per cent upside potential over the next 12 months, and including the dividend yield, the stock has a potential total return of over 11 per cent. Individual target prices are as follows in numerical order: two at $15, $15.50, and $17 (at RBC Capital Markets).

Chart watch

Technical analysis is limited given that the stock has only been trading on the Toronto Stock Exchange since Feb. 22. That being said, the share price has already rallied 31 per cent from its offering price.

Liquidity can be low with a limited public float. The one-month daily average trading volume is approximately 50,000 shares. ONCAP Entities is the largest shareholder holding over 14-million shares or 43 per cent of the shares outstanding.

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The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.

If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.

Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.

Positive BreakoutsMarch 22 close
BOS-TAirBoss of America Corp $12.49
AGB-TAtlantic Gold Corp. $1.93
DRG.UN-TDream Global REIT $13.60
DRM-TDREAM Unlimited Corp $8.33
HNL-THorizon North Logistics Inc $2.16
NFI-TNew Flyer Industries Inc $60.50
SSRM-TSSR Mining Inc. $11.99
TGL-TTransGlobe Energy Corp $1.85
Negative Breakouts
ARE-TAecon Group Inc $18.10
AOI-TAfrica Oil Corp $1.25
AFN-TAg Growth International Inc $53.26
AD-TAlaris Royalty Corp $17.63
ATD.B-TAlimentation Couche-Tard Inc $57.43
BCE-TBCE Inc $55.18
BPY.UN-TBrookfield Property Partners LP $25.31
CNR-TCanadian National Railway Co $92.93
CWB-TCanadian Western Bank $34.17
CS-TCapstone Mining Corp $1.27
CHE.UN-TChemtrade Logistics Income Fund $15.60
CHP.UN-TChoice Properties REIT $11.60
CHR-TChorus Aviation Inc $8.01
CCA-TCogeco Communications Inc $69.29
CGO-TCogeco Inc $69.10
KWH.UN-TCrius Energy Trust $7.39
DC.A-TDundee Corp $2.13
ELD-TEldorado Gold Corp $1.20
FSZ-TFiera Capital Corp $11.39
FN-TFirst National Financial Corp $26.00
FEC-TFrontera Energy Corp. $39.68
GMP-TGMP Capital Inc $2.97
GC-TGreat Canadian Gaming Corp $32.82
GWO-TGreat-West Lifeco Inc $33.25
HCG-THome Capital Group Inc $14.16
HBC-THudson's Bay Co $8.73
IBG-TIBI Group Inc. $7.10
III-TImperial Metals Corp $2.13
IFC-TIntact Financial Corp $96.83
IPL-TInter Pipeline Ltd $21.97
LIF-TLabrador Iron Ore Royalty Corp $22.83
LNF-TLeon's Furniture Ltd. $16.50
LIQ-TLiquor Stores N.A. Ltd $9.87
LUC-TLucara Diamond Corp $2.08
MAL-TMagellan Aerospace Corp $19.56
MAXR-TMaxar Technologies Ltd. $56.20
MEG-TMEG Energy Corp $4.81
ML-TMillennial Lithium Corp. $2.75
NLN-TNeuLion Inc $0.47
PLZ.UN-TPlaza Retail REIT $3.87
POW-TPower Corp of Canada $29.32
QTRH-TQuarterhill Inc. $1.93
SJR.B-TShaw Communications Inc $24.05
TKO-TTaseko Mines Ltd $1.56
TRZ-TTransat AT Inc $7.47
TRP-TTransCanada Corp $52.88
TV-TTrevali Mining Corp $1.32
UNS-TUni-Select Inc $21.01
UR-TUrtheCast Corp $0.34
VFF-TVillage Farms International $5.81
WJA-TWestJet Airlines Ltd $23.41
Y-TYellow Pages Ltd $6.61

Source: Bloomberg