Opinions
Jordan Zinberg
Source Energy Services Ltd
SHLE-T
TOP PICK
Jul 04, 2023
Stock price when the opinion was issued
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The Calgary based frac sand supplier recently reported 98% utilization in its trucking fleet -- an increase from 89% from a year ago. Its rail facility in NE BC has achieved unit train size capacity, which will add further revenues. We like that it trades at 4x earnings and under book value. We recommend setting a stop-loss at $8.50, looking to achieve $14.00 -- upside potential of 27%. Yield 0%
(Analysts’ price target is $17.00)We reiterate SHLE, a frac sand distributor as a TOP PICK. The company recently announced a partnership with Trican Well Service to develop a world-class storage facility in NE BC, capable of receiving unit trains -- this should make it a key player in the development of this region. It trades at 4x earnings and under book value. We recommend trailing up the stop (from $9.50) to $10.50, looking to achieve $15.00 -- upside potential of 28%. Yield 0%
(Analysts’ price target is $18.50)We reiterate SHLE, provider of frac sands as a TOP PICK. Last reported earnings confirmed a 136% increase in free cash flow and 31% expansion in margins, which was allowing for continued retirement of debt. It trades at 4x earnings, under book value, and a robust ROE of 168%. We continue to recommend a stop at $10.50, looking to achieve $15.50 -- upside potential of 19%. Yield 0%
(Analysts’ price target is $15.50)Canada's largest provider of frac sand. Demand for frac sand is quite high, especially with LNG coming on. Executing very well. Refinanced debt at lower rate, pushing it out to 2029. Easily an $18-20 stock in the next year. US and potential Canadian governments are much more pro-energy. No dividend.
(Analysts’ price target is $18.00)
Our PAST TOP PICK with SHLE has triggered its stop at $13. To remain disciplined, we recommend covering the position at this time. When combined with our previous guidance, this will result in a net investment gain of 14%.
Dominant in frac sand supply/distribution with over 50% market share in Canada. Profits are spiking this year because they renewed contracts earlier this year at much higher prices. Also, they have a lot of cash flow so are paying off debt. Should $500 million revenue this year, $100 million EBITDA and $40-50 million of free cash. Trades at 2x earnings. At $8-10 by end of 2024 as long as oil stays above $70.
(Analysts’ price target is $8.25)