Xebec Adsorption (XBC.TO) Buy, Sell or Hold

Xebec Adsorption (XBC.TO)

0.51

+0.01 (2.00%)

as of Sep 28, 2022, 7:58:24 pm Market Open.

246 watching

WATCH

They build RNG facilities. Companies pay a huge premium for this. They're at the forefront. There are legs to this. There's big-time execution risk. He's watching to see how it executes. If it does well, it will be around a while.

BUY

The only company that takes gas off garbage dumps and separates the methane gas. There is recurring revenue with their service side business. They are planning on doing more acquisitions. Service is over 40% of the business. Competitors do not offer servicing usually. It is also big on hydrogen. He would be a buyer around $3.75 - $4.00.

TOP PICK

This is Greenlane's big brother. Governments are pushing for renewable gas, so this is a huge tailwind for renewable natural gas companies like XBC. XBC just announced an acquisition and will continue to do so to increase revenue and EBITDA. XBC often is rangebound then consolidates. Now, it's entering its next acceleration. (Analysts’ price target is $5.71)

STRONG BUY

He's owned this for a long time.They're a master of renewable energy, particularly natural gas, in North America and Europe. Their hydrogen business will leap--hydrogen and clean energy are huge now (look at Ballard Power's performance). 2021's earnings are expected to grow 35%. $5.15 is the target price.

TOP PICK

A previous Past Pick. They sold off today on earnings that just fell short of expectations. They are in the bio-gas space which is being legislated as to how much renewable natural gas needs to be used. They have strong backlogs in orders. An area that has sustainability over the next 5 years or more. Good products and good experience. Yield 0% (Analysts’ price target is $4.89)

BUY

It is a prior past pick. This continues to be a growth sector even with everything that has happened. Because everyone has been staying at home, they pushed some of their backlog. They could get some acceleration. They have been growing. There is tremendous tail wind for this company.

BUY

This company has a legacy component involved in air extraction (used in renewal natural gas and hydrogen). They take methane from garbage sites and sell to manufacturers. Because BC and PQ have added renewal requirements in regulations, so this allows the company to sell methane at about 10 times more than current market prices. They have announced recent new contracts that will allow sales to almost double this year. They are profitable and are guiding 5 cents of EPS. It look expensive on a PE basis, but with the growth it is warranted. There is almost a billion dollars of potential projects in their pipeline, which include European opportunities. He owns this personally.

BUY

10% of sales are in hydrogen in China and was expected to triple. Everyone is back to work in China, working weekends to play catch-up. It should go well. Italian projects are put on hold. Earnings are expected to increase 100% this year and 50% next year. Their backlog is substantial. They take the gas that comes off a garbage dump and convert to energy.

STRONG BUY

GRN-X vs. XBC-X. Analysts are forecasting a loss of 3 cents this year and 2 cents next year for GRN-X. XBC-X expects 10 cents earnings this year and 15 next year. Both companies are bidding on the same backlog. He is not keen on a company that is not making money this year or next year.

HOLD

An interesting company that fits with the green theme. They are growing revenues sharply. They manufacture renewal gas equipment for sale to other companies. They are expecting 80% revenue growth this year, but that drops to 30% the following year. This makes the valuation difficult to access. He would be a hold for now.

BUY ON WEAKNESS

It was a Top Pick in December. It is a sector he really likes. They continue to gain more market share and get bigger and bigger projects. He would wait for a pullback if he didn't own it. If you own it, hold on to it. They harvest Methane from Garbage dumps.

BUY

A 400% return over the 15 months since he recommended it. There is still good opportunity going forward. They separate methane from garbage dumps. There could be regulations that require this technology to be used across the country. They have a 20% ROE. They have hydrogen sales as well, where sales are expected to grow rapidly. A huge position for him. They have a $100 million back log.

BUY

A huge holding for him. They just completed financing that gives them a boatload of working capital. 2018 sales were $25 million, expected $45 million in 2019, and a projected $70 million in 2021. To build out, they need that capital; the financing closed today. Lots going on in this space. Also see GRN-X. They deal in methane gas which is far less harmful than CO2 to the environment. BC and QC demand 5% of gas to homes be renewable, so that is a tailwind.

TOP PICK

They are in the renewable natural gas business. They capture gas that is not being used such as in a landfill or feed lot and put that gas into the pipeline to sell into homes. Many jurisdictions around the world are ramping up the amount of renewable natural gas that they are requiring to go into facilities. They only have 3 or 4 competitors globally. They can make the fastest change and grow the fastest. (Analysts’ price target is $2.92)

PARTIAL BUY

They're in the gas market with bio-gas in the emerging sub-sector. We're shifting from coal to nat gas, which is the bridge fuel to pure renewable energy. XBC is a great company because it provides a solution for this industry. Be cautious because XBC lacks positive earnings and it's a very small company. No problem holding this, but keep your holding small.

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Xebec Adsorption (XBC.TO)