Newalta shows it's capital expenditure program
On Decmeber 14,2015 gave a press release setting out it's capital expenditure program and some of it's cost reduction program also.Newalta(NAL) is a provider of innovative, engineered environmental solutions that allows customers to reduce disposals, enhance recycling and recover valuable reserves.Their capital expenditure program will be between $30 and $ 40 million in 2016 compared to $70 million in 2015.Maintenance capital for existing programs will be $10 million which is unchanged from 2015.
This means that there will be $50 million of employed assets and $20 to $30 million of underutilized assets.Newalta also announced that it would have $40 million of cost reductions for 2016.And NAL will be cash flow neutral in 2016 after cash dividends and capital expenditures.But they add they will be cash flow positive in 2017.These figures are interesting but what does it mean for it's income statement.
2015 Financial Calculations
Revenues were $83.50 million in Q3 2015 compared to $228 million in Q3 2014.While earnings per share were (.23 per share) compared to $.29 per share for the same period in 2014 and earnings were ($13 million) compared to $17 million in 2014.But EBITDA was starting to trend upwards.It was $48 million for nine months in 2015 versus $98 million in 2014 and $.86 per share compared to $1.77 in 2014.But for the last three months EBITDA was $20 million compared to $43 million in 2014 and $.36 per share compared to $.77 per share.
Using the last three months as a predictor, annualized EBITDA would be about $80 to $90 million and EBITDA per share $1.45 to $1.60.These figures might be at the high end of the range because of the recent cost reduction programs put in place.But using the last nine months as a predictor EBITDA would be only $70 to $75 million and EBITDA per share of only$1.25 to $1.35.This blog takes EBITDA per share as the best estimate of earnings per share.Net income per share is an accounting anomaly and will not be used to measure performance.
What is the Price?
At the start of 2015 Newalta was trading around the $13 to $15 a share range but then the price of oil and gas dropped.It actually fell to almost $2 a share in January.Now it has started to trend upwards but will it continue?Most forecasts of oil prices show a comeback in 2016 and this will help support the price.But NAL is keeping a healthy capital program to try and earn a satisfactory amount of revenue.If revenues and earnings continue on the path of the third quarter then EBITDA per share will likely be at least $1.35 per share and maybe as much as $1.50 per share.At the present share price this produces a price /earnings ratio of 2.5 to 3.0 times earnings.This makes NAL one of the cheapest stocks on the TSX index.This blog expects the price to move up to at least a 5.0 multiple and this means the stock price should gradually track upwards towards $6 a share.When this will happen is not certain.
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This means that there will be $50 million of employed assets and $20 to $30 million of underutilized assets.Newalta also announced that it would have $40 million of cost reductions for 2016.And NAL will be cash flow neutral in 2016 after cash dividends and capital expenditures.But they add they will be cash flow positive in 2017.These figures are interesting but what does it mean for it's income statement.
2015 Financial Calculations
Revenues were $83.50 million in Q3 2015 compared to $228 million in Q3 2014.While earnings per share were (.23 per share) compared to $.29 per share for the same period in 2014 and earnings were ($13 million) compared to $17 million in 2014.But EBITDA was starting to trend upwards.It was $48 million for nine months in 2015 versus $98 million in 2014 and $.86 per share compared to $1.77 in 2014.But for the last three months EBITDA was $20 million compared to $43 million in 2014 and $.36 per share compared to $.77 per share.
Using the last three months as a predictor, annualized EBITDA would be about $80 to $90 million and EBITDA per share $1.45 to $1.60.These figures might be at the high end of the range because of the recent cost reduction programs put in place.But using the last nine months as a predictor EBITDA would be only $70 to $75 million and EBITDA per share of only$1.25 to $1.35.This blog takes EBITDA per share as the best estimate of earnings per share.Net income per share is an accounting anomaly and will not be used to measure performance.
What is the Price?
At the start of 2015 Newalta was trading around the $13 to $15 a share range but then the price of oil and gas dropped.It actually fell to almost $2 a share in January.Now it has started to trend upwards but will it continue?Most forecasts of oil prices show a comeback in 2016 and this will help support the price.But NAL is keeping a healthy capital program to try and earn a satisfactory amount of revenue.If revenues and earnings continue on the path of the third quarter then EBITDA per share will likely be at least $1.35 per share and maybe as much as $1.50 per share.At the present share price this produces a price /earnings ratio of 2.5 to 3.0 times earnings.This makes NAL one of the cheapest stocks on the TSX index.This blog expects the price to move up to at least a 5.0 multiple and this means the stock price should gradually track upwards towards $6 a share.When this will happen is not certain.
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