Northland Power's Second Quarter Results -- Waiting for Q4

 On August 7 Northland Power released it's second quarter results and there was little growth over Q2 2018.That is because Northland's two big projects are not yet completed but there is some good news.There is a rainbow with a pot of  gold behind this story. Firstly all Northland Power's financial and performance 

indicators are ahead of Q2 in 2018.But more importantly NPI is nearing completion on it's North Sea wind farm called Deutsche Bucht.And it has started construction on it's first  solar project in Mexico called La Lucha;Northland says there will be others  to follow in Mexico.Lastly it is developing sub projects for it's offshore Taiwan wind farms and will be ready to execute power purchase agreements in late 2019. These matters were discussed in an earlier Workathon blog dated February,14,2019 

Second Quarter Highlights

Most financial indicators were up in Q2 but only slightly so.Revenues were ahead by 2% over Q2 in 2018.While adjusted EBITDA was up by 6%.Lastly free cash flow per share decreased by 5% -- from $.21 to $.20 per share.And net income increased by 10% to $76 million.NPI also adds that La Lucha has started construction and will be finished in the second half of 2020.In addition, 25 of 33 turbines have been installed in the North Sea and DeBu has generated it's first KWH of pre-completion revenue already.Perhaps there will be  a substantial amount of pre- completion North Sea off shore revenue by September 30.

                     Totals for the 6 months were a little better as revenues were up to  $842 million.While net income moved to $280 million from $245 million in 2018.And adjusted EBITDA was ahead by 3% over 2018 to $488 million.Northland says that this is on track to hit

 EBITDA of $1200-$1300 million for 2019. 

Good Growth for last 4 years 

Northland showed only modest growth this quarter.And will have only little increase in Q3.Investors will have to wait until Q4 for their reward.But investors have been rewarded well over the last four years.Revenues have doubled from $728 million to$1555 million in 2018.Operating income almost tripled as it went from $383 million to $1134 million.In addition, net income showed tremenduous gains as it went from $27 million to $405 million in 2018.True, the dividend only increased slightly over the four year period.But Northland Power has made some large and very profitable investments in the North Sea.   

Comparison to Emera 

 This blog considers Emera one of,if not the best run,and most stable Canadian utilities.At first glance these two utilities seem like David and Goliath.Emera has certainly been around for longer and has grown it's dividend quite well but Northland Power has made tremenduous gains recently.In 2018 NPI's revenues were only about 25% of Emera revenues  but at the same time they made up almost 55% of Emera net income.This with two big projects schedule to finish by Q2 of 2020 and one of these in Q4 2019.Northland constructs quite large projects (Deutsche Bucht is a $1.4 billion project).So this blog sees that Northland's net income may be 60% of Emera net income by Q2 of 2020.Emera is trading at $56 to $58 per share so why shouldn't Northland trade at 60%  of this value or at least $30 per share.    https://www.brookfield.com/https://www.omers.com/      

Blackline Safety is in a Breakout Pattern

    Blackline Safety is a junior technology leader and it released it's second quarter results on June 27.Blackline (BLN) paints a fairly rosy picture.Quarterly revenues have doubled from Q2 in 2018;they were $8.2 million in 2019 for a whopping118% increase over 2018.Cash and short term investments stood at $34 million.Although they still incurred a $4.8 million loss versus a $4.5 million loss in 2018.But importantly adjusted EBITDA was $253,000 for Q2  versus a $104,000 loss in 2018 and for 6 months it was $286,000 versus a $239,000 loss in 2018.A 343% gain for the quarter and a 220% increase for the first half.
       New Products and New Revenues
   Like in the picture above BLN has room to grow with it's present stable of products;some of which are newly acquired.This blog has given several good leads to BLN on my Site123.com website.Details are available  for several dates on Site123.com.It is clear that Blackline has substantial cash on hand and a strong capital structure that has allowed accretive investments.Further revenue increases are expected throughout 2019 from these solid investments.                       

      Blackline Safety has a Special Niche
    BLN is a very well managed company and is seen by this blog as poised for new acquisitions.It's recent growth spurt has been caused by products from it's recent acquisitions.But BLN has a special niche and special products.This niche has less competition than does many junior technology companies.And this blog ( see the picture above) has another small acquisition lined up;this will be in the business of wireless transmissions to employees and wireless security similar to BLN's present business and should fit in well.If this new acquisition gets tucked in and is accretive to  EBITDA then look for Blackline Safety to be in the high $6 range by yearend.         https://www.zacks.com/  https://www.omers.com/       

GoEasy has Safety and More Products

      GoEasy Financial is working on remaking itself.It is keeping it's delinquency rate down and secured lending up.At the same time this blog has recommended that it make some combination or even an outright acquisition of Street Capital Bank-a small fairly new Tier1 bank.There has been an acquisition of Street Capital Bank by an unknown company called RFA.It is not known whether GoEasy is connected directly or indirectly with RFA.But if it is then GoEasy will have a number of new products to offer it's customers.If handled correctly and slowly this could increase revenues dramatically.But of course some of their new banking products will meet with competition in the small Canadian market.
    First Quarter Highlights
   GoEasy is a consumer loan specialist and so their loan portfoloio increased by 46% over 2018 to $602 million.At the same time revenue increased by 22% to $140 million.More importantly e.p.s. increased by 53% or from $.77 to $1.18 per share.
      Safety First
    They also enhanced their plan to lend in Quebec which will give them further growth.GoEasy also tells it's shareholders that secured lending increased from 4% in 2018 to 12% in Q1 2019.This strategy and others has kept their delinquency rate down to 4.4% which is consistent with 2018.In fact, the CEO says that "1 in 3 Easy Financial customers graduated to prime credit and 60% increased their credit score within 12 months of borrowing from us."GSY also takes care of shareholders by repurchasing 283,500 shares at an average price of $41.75 per share.
      Larger Market                    

   GoEasy has a quite successful market niche and as can be  seen from above they have improved this market over time.This alone should allow earnings to grow by 40 to 60% for a number of years.But GoEasy has decided to gradually increase it's banking products.If this is done slowly and carefully it should strengthen the company even further.A Go Easy credit card and line of credit (over $15,000) may not be too far away.But Go Easy mortgages may likely never appear.Look for annual e.p.s. of $.50 to $5.00 for 2019 and this should allow the price to gradually move towards $58-$60.                https://www.otpp.com/homehttps://www.info.com/serp?q=cpp%20canada%20pension%20plan&segment=info.0419&s1aid=8515556047&s1cid=1628428016&s1agid=57491951010&s1kid=kwd-300114431469&utm_source=adwords&gclid=Cj0KCQjwyLDpBRCxARIsAEENsrL8xz00HWInfPMwKPQKt5Srbq4VGKkznQGq8KUkTn1zTbIX-T3s4T8aAmZ1EALw_wcB

Domaine names are still Tucows' main domaine

    On May8 Tucows released it's first quarter results and they were as this blog expected.And that is chiefly because Tucows is either still making revenues from domaine names or at least telling investors that they are.This has caused the stock price to be on a roller coaster.It was trading around $120 a share in January and February and this blog believed that investors thought that they owned a  number of hardware and online advertising companies.As they gradually learned that Tucows was only in domaine names the stock price fell to $83 at the release of the quarterly report.After results had been absorbed the price fell further  to it's $80 price level.Now it does not  appear so stylish and modern but it is still buoyed by it's ample profit.
    First Quarter Highlights 
  Tucows tells shareholders that it's mobile internet service company called Ting is operating in it's eighth American town-Fullerton, California.However total Ting revenues plus revenues from domaine names has fallen since Q1 2018 by18% while net income dropped by 25%.Basic e.p.s. dropped by 26% and adjusted EBITDA by 9%.So their financial indicators all show to varying degrees that financial performance is starting to falter. 
      It is not clear how revenues are earned.For example, how much revenue is recurring and how much is one time only.It is also not clear if Ting makes any income at all it seems to have very heavy investment and little revenues coming in.But it is starting to be more clear that the growth in revenues is faltering.It is also clear that Tucows has a small capital structure with only 10.5 million shares outstanding.     

     A New CEO
   This blog has warned the CEO,Elliott Noss, to diversify out of domaine names.And that a discussion of Ting does not belong as a highlight;it is only a footnote.Tucows lost a good opportunity to buy Yellow Pages and get into the Quebec market and into online advertising.Domaine names is too specialized to count on as your only revenue source.In addition, Tucows has a very tight capital structure at 10.5 million shares.It should have raised more equity when the stock was trading at $120/share,     http://www.caissepopulaire.ca/https://www.laurelhill.com/
   

Northland Power gets new sun and wind Power Projects

     It took a long time for Northland Power to get completed power purchase agreements (PPA) on it's three wind farms in the North Sea.The projects were built but little revenues were coming in as the PPAs were not signed.Although there was a small delay the first two are now fully commissioned.NPI tells investors not to expect revenues until 20202.But this blog expects pre-completion revenues in Q4 of this year.  Now NPI has released it's first quarter report and it tells shareholders that they have a PPA for the 300MW Hai Long 1 and close to having them for the 232MW Hai Long 2 and 512 MW  Hai Long 3.This is partly due to the fact that they are only 60% owner of these 2 new wind projects;the remaining 40% is owned by Yushan Energy of Taiwan.This makes it easier to get PPAs signed.But Northland has also announced a new solar project in Mexico;this 130MW project has obtained all permits required for construction and is expected to be generating revenues in Q2of 2020.
      First Quarter Highlights
    The first quarter only showed slight growth over Q1 in 2018.
     On May 8 Northland released it's first quarter results and they were largely as most investors expected.They are showing slow, steady growth.Revenues increased 3% from 2018 while adjusted EBITDA increased by 1% to $294 million.Net income increased by 15% to $204 million.                                                                                         This blog expects generally that this trend will continue into Q2.There will be no major changes in Q2 and only small changes in Q3.Investors will have to wait until Q4 to see the initial impact from Deutsche Bucht.But the changes will potentially be quite significant.Adjusted EBITDA may hit $1200-$1300 million and net income may jump to $940 million- $1 billion in 2019. 
        

 2019 is Another Building Year
   Once again Northland is working on not one but two major investment projects.Investors have to see beyond the second and third quarter to get the fruit of their endeavours.But NPI offers a substantial dividend for investors to wait.The fourth quarter should  start to show some pre-completion revenues while Q1 in 2020 will have sizeable gains in revenues and earnings.
    Northland says in their guidance that adjusted EBITDA will be $920 -$1010 million for 2019 and earnings per share of $1.65-$1.95.This blog sees adjusted EBITDA of $1050-$1200 million and e.p.s. of $1.80-$2.00.Investors need to know that  NPI is growing in leaps and bounds.So much so that their net income is almost 65% of Emera Utilities which trades at $55 a share.Consequently this blog sees Northland Power trading at close to $30 by year-end.In other words about 60% of the Emera price.https://www.brookfield.com/

Go Easy earnings shoot up but needs a New third Division

         On May7 Go Easy reported it's financial results.Revenues were up by 22% but e.p.s was up by 53% and net income by a whopping 65%.Go Easy calls these  record  results.For example, Scotiabank shows 2018 e.p.s at $3.97 and the P/E ratio at 12.84.But now based on Q1, e.p.s are on track to hit $5.00 per share.At present P/E levels this will move the stock price to about $63 per share.Even with a slight reduction in the P/E ratio as growth dampens this should bring the stock up to the $60 level.It's present price of $51 shows it as  considerably undervalued.

     

And Now for the Rest of the Story

This blog was not too surprised by these favorable results.Go Easy has a very successful consumer loan division.Most readers have seen their advertisement on television showing people paying bills (not Goeasy consumer products).This helps to explain how their consumer loan portfolio increased from $600 million to $879 million in Q1 2018.But one of my blogs on Website123.com suggested that Goeasy make some kind of combination with the faltering Street Capital Bank as well as with Pinetree Capital.Both are represented in the picture above.It is true that SCB has been losing money lately and will need some GSY  investment to shore up SCB finances.But Goeasy must pick and choose the functions that it will push on consumers.For example, mortgages may be considered too competetive to invest heavily in.Nevertheless Goeasy will be a successful operation with more tools to use now. 

https://www.omers.com/  https://www.otpp.com/

Is Atlantic Power poised for a Recovery?

        Atlantic Power is an utility that has been covered in several of my Workathon blogs.The financial literature (both online and offline) is full of blogs that say that ATP is ready for a comeback.It was $13/share in 2013 and has traded as low as $1.45/share.but their new CEO has done a lot of things to improve Atlantic Power and so some pundits are suggesting there may be a comeback.This blogs' answer is no-not yet.                

              Changes since 2013
    It was starting to look like ATP would rebound in 2019.The stock had moved up to the $3.50 level.Debt had been cut almost in half although the dividend was gone now.It had a power generating capacity of 2138 MW of which it owns 1500 MW.But back in 2013 it owned 28 power plants and now it owns 23 (2 are in Canada).ATP just released it's Q1 results and almost all financial indicators were down from Q1 2018.It appears that Atlantic Power is suffering from the closing of four plants in northern Ontario. Although there has been some compensation from the province as a result of their Go Green platform.So the price has fallen off from their January and February highs.Recently Atlantic Power has made arrangements to sell it's 300 MW Manchief natural gas power plant.But in return it bought from Altagas their share of two biomass plants which generate about 85MW of power.
        Slow Growth
     Atlantic Power had 28 generating plants in 2013.Now it has 23 and selling one more in 2022 ( 300MW).It is not totally replacing the generating power that has been lost.But it is buying 50% interests in 2 biomass plants with 85 MW of power this year.On the positive side it has reduced total debt by about 50%.There is credit capacity to buy or to build more generating capacity.However there is another option!ATP  would make an excellent fit for one or two Canadian utilities with significant foreign (especially American utilities).One is Emera and another is Algonquin Power.This blog has suggested an acquisition with Algonquin but it is possible that Algonquin sees too many problems.Also they just made an investment in Bermuda.There would be connection or combination problems as well as internal ATP problems.But Emera could also be a good fit and has a very substantial cash flow (about$700 million).       http://algonquinpower.com/ http://www.emera.com/en/home/default.aspx