Ahead of the company’s third quarter results, Echelon Wealth Partners analyst Amr Ezzat is reiterating his “Top Pick” status of Pure Technologies (TSX:PUR).
On August 3, Pure reported its Q2, 2017 results. The company earned $1.3 million on revenue of $33.7-million, a topline that was up 16 per cent over the same period last year.
“With the first half of 2017 behind us, Pure is well positioned to deliver strong results for 2017,” said CEO Jack Elliott. “In our water business, our investment in sales personnel in 2015 and increased focus on operational excellence and cost control is driving both sales growth and increased profitability. The WWS segment continues its positive performance trend with revenue increasing 32% quarter-over-quarter, and 27% YTD, resulting in significant Adjusted EBITDA growth over these same periods last year. Internationally, expected activity in the second half of 2017 includes a large PipeDiverTM project in the UK and our first condition assessment project in South-East Asia, along with the extension of several leak detection projects. We also continue to develop our partnership with Xylem Inc., as discussed in the first quarter, with meaningful benefits expected in 2018. At PureHM, our oil and gas division, much of the focus in the first half of the year has been on integrating the E-MAC business which we acquired at the end of 2016. Second quarter revenues were the highest revenues on record for the division, consistent with our expectations. With integration essentially complete and a traditionally busier second half for E-MAC, activity levels are expected to remain high for the remainder of the year. We will continue investing in our people to ensure we can deliver the work we see ahead. In addition, to support the continued growth of our remote pig tracking business in 2018, we expect to invest an additional $1.5 million in tracking equipment this year.”
Ezzat says a skip in share price since those results is a buying opportunity.
“The Company’s recent Q217 showcased excellent cost execution and very strong operational results all around,” the analyst says. “More significantly, the conference call commentary suggested that H217 will be operationally busier than H117, with the Company focused on keeping opex flat. Post the strong Q217 results, we increased our EBITDA estimates for 2017 and 2018 and upped our target price to $7.25/shr from $7.00/shr. The stock is down ~9.6% since its late May peak of $5.94/shr despite the Company’s strong results. We believe the current stock price is a great buying opportunity ahead of what we expect to be an even stronger second half of the year.”
In a research update to clients today, Ezzat maintained his “Buy” rating and one-year price target of $7.25 on Pure Technologies, implying a return of 37.2 per cent at the time of publication.
Ezzat thinks Pure will generate Adjusted EBITDA of $25.4-million on revenue of $136.9-million in fiscal 2017. He expects those numbers will improve to EBITDA of $30.0-million on a topline of $158.6-million the following year.