UGE will be profitable next year, Haywood says

Following the company’s third quarter results, Haywood Securities analyst Pardeep Sangha is maintaining his bullish stance on solar player UGE International (TSXV:UGE).

On Wednesday, UGE reported its Q3, 2017 results. The company lost (U.S.) $857,893 on revenue of $4.97-million, a topline that was up 678 per cent over the same period last year.

“UGE’s focused approach to the mid-scale solar sector is resulting in exponential growth and an increasingly strong market leadership position,” said UGE’s chief executive officer, Nick Blitterswyk. “Through the first three quarters of 2017 our revenue has grown approximately seven times year over year, and we look forward to continued growth in revenue and EBITDA going forward.”

Sangha says UGE’s topline met his expectations, but that the company’s Adjusted EBITDA fell short of what he had modeled. Nonetheless, the analyst forsees big gains for the company.

“We are forecasting 280% revenue growth in CY17 followed by 54% revenue growth in CY18,” the analyst explains. “We kept our CY17 revenue forecast unchanged. We lowered our CY18 revenue forecast due to the decrease in the Peterborough contract value, but we are expecting improved margins. We are forecasting CY18 revenue of $34.0M (previously $37.7M) with Adj. EBITDA of $1.2M (previously Adj. EBITDA of $1.3M). We are expecting an improvement in gross margins from 16.0% in CY17 to 19.3% in CY18.”

In a research update to clients today, Sangha maintained his “Buy” rating and one-year price target of $1.00 on UGE International, implying a return of 156.4 per cent at the time of publication.

Sangha estimates that UGE will generate Adjusted EBITDA of negative $1.0-million on revenue of $22.1-million in fiscal 2017. He expects those numbers will improve to EBITDA of postive $1.2-milion on a topline of $34.0-million the following year. The analyst thinks the company will lose $0.07 a share in fiscal 2017 and earn $0.01 in fiscal 2018.