A new capital raise should be just what the doctor ordered for clean tech name Greenlane Renewables (Greenlane Renewables Stock Quote, Chart, News TSXV:GRN), according to Ahmad Shaath, analyst for Beacon Securities, who on February 20 provided an update to clients where he reiterated his “Buy” recommendation and $1.10 per share price target.
Biogas upgrading company Greenlane announced on February 10 the closure of its $11.5-million equity raise, which included a $1.5-million over-allotment option. The transaction was priced at $0.50 per unit, with each unit representing one common share and one-half of a common share purchase warrant at an exercise price of $0.70 on a one-year term.
Beacon Securities is acting as lead underwriter and sole bookrunner on behalf of itself and a group of underwriters. Greenlane says the proceeds will go towards its biogas upgrader joint venture, Build, Own and Operate (BOO), and to pay down a portion of its outstanding promissory note to Pressure Technologies.
Shaath says the financing will give GRN the flexibility to pursue more aggressively opportunities related to its two key partnerships and it will give Greenlane a healthy balance sheet after the $3.5-million payment to Pressure Technologies, leaving Greenlane with about $10.0 million in cash and $7.0 million of its promissory note.
“In our view Greenlane planted the seeds with two key partnerships that should result in its valuation expanding as it starts realizing their benefits: (1) The Integrated Biogas Alliance, a unique industry alliance where GRN is cooperating with key partners across the value chain to accelerate its market penetration; and (2) a joint venture with SWEN Capital on the BOO front that should accelerate the establishment of a stable, recurring revenue base from sale of RNG and Operation and Maintenance contracts,” Shaath wrote.
The analyst estimates that Greenlane is currently trading at an EV/Sales (fiscal 2020) multiple of 2.8x, which is well below its renewable gas-driven clean tech peers at an average of about 10x and a median of 5.0x.
“Our confidence in Greenlane’s execution in capitalizing on the significant tailwinds in the RNG space continues to increase, buoyed by recent wins of large equipment contracts. Greenlane booked over $15.0 million in new orders from two major contract wins and its growing quote log of >$650 million bodes well for continued backlog growth,” wrote Shaath.
Looking ahead, the analyst is expecting Greenlane to generate fiscal 2020 revenue and adjusted EBITDA of $25.0 million and negative $0.3 million, respectively. Shaath’s target, which is now based on a 4x multiple of his EV/Sales estimate (previously 3.5x), represented at press time a projected 12-month return of 36 per cent.
Earlier this month, Burnaby, BC-based Greenlane announced a new $7.0-million contract for its wholly-owned subsidiary Greenlane Biogas North America. The contract is for three biogas upgrading systems for landfills with Pennsylvania-based Renewable Natural Gas Company (RNGC).
“We are delighted to have been selected by RNGC to provide the biogas upgrading systems for RNGC’s landfill projects where the resulting clean, low carbon renewable natural gas will be injected into the natural gas pipeline,” said Brad Douville, President & CEO of Greenlane, in a press release. “Our technology is ideally suited for this application developed by RNGC to provide robust low-cost operation. We look forward to working with RNGC to make this project a success.”