After reviewing key data from the Canada Mortgage and Housing Corporation, Beacon Securities analyst Russell Stanley continues to think there is money to be made on Atlas Engineered Products (Atlas Engineered Products Stock Quote, Chart, News, Analysts, Financials TSXV:AEP).
In a research update to clients September 18, Stanley maintained his “Buy” rating and one-year price target of $2.25 on AEP, implying a return of 73 per cent at the time of publication.
Stanley says he is trimming his third quarter estimates on Atlas to reflect the most recent data on housing start levels.
“The Canada Mortgage and Housing Corporation (CMHC) has reported that August housing starts totaled 253k on a seasonally adjusted, annualized basis (SAAR),” he noted. “This represents a 3% beat v. consensus at 245k, though starts softened 1% m/m. The July and June figures were also revised upward slightly. Raw housing starts, which are more relevant for projecting quarterly results for AEP, totaled 19.4k in August, down 6% m/m and y/y. On a quarter-to-date basis, raw starts are up 10% (July + August v. April + May), reflecting seasonal strength. We have trimmed our Q3 revenue/EBITDA forecast from $14.7M/$2.9M to $13.8M/$2.8M to better reflect the QTD start levels, as well as a partial quarter contribution from the $29M acquisition of LCF (see our note). Our estimate revisions are otherwise minor, and we reiterate our $2.25/sh PT.”
Stanley thinks AEP will generate Adjusted EBITDA of $11-million on revenue of $53-million in fiscal 2023. He expects those numbers will improve to EBITDA of $23-million on a topline of $81-million the following year.
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