This investor loves Enerflex right now

Lightwater Partners portfolio manager Jerome Hass says Enerflex (Enerflex Stock Quote, Chart, News, Analysts, Financials TSX:EFX) offers an attractive way to invest in growing natural gas demand without exposure to Western Canadian gas prices.

Speaking on BNN Bloomberg’s Market Call on Oct. 13, Hass said Enerflex benefits from demand for natural gas infrastructure, particularly as data centres increasingly look for reliable off-grid power.

Enerflex shares surged following the announcement of a data centre contract, although the customer was not disclosed.

Asked whether he would buy the stock after its sharp gain, Hass said he would…

Hass pointed out that Enerflex provides infrastructure, compression and processing equipment needed to move natural gas, along with ongoing operations and maintenance services.

The fund manager said the company is essentially a picks-and-shovels provider to the natural gas industry.

“We’re big believers in the demand for natural gas in the short, medium, and long term,” Hass said.

He argued that natural gas is an attractive option for data centres seeking power supplies that do not depend on local electricity grids.

Hass also highlighted Enerflex’s recurring revenue profile, saying about 65% of its gross margin comes from recurring activities, including operations and maintenance.

The company is the largest gas compression provider in Canada and ranks among the top three in the United States.

Despite its growth, Hass said Enerflex trades at a significant discount to comparable businesses.

Before the latest rally, Enerflex traded at about 5.7 times enterprise value to EBITDA. Following a roughly 14% increase in its share price, Hass estimated the multiple at about 6.5 times.

The investor said a comparable U.S. company trades at about eight times, while Enerflex could command a multiple of 10 to 12 times if valued as an industrial business rather than an oil and gas company.

Asked whether he would buy the stock after its sharp gain, Hass said he would.

“Absolutely,” he said. “You’re buying a great growth story at six times, even after today’s move, 6.5 times.”

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