Eneraqua Technologies Share Discussion Threads

[le4r] 15/9/2022 08:05

Jumped on board this morning. Saw the presentation awhile ago but wanted to wait for this announcement. It's a great update and, as you say Rivaldo, phenomenal visibility line ahead. Refreshing in this market to say the least.

[rivaldo] 15/9/2022 07:48

Agreed. Huge revenue visibility now for next year, never mind this year which is already in the bag.

On such a low P/E there’s substantial upside on a post-IPO realisation of the potential.

[rimau1] 15/9/2022 07:15

Excellent news this morning, trading in line, substantial new contract awards and a bulging order book. H1 revenues of £24m and with a confirmed H2 weighting its going to be a very strong year. FY22 revenues were £36m for context. In this market that makes for refreshing reading and not a word on cost inflation!!!

[rivaldo] 08/9/2022 11:10

Hi Adam, good to see you here. Having looked at the prospectus that's a fair point, which perhaps you could contact Finncap's analyst about. No doubt he would have prepared his figures with guidance from ETP so there may be an obvious explanation. Of course the interims to July will tell us more.

[adamb1978] 08/9/2022 08:47

Hello

Recently came across these and trying to work through the numbers as it seems interesting. I'm always a little wary of recent IPOs particularly as opex tends to jump at the time of IPO, and not just exceptional costs relating to the IPO, and it dampens post-IPO earnings.

From what I can see, market estimates for these guys are:

FY23:
turnover: 61.3
gross profit: 20.6
EBITDA: 12.0

FY24:
turnover: 71.3
gross profit: 23.4
EBITDA: 13.3

So opex of 8.6 in Fy23 and 10.1 in FY24

When I look at FY22 results, admin costs excl D&A was around £7.9m...so the forecasts seem fine however when you look at it on a half year basis, clean opex was £2.8m in H1 FY22 and then £5.1m in H2.

That jump feels huge and makes me sceptical but their headcount grew from 47 to 113 people over FY22, so that opex now feels realistic and sustained. That means opex should be a good bit over £10m in FY23.

Am I missing anything? Seems like an interesting company and the sort of thing I like to invest in, but cant see that this headcount and opex ramp is built into the market forecasts
Thanks

Adam

[rivaldo] 08/9/2022 07:31

ETP's Cenergist are commencing a £2m contract from Leeds City Council to install via ground source heat pumps "new low-carbon heating and hot water systems which are better for the environment and cheaper for tenants to run".

From the article it sounds like there's more to come too:



"Work to start on £2m Armley high rise heating system
September 6, 2022

Work on a new eco-friendly heating system for two Armley high-rise blocks will start this month and cost more than £2 million, according to council documents released this week.

The report confirms that Cenergist has been awarded a £2,029,673 contract to revamp the heating in Burnsall Court and Gardens with new low-carbon heating and hot water systems which are better for the environment and cheaper for tenants to run.

It says the new measures will replace the ineffective electric storage heaters currently used by residents: “The works to install ground source heat pumps is planned to reduce resident’s fuel costs, improve their ability to control heating, and reduce carbon emissions.”

etc"

[rivaldo] 17/8/2022 09:40

The IC has released its latest AlphaScreens update researching all listed companies for the quest for quality:

"The holy grail for buy-and-hold investors is to find a business that is capable of generating a high return on capital and sustaining it while reinvesting profits. This screen looks for sharesthat display these quality characteristics and can potentially deliver significant compounded returns over time."

The 9 screening criteria cover RoE, operating margins, P/E, PEG, free cash flow, interest cover etc.

Of all the AIM stocks above £35m m/cap, only 5 companies pass all 9 tests. ETP are one of them (along with MWE, which I also hold).

[rivaldo] 16/8/2022 09:17

Nice to see a couple of buys this morning causing a 10p rise. Evidently not much stock around, especially given that the shares are pretty tightly held.

[farnesbarnes] 12/8/2022 11:19

Yeah, toe dipped this morning too.

[rivaldo] 12/8/2022 08:41

Welcome rimau1, couldn't agree more.

There's a nice plug for ETP in this chat yesterday between Paul Hill and Jamie Constable of Singer Capital Markets, at just over 20 minutes in:

[rimau1] 11/8/2022 13:14

Been on my watchlist since IPO and finally taken the plunge, happy to get in marginally below IPO price as my research concludes this is a high quality operation. I am a huge fan of Air Source and Ground Source (bad reviews are simply misunderstanding the tech or poor installations) and the water efficiency technology will become equally important given the droughts that we are currently suffering. 26% water efficiency on retro fits is very impressive and i can see why councils will pay for this to achieve net zero water efficiency as housing stocks rise. Given this is mostly public sector work clients should be sticky and the order book should balloon overtime. Cheap, defensive, high quality.

[rivaldo] 10/8/2022 08:56

More work for ETP via its Cenergist subsidiary on a contract to install its "innovative ground source heat pump systems" over the rest of this year:



And a new article from Cenergist on public sector decarbonisation:

[rivaldo] 09/8/2022 14:12

The list of major shareholders is worth noting - those over 3% own over 76% of the shares, including of course the major director shareholdings and Slater Investments:

Anila Dhanak 4,757,521 14.32%
David (Dave) Arthur Routledge 4,119,300 12.40%
Ian Daniel McLeod 3,860,100 11.62%
Joseph Andrew (Drew) Johnson 3,519,300 10.60%
James Robert Waring 2,748,060 8.27%
Gary James Copeland 1,852,740 5.58%
Slater Investments Ltd 1,685,920 5.07%
Mitesh Ramji Dhanak 1,625,100 4.89%
Hayley Louise Peters 1,109,160 3.34%

[rivaldo] 02/8/2022 11:03

Finncap have upped their forecasts for next year after today's acquisition, retaining their 425p target.

They now see 25.9p EPS this year and 27.1p EPS next year:

Extracts:

"This extends the group’s low-carbon offering into these two market areas, expanding Eneraqua’s client proposition, with strong synergies with ground source and air source heat pump-based heating solutions and has applications in the wider scope of sectors that Eneraqua currently serves – providing enhanced medium-term growth opportunities. Compared to traditional radiators that use water heated up to around 85 degrees, underfloor heating typically uses water of around 50 degrees and thus makes it ideal, coupled with ground/air source heat pump systems."

"We maintain our existing 425p price target that offers significant upside to current levels, with the current FY24 P/E valuation of 9.6x at a significant
discount to peer multiples."

[rivaldo] 02/8/2022 07:14

Nice earnings-enhancing acquisition just announced - sounds like there are lots of synergies:

[rivaldo] 29/7/2022 08:42

Finncap this morning retain their 425p target and 25.9p EPS forecast.

There's also a 1.2p dividend and £3.9m net cash.

They summarise (extracts):

"AGM trading update – on track for FY22 expectations

The group’s first AGM as a quoted company is encouraging, with positive trading and a strong order book supporting prospects. With encouraging trading seen in H1, the group is on track with growth plans. Demand continues to grow in energy and water efficiency – with recent increases in energy costs driven by the Ukraine conflict highlighting the need for energy sustainability and the increasing issue of fuel poverty. No change to forecasts and we maintain our 425p price target. The shares responded well to FY22 results but have since retreated. The valuation remains significantly below peer group valuations, while our price target offers good upside to current levels and should benefit from defensive characteristics and strong growth."

"Valuation.

The shares continue to offer very compelling value, in our view. FY22 results announced recently were on track and illustrate a continuing high level of cover from its multiyear order book. The group has defensive characteristics, not just from order visibility but also from a customer base that is significantly made up of utilities, municipal and other local authorities, where demand is being driven by heightened awareness of climate imperatives, increasingly supported by regulation. We maintain our existing 425p price target that offers significant upside to current levels, with the current P/E valuation of 9.9x a significant discount to peer multiples."

[rivaldo] 29/7/2022 07:31

Excellent AGM statement today.

H1 trading has been "encouraging" and is in line with forecasts of 25.9p EPS - barely above a single-digit P/E.

And there's huge forward revenue visibility for the next two years:

"In addition to delivering on contracts in the current year, we are also building a strong pipeline of opportunities for the following year and beyond with an Order Book(1) providing full revenue cover for our FYJan23 revenue target and 67% for FYJan24"

Following the first Agritech win in India ETP are "in discussions with other states across India". Imagine the potential....

[rivaldo] 30/6/2022 07:29

The maiden post-IPO AGM will be on 29th July - hopefully there'll be an accompanying trading statement:

[rivaldo] 27/6/2022 11:03

Great review on Investor's Champion:



"Eneraqua: excellent results and cracking value?

Eneraqua Technologies (AIM:ETP), the provider of specialist energy and water efficiency solutions, which arrived on AIM in November 2021, announced excellent results for the year ended 31 January 2022. You can read our previous coverage of its IPO here.

Eneraqua designs and delivers improved energy and water systems which use its Control Flow HL2024 technology to reduce water wastage and improve the performance of heating and hot water systems.

Energy was the first market Eneraqua entered, and this is the larger sector, with the focus on clients with end of life gas, oil or electric heating and hot water systems. Under the Cenergist brand the Group provides turnkey retrofit district or communal heating systems based either on high-efficiency gas or ground/air source heat pump solutions that support Net Zero and decarbonisation goals.

Water is also a growing service offering, focused on water efficiency upgrades for utilities and commercial clients including hotels and care homes. It has also expanded into agritech systems.

Turnover in the year to 31 January 2022 rose 148% to £36.2m while EBITDA increased by 319% per cent to £5.55m. Statutory profit before tax was £4.1m (FY21: £0.8m) after £1m of IPO related costs.

Management considers that the potential of its technology globally is huge and the initial success in India, with a £0.9m contract for The Department of Horticulture for the State Government of Uttarakhand, highlighting this. This contract will see them supply water systems to 340 horticultural farms across the state, helping to reduce carbon emissions and improving water efficiency. This is the first major zero carbon irrigation initiative of its kind in India.

Having listed at a share price of 277p the shares have held up better than most, sitting currently just below the IPO price at 271p.

The order book of secured and contracted work has increased from £74.4m at the time of the AIM IPO to £91.0m. This together with delivered revenue in the current financial year to date gives 95% cover on forecast revenue of £61.3m, which assumes growth of an impressive 69%.

Rising energy costs are prompting greater interest from local councils in the UK to reduce energy costs, concerned about rising fuel poverty in social housing, which is supporting a growing interest in the Group’s solutions.

Forecast profits of £10.6m equate to a healthy margin of 17%, while forecast earnings per share of 25.9p means the shares carry a PER of only 10.5x. By that simple measure alone, the shares look cracking value.

We also like the capital light structure of the business with forecast pre-tax ROCE a healthy 44%."

[tomps2] 24/6/2022 09:25

Eneraqua Technologies (ETP) full year 2022 results presentation - June 2022

Eneraqua Technologies CEO, Mitesh Dhanak and CFO, Iain Richardson present the full year results for the period ended 31 January 2022.

Watch the video here: www.piworld.co.uk/company-videos/eneraqua-technologies-etp-full-year-2022-results-presentation-june-2022/

Or listen to the podcast here: piworld.podbean.com/e/eneraqua-technologies-etp-full-year-2022-results-presentation-june-2022/

[rivaldo] 22/6/2022 08:54

Overnight the IC sent out new AlphaScreen tables for every quoted stock looking for shares "capable of generating a high return on capital and sustaining it while reinvesting profits".

The screen has 9 tests of cash flow, ROCE, margins, P/E, earnings growth etc.

ETP is the top rated stock of all those in the UK small cap universe, passing all 9 tests:

[rivaldo] 21/6/2022 07:28

Hi c3479z (catchy moniker!).

The total consideration for the Welltherm drilling acquisition, including deferred consideration, is £1.18m, so this is completely immaterial. As noted above, ETP state they're largely protected against inflation (obviously including wage inflation). And the cost of heat pumps is steadily reducing and will continue to do so as production and implementations scale up, especially given governmental and regulatory pressure for more installations as quickly as possible.

I like that ETP are providing premium, high quality products which actually work and provide such large water and energy efficiency savings against competitors - and as you say their markets seem to like them too as word spreads across lcoal authorities etc.

[c3479z] 20/6/2022 17:20

negatives though were the large range and number of competitors,where they operate at the high quality end, their water flow product being a premium offering, although market appears impressed by it and the high cost of ground pumps against alternatives. Have to pay an earn-out for their drilling acquisition.
Nevertheless, appears to have potential and relatively capital-light as most of the work subcontracted, only 143 employees but number has risen markedly and wage inflation a major headache.

[rivaldo] 20/6/2022 12:06

Lots of highlights from the presentation just now:

- "we are a cautious company" as regards EPS forecasts. I like this.
- further acquisitions are likely and are under discussion
- 50% win rate on tenders
- discussions are underway with other utility companies re the Control Flow HL2024 as well as Affinity Water
- the new MeterSave product will come on stream this H2, with "strong interest" from water utility companies
- all the receivables at the year end have been received
- ETP are protected against inflation via (1) their sub-contract model and (2) fixed price contracts with suppliers
- this H2 will hopefully see contract win RNS's from new customers in Northern Europe
- "Agritech product trials planned for H2" in the EU
- after the Agritech product win in India, ETP are in conversations with three other Indian stateds. Apparently 70,000 further farms in these states would be suitable!
- there's huge revenue visibility for this year, and already 45% coverage for 2024
- ETP typically expect to see 80% forward visibility for the year ahead at the start of that year

[rivaldo] 20/6/2022 09:01

Cheers re the video Tomps2. I rather like that the CEO is "understated" and unshowy to say the least, with a very individual gravelly (robotic?!) voice. The CFO is similarly down to earth. I suspect these guys are very business-focused and will strip away the fripperies.

Looking forward to the presentation at 11.00 this morning.