In a June 21 research note, PI Financial analyst Devin Schilling reported that UGE International Ltd. (UGE:TSX.V; UGEIF:OTCQB) landed an additional community solar project in Maryland, its second in the state.
Schilling also noted that UGE's current "discounted valuation provides significant upside." The company is trading at a discount to its peers, at 5.3 times full-year 2023 enterprise value/EBITDA versus 14 times.
As for the new project, which UGE adds to its backlog, it is a ground-mounted facility with a rated capacity of about 2.2 megawatts of direct current (2.2 MW DC), Schilling wrote. Once operational, the installation should generate an estimated US$0.4 million (US $0.4M) per year.
UGE is making progress on its first contracted Maryland ground-mounted solar project through the state's community solar pilot program, "a new growth market for the company," Schilling noted. That deployment should be finished and running commercially next year, in 2022, after which it is expected to generate 2.7 MW DC and yield US$0.5M-plus in annual revenue.
The analyst highlighted that community solar is one of the solar industry's fastest-growing segments, driven by states expanding consumer access to clean energy.
Schilling wrote that UGE is early in the process of building out its project backlog, which amounted to approximately 71 MW, or CA$130M in value, in Q1/21. As such, most of those deployments will take place in 2022 and 2023 and subsequently result in "a high margin recurring revenue stream."
"With a turnaround largely complete and a strategic shift entering into the owner/operator business model behind them, we believe UGE is well positioned to benefit from the rapidly growing solar market in the years to come," Schilling concluded.
PI Financial has a Buy rating on UGE International and a target price of CA$4.50 per share. UGE is trading at approximately CA$1.82 per share.
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Disclosures from PI Financial, UGE International, First Look, June 21, 2021
I, Devin Schilling, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this report. I am the research analyst primarily responsible for preparing this report.
Research Disclosures for UGE International:
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4) PI Financial Corp. and/or its affiliates expect to receive or intend to seek compensation for investment banking services from the subject company.
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