ETX: A Future as Bright as the Sun

MARVIN WOLFF, Paradigm Capital Inc. (07/06/2010)
"Etrion's strategy is to build, own and operate solar energy parks at low kilowatt-per-hour cost and where possible to lock in high feed‐in tariffs that are available in Europe. The opportunities to achieve these goals currently exist in Italy where Etrion is 100% focused, but France and Spain are also targets.

Global economic conditions have brought the prices of solar panels down; yet in an effort to move to greener electricity generation, government feed in tariffs remain attractive. Etrion has access to the financial resources required to build solar assets through The Lundin Group. In addition, institutional financiers are willing to lend debt against these long-lived assets (30 years+). The company is actively permitting, building and/or acquiring solar generation and plans to produce almost 200 MW annually. Etrion is uniquely positioned to experience impressive revenue and EBITDA growth as a European solar power supplier focused on Italy due to strong solar economics.

We recommend the shares of Etrion as a Buy with a one-year share price target of $1.85. However, we see Etrion as a growth vehicle in the European solar power provider space and can envisage growth in 2012 to 140 MW. This would imply an EBITDA of $96.3M (annualized exit rate) and a two-year share price target of $2.45. With more than 100 MW of permits in hand, we do not expect the growth in revenues and profits to stop in 2012. Also, the strong cash flow generation of the company will allow quick debt repayment and thus a higher growth capacity and EBITDA and EPS expansion."

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