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EnerNOC, Inc. Message Board

  • rhuntting rhuntting Jan 15, 2013 1:32 PM Flag

    Credit Suisse New Price Target $19

    Jan 15, 2013
    Best-Case Scenario Secured; EPA Supports
    Use During Emergencies; Reiterate
    Outperform and Raising TP to $19
    ■ Bottom line: The EPA released a “best case” final ruling on emission
    control requirements for backup diesel generators (RICE NESHAP),
    removing the largest overhang on ENOC shares. The final ruling is the bestcase
    scenario we outlined last week as EPA is allowing up to 100 hours of
    generator use for emergencies, which should have no impact to EnerNOC’s
    financials. Many had feared the ultimate ruling would not allow the use of
    backup generators, however EPA recognized the value of the emergency
    resources to protect grid reliability.
    ■ Increasing target price to $19 (from $16): With the increased visibility and
    confidence on our earnings estimates, we increase our target price to $19
    (from $16) reflecting 4.5x 2014 Adj EBITDA. We continue to see the stock as
    undervalued, trading at just 3x our 2014 EBITDA with limited capital needs.
    Even at $19/share (26% upside from current levels) the stock would reflect a
    22% Free Cash Flow Yield on our 2014 estimate.
    ■ The details: Emergency generators can be operated up to 100 hours per
    year during emergency events (Level 2 situations or when voltage drops 5%)
    which is effectively the dispatch signals for most resources. Starting in 2015,
    generators that run more than 15 hours per year will have to use Ultra Low-
    Sulfur Diesel (very minor cost) and will have to keep a log of operating dates
    and times. While peak shaving will be limited, this is not significant for
    EnerNOC. Upset parties may challenge EPA’s rule, but given the extensive
    comment period and exhaustive debate throughout the process, we believe
    that any challenges are unlikely to have merit.

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