Valuation Model Indicates Shares Trading Below Many Peers and the Sum-of-the-Parts
Revolve is undergoing a transformational strategy shift to an owner/operator model through organic and inorganic growth. This strategic shift in the business model should drive increased cash flow through long-term recurring revenue. Revolve trades at a significant discount to its peers, even though it has delivered revenue and EBITDA, has a larger development pipeline than many of its peers, and further expected payments of US$50-60 million from the ENGIE transaction. Relative valuation suggests that shares of REVV trade at a significant discount to the peer group of US- and Canada-listed renewable energy developers. Based on Revolve’s FY25 EBITDA target, it currently trades at an FY25 EV/EBITDA of 1.6x compared with the peer average of 5.8x. A sum-of-the-parts analysis suggests a base-case valuation of C$28.1-33.6 million (C$0.69-0.83 per share). We note that this uses a conservative 80% project development risk for the utility-scale project and values only the operating and under construction distributed generation (DG) portfolio. As the utility-scale project portfolio moves closer to “ready-to-build” status and the project discount moves to 70%, the valuation would be an additional C$23-30 million. Further, this sum-of-the-parts does not include the DG project portfolio or the payments from ENGIE. Option value. One can view the 155MW of DG projects in development, including the 2MW with LOIs signed, and the US$50-60 million in trailing payments from ENGIE as free options, which are not reflected in the share price or our sum-of-the-parts analysis. Revolve recently issued its FY24 outlook of US$5 million in revenue and break-even EBITDA, with a target to increase this to FY25 revenue of US$15 million and EBITDA of US$10 million. The company also announced the acquisition of WindRiver Corporation, a Canada-based owner, operator, and developer of wind and hydro projects, with a net operational and development capacity of 96.63MW. This is expected to add further revenue and cash flow to the business, in addition to two “run of river” hydro projects that are under development.Philippine Metals is a mineral exploration stage company engaged in the exploration of its exploration and evaluation assets, located in the Philippines. Co. has not been able to identify a known body of commercial grade ore on any of its exploration and evaluation assets. The ability of Co. to realize the costs it has incurred on these exploration and evaluation assets is dependent upon Co. being able to identify a commercial ore body, to finance its exploration costs and to resolve any environmental, regulatory or other constraints which may hinder the development of the exploration and evaluation assets. Co. has not earned any revenues and is considered to be in the exploration stage.
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