RE Royalties Ltd. engages in the acquisition of revenue-based royalties from renewable energy generation facilities and other clean energy technologies by providing a non-dilutive royalty financing solution to privately held and publicly traded renewable energy generation and development companies, and clean energy technology companies. As of April 25, 2022, it owned a portfolio 104 royalties on solar, wind, hydro, battery storage, and renewable natural gas projects in Canada, Europe, and the United States. The company is headquartered in Vancouver, Canada.

Canada

RE Royalties Ltd.

Energy

The company pays dividends most of the time. It has paid dividends in almost every one of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been outstanding and can be rated excellent compared to its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. On average, the company pays dividends quarterly, which may appeal to investors valuing a regular income stream. 

RE.V reported revenue of CAD 4mn in the last 12 months, down 31% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 30% from FY23 to CAD -0.05.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 9ppts over past six months and grown 3ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 75.0% in the last 12 months, up from 41.8% in FY22. 

Historically, RE.V has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -55.2%, down from -24.8% in FY22. 

RE Royalties Ltd. reported a return on equity (RoE) of -13.2% in the last 12 months, down from -4.2% in FY22. 

Another important profitability metric, return on assets (RoA), amounted to -4.4% in the last 12 months, a decrease from -1.9% in FY22. 

In the last 12 months, the return on capital employed (RoCE) declined to -4.5%, below the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -0.2 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

RE.V has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity is unstable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to weak positions in its industry, negligible return on capital, excessive margin volatility, poor working capital management, weak debt servicing capacity, inadequate interest coverage, and an unfavourable capital structure. We note resilient historical revenue growth and robust profitability, among the positive credit factors. 

In highly turbulent market conditions, RE.V is highly volatile. In other words, the stock will fall substantially more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be significant. 

In normal market circumstances, RE.V is highly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change somewhat erratically. The stock's losses on its worst days (less than 1-5% of the time) will range from significant to immense. 

Considering past and projected metrics, the stock is distinctly 'expensive' compared to its peers. Specifically, the stock is overvalued on EV/EBITDA. 

RE Royalties Ltd.

CA$ 0.45

3

RE Royalties Ltd.

CA$ 0.45

3

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Profitability factor

Risk / Profitability

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Profitability factor

CA$ 0.45

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