Ann: Infratil announces Jason Boyes as its new CEO, page-7

Just got this research:
ASX: TLT Market cap: A$2.4BNShare price: A$6.1552-week range: A$2.75 / A$6.70
Headquartered in Auckland, Tilt Renewables is part of the surging interest in wind and solar farms worldwide. The company currently operates seven farms in Australia and New Zealand. Not content to sit on its assets, management currently has 11 wind and solar farms in development with an additional two already under construction. But right now that’s not really the story, because Tilt has received a number of non-binding offers and it seems the company is for sale.
A new type of farmer
How the world generates its electricity worldwide has changed rather rapidly over the last few years. Installation of wind (30% of total capacity) and solar (60% of total capacity) capacity has led this sprint into renewable installation with the International Energy Agency (IEA) now predicting that total power capacity of wind and solar will outstrip natural gas by the end of 2022 and coal by the end of 2023. In its 2020 Renewable report, the IEA also predicts that renewable capacity will increase by 10% year-over-year during 2021, compared to just 4% in 2020. The main driver for this growth, according to the IEA, is the electricity sector. Despite 2020 seeing a net decline in global energy demand of 5%, renewable energy demand actually increased by 1%. This has seen a direct impact on the shares of global wind and solar companies. As of October 2020, shares of solar companies worldwide had more than doubled in value from December 2019. So even COVID-19 could not stop the unstoppable renewable-energy train and showed that the farmer of the future will work on wind and solar farms as soon as 2024. That’s good news for Tilt Renewables. Assets in demand
Tilt currently operates seven wind farms in SA, VIC, NSW and New Zealand with a total installed capacity of 367MW at the end of its 1HY21, which is 30 September 2020. Tilt has an additional two wind farms under construction in VIC and New Zealand and had already installed 336MW and 133MW, respectively, on those farms as of 1HY21. The Victoria farm is slated to be at full production in the first quarter of CY21. This also happens to be when New Zealand construction is to be completed.
Revenue during FY20 (ending 31 March 2020) declined 12% year-over-year, to $168.8m due to fluctuations in energy prices, a risk for all companies in the renewable energy space. This decline in revenue led to a subsequent decline in EBITDA of 13% to $116m. FY21’s results are estimated to see a significant further decline to $132m in revenue and $70m in EBITDA. However, we would remind our readers that for Tilt FY21 will include the majority of COVID-19 as their financial year runs from 1 April through 31 March. The market expects revenue and EBITDA to rebound hard during FY22, to $185m and $107m respectively. This rebound seems well within reason to us and might even be on the low side. Let’s face it, the pandemic is more or less over in Australia and New Zealand, and Tilt is slated to bring both of its current construction projects online, which will more than double its current production capacity. Who is Infratil? Tilt is in an unusual situation for a publicly listed company as Infratil effectively controls it through its 65% ownership stake. While this would normally constitute a simple footnote, Infratil announced on 7 December 2020, that it was initiating a strategic review of its shareholding in Tilt with an eye to completely divest the company. Since then, Infratil has made it clear that it has received a significant, though undisclosed, amount of offers for Tilt. To be clear, this would constitute a 100% purchase, not just the 65% owned by Infratil. On 4 February 2021, Tilt announced to the market that it had begun due diligence proceedings with a ‘number of parties’ who had issued non-binding proposals. While far from a certainty, it seems increasingly likely that Tilt will be acquired and taken private. The issue investors are facing at the moment is that the market has not received any guidance as to the valuation these offers put on Tilt. It is important to note that since the 7 December 2020 announcement, Tilt shares have rallied 40%.Normal valuation metrics do not apply Tilt is an interesting case study in valuation. The company is currently trading at EV/EBITDA ratios of 37x and 24x for FY21 and FY22, respectively. However, this is based on an expected decline in EBITDA of 41% during FY21 and growth of 53% during FY22. While 53% EBITDA growth might seem rather impressive, we would remind our readers that this is due to FY21 containing the majority of COVID-19’s market troubles. Therefore, FY22 is simply a return to normal conditions. After all, FY22’s EBITDA is estimated to be 10% below FY20’s.Normally we would state that based on the current valuation, Tilt would be a two star company. However, we believe the potential for a full acquisition changes things quite considerably. The continual and drastic influx of cheap money combined with fervour for all things renewable causes us to believe a considerable premium likely to be paid for Tilt. The issue is this: It is completely unclear what this multiple would be. We think it is unlikely, although not impossible, that Tilt would be sold for less than current market value. However, we believe there is a good chance that Tilt will be sold at a clearly higher price than what the stock is trading at today. Tilt is certainly a risky play, but it has some highly desirable assets for investors willing to take the risk. So, four stars from us, although this type of risk may not be for everyone.