Freehold Royalties Ltd reports 12.4% EBITDA growth and 10.5 pp EBITDA Margin growth from 63.8% to 74.3%
02.03.2017 • About Freehold Royalties Ltd (
$FRU) • By InTwits
Freehold Royalties Ltd reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Freehold Royalties Ltd is a company in decline: 2016 revenue growth was -3.5%, 5 years revenue CAGR was -3.5%
- Freehold Royalties Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 23.0%. At the same time it's a lot of higher than industry average of 24.1%.
- CAPEX is quite volatile: 5.2 in 2016, 22.3 in 2015, 33.7 in 2014, 29.3 in 2013, 97.6 in 2012
- The company has unprofitable business model: ROIC is at -0.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Freehold Royalties Ltd ($FRU) key annual financial indicators
| mln. CAD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 161.7 | 175.2 | 194.2 | 133.4 | 128.7 | -3.5% |
| Gross Profit | 146.1 | 155.8 | 175.2 | 115.2 | 111.0 | -3.6% |
| SG&A | 7.7 | 7.6 | 8.7 | 10.6 | 10.2 | -4.3% |
| EBITDA | 131.8 | 141.7 | 160.8 | 85.0 | 95.5 | 12.4% |
| Net Income | 46.3 | 57.9 | 66.4 | -4.1 | -11.2 | |
Balance Sheet
|
|---|
| Cash | 0.1 | 0.2 | 1.1 | 0.9 | 0.9 | 1.8% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 18.0 | 49.0 | 139.0 | 152.0 | 84.0 | -44.7% |
Cash flow
|
|---|
| Capex | 97.6 | 29.3 | 33.7 | 22.3 | 5.2 | -76.6% |
Ratios
|
|---|
| Revenue growth | 5.2% | 8.4% | 10.8% | -31.3% | -3.5% | |
| EBITDA growth | 3.0% | 7.6% | 13.5% | -47.1% | 12.4% | |
| Gross Margin | 90.4% | 89.0% | 90.2% | 86.3% | 86.3% | -0.0% |
| EBITDA Margin | 81.5% | 80.9% | 82.8% | 63.8% | 74.3% | 10.5% |
| Net Income Margin | 28.7% | 33.0% | 34.2% | -3.1% | -8.7% | -5.6% |
| SG&A, % of revenue | 4.8% | 4.4% | 4.5% | 8.0% | 7.9% | -0.1% |
| CAPEX, % of revenue | 60.4% | 16.7% | 17.4% | 16.7% | 4.1% | -12.7% |
| ROIC | 17.1% | 20.2% | 18.8% | -1.4% | -0.9% | 0.5% |
| ROE | 15.7% | 19.0% | 18.6% | -0.7% | -1.4% | -0.7% |
| Net Debt/EBITDA | 0.1x | 0.3x | 0.9x | 1.8x | 0.9x | -0.9x |
Freehold Royalties Ltd ($FRU) key quoterly financial indicators
| mln. CAD | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 25 | 32 | 33 | 39 | -8.7% | -14.3% | -7.8% | 16.9% |
| EBITDA | 16 | 24 | 25 | 30 | -62.6% | -15.9% | | 71.1% |
| Net Income | -9 | -2 | -2 | 2 | -139.7% | -157.4% | | |
Balance Sheet
|
|---|
| Cash | 0 | 0 | 1 | 1 | -57.4% | -50.6% | 227.0% | 1.8% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | |
| Long Term Debt | 153 | 108 | 100 | 84 | -27.1% | -34.1% | -35.5% | -44.7% |
Ratios
|
|---|
| Gross Margin | 82.3% | 87.8% | 86.5% | 87.4% | -1.5% | -0.1% | 0.0% | 0.9% |
| EBITDA Margin | 63.4% | 76.5% | 76.9% | 77.1% | -91.2% | -1.5% | 86.9% | 24.4% |
| Net Income Margin | -34.8% | -7.0% | -6.0% | 4.2% | -114.8% | -17.6% | 56.7% | 26.2% |
Revenue and profitability
The company's Revenue decreased on 3.5%. Annual revenue decline showed slowdown in 16Q4 - revenue jumped on 16.9%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin jumped on 10.5 pp from 63.8% to 74.3% in 2016.
Gross Margin showed almost no change in 2016. SG&A as a % of Revenue showed almost no change in 2016.
Net Income marign decreased on 5.6 pp from -3.1% to -8.7% in 2016.
Capital expenditures (CAPEX) and working capital investments
Freehold Royalties Ltd's CAPEX/Revenue was 4.1% in 2016. The company showed big decline in CAPEX/Revenue of 12.7 pp from 16.7% in 2013 to 4.1% in 2016. For the last three years the average CAPEX/Revenue was 12.7%.
Return on investment
The company operates at negative ROIC (-0.95%) and ROE (-1.37%). ROIC showed almost no change in 2016. ROE decreased slightly on 0.67 pp from -0.70% to -1.4% in 2016.
Leverage (Debt)
Debt level is 0.9x Net Debt / EBITDA and 0.9x Debt / EBITDA. Net Debt / EBITDA dropped on 0.9x from 1.8x to 0.9x in 2016. Debt dropped on 44.7% while cash increased slightly on 1.8%.
Management team
The company's CEO Thomas J Mullane "Tom" is a founder and has spent 5 years at the company. Freehold Royalties Ltd's CFO is Darren G Gunderson. Darren G Gunderson has 10 years tenure at the company.
Appendix 1: Peers in Energy
Below we provide Freehold Royalties Ltd benchmarking against other companies in Energy industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Oryx Petroleum Corp Ltd ($OXC) | | | | -18.4% | 141.2% |
| Seven Generations Energy Ltd ($VII) | | 115.7% | 340.2% | 39.0% | 94.4% |
| Athabasca Oil Corp ($ATH) | | 342.7% | 5.5% | -22.9% | 73.1% |
| Painted Pony Petroleum Ltd ($PPY) | | 41.3% | 56.0% | -42.5% | 60.7% |
| ONEnergy Inc ($OEG) | | | 6,002.6% | 231.5% | 57.4% |
| |
|---|
| Median (116 companies) | | 16.2% | 17.0% | -27.7% | -19.1% |
|---|
| Freehold Royalties Ltd ($FRU) | | 8.4% | 10.8% | -31.3% | -3.5% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Americas Petrogas Inc ($BOE) | 77.1% | 43.3% | -34.3% | 121.1% | |
| TransAlta Renewables Inc ($RNW) | | 94.4% | 94.5% | 94.5% | 91.1% |
| Serinus Energy Inc ($SEN) | 80.5% | 76.5% | 86.8% | 88.5% | |
| Advantage Oil & Gas Ltd ($AAV) | 62.0% | 84.5% | 92.5% | 88.5% | 90.3% |
| Polaris Infrastructure Inc ($PIF) | 39.9% | 33.6% | 32.0% | 86.7% | 88.6% |
| |
|---|
| Median (114 companies) | 32.0% | 32.1% | 32.2% | 33.6% | 31.5% |
|---|
| Freehold Royalties Ltd ($FRU) | 90.4% | 89.0% | 90.2% | 86.3% | 86.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Granite Oil Corp ($GXO) | 59.4% | 64.5% | 70.8% | 201.9% | |
| Perpetual Energy Inc ($PMT) | 35.5% | 70.7% | 58.0% | 110.3% | |
| Petro Rio SA ($PRJ) | -4,809.7% | -6,899.7% | 28.2% | 90.7% | |
| Peyto Exploration & Development Corp ($PEY) | 86.1% | 83.2% | 86.3% | 84.6% | 80.7% |
| Innergex Renewable Energy Inc ($INE) | 111.8% | 110.0% | 82.9% | 83.4% | 83.5% |
| |
|---|
| Median (128 companies) | 25.3% | 34.1% | 28.9% | 8.1% | 27.3% |
|---|
| Freehold Royalties Ltd ($FRU) | 81.5% | 80.9% | 82.8% | 63.8% | 74.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Oryx Petroleum Corp Ltd ($OXC) | | | 1,997.8% | 712.8% | |
| WesternZagros Resources Ltd ($WZR) | | | | 385.6% | |
| Athabasca Oil Corp ($ATH) | 2,426.4% | 596.6% | 504.7% | 315.2% | 83.7% |
| TORC Oil & Gas Ltd ($TOG) | 453.8% | 466.9% | 104.5% | 229.4% | 76.3% |
| Seven Generations Energy Ltd ($VII) | 452.8% | 513.1% | 227.4% | 191.2% | 73.5% |
| |
|---|
| Median (129 companies) | 42.3% | 39.2% | 45.6% | 28.1% | 23.8% |
|---|
| Freehold Royalties Ltd ($FRU) | 60.4% | 16.7% | 17.4% | 16.7% | 4.1% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Enerplus Corp ($ERF) | -17.3% | 10.2% | 11.5% | -55.5% | 16.3% |
| Whitecap Resources Inc ($WCP) | 7.1% | 8.1% | 9.6% | -10.6% | 10.1% |
| Ecopetrol SA ($ECP) | 29.3% | 24.4% | 16.5% | 3.0% | 9.6% |
| Parkland Fuel Corp ($PKI) | 22.3% | 23.3% | 9.9% | 7.8% | 8.6% |
| Inter Pipeline Ltd ($IPL) | 9.5% | 8.0% | 7.5% | 9.6% | 8.5% |
| |
|---|
| Median (128 companies) | 3.6% | 5.4% | 5.5% | -8.5% | -1.9% |
|---|
| Freehold Royalties Ltd ($FRU) | 17.1% | 20.2% | 18.8% | -1.4% | -0.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| BlackPearl Resources Inc ($PXX) | -0.2x | -0.1x | 0.2x | 3,726.1x | -0.2x |
| Paramount Resources Ltd ($POU) | 14.6x | 23.9x | 8.9x | 421.5x | -5.8x |
| Precision Drilling Corp ($PD) | 2.2x | 1.9x | 2.0x | 68.4x | 7.6x |
| Trican Well Service Ltd ($TCW) | 2.5x | 3.4x | 2.9x | 31.4x | |
| Trilogy Energy Corp ($TET) | 2.6x | 1.8x | 2.3x | 25.5x | 7.3x |
| |
|---|
| Median (78 companies) | 1.6x | 1.5x | 1.4x | 2.7x | 2.7x |
|---|
| Freehold Royalties Ltd ($FRU) | 0.1x | 0.3x | 0.9x | 1.8x | 0.9x |
