RE: Primoris Warrants (PRIMW)
These warrants have gone to town. Closed at $2.45, up 0.45 for the day. I'd avoid "chasing" the warrants at this stage. One analyst has given the shares a $10 target:
Initiating Primoris Services at Buy - KeyBanc Capital comments
(RTTNews) - Friday, KeyBanc Capital initiated coverage of Primoris Services Corp. (PRIM) stock with a Buy rating and a price target of $10. The brokerage established its 2009 EPS estimate of $0.60, and its 2010 estimate of $0.71.
While analyst Tahira Afzal sees some headwinds for PRIM in the 2009 time frame in terms of an end market transition and possible dilution from warrants/earn-outs, he views PRIM as highly leveraged to potential solar related spending in the 2010+ time frame.
The analyst recommends PRIM as a value play for longer-term oriented small cap investors, particularly those who might be looking to gain leverage to renewables plays in the E&C space.
While the analyst believes that PRIM's near-term headwinds might keep the stock volatile in 2009, he also believes these are already partly reflected in current trading levels, which reveal a compelling valuation even when adjusted for possible dilutive events that may occur.
The analyst highlights that PRIM is currently trading at $6 per share with net cash per share of roughly $1.60, he assess management should be able to maintain its cash balances at current levels even if its operations slow down further.
In addition, the analyst expects PRIM's free cash flow to remain relatively strong his 2009 estimate of $1.50 is below the company's 2007/08 levels of $2.00 per share but still offers a compelling 25% yield. With inside ownership of close to 59%, the analyst assess there is sufficient incentive within company management to lead to continued focus on execution and performance.
In terms of end markets, the analyst highlights that PRIM largely operates out of California and is very well positioned with key utilities and other stakeholders that will likely partake in the anticipated renewable spending cycle, PRIM is already bidding on solar opportunities, and looking to partner with strategic players in the space.
While the analyst assess there could a near-term air pocket on the renewables front, he highlights that PRIM's core refinery, pipeline and power generation construction businesses should continue to benefit from PRIM's alliances and longstanding relationships with California's major sponsors in those markets.
Currently, PRIM is up $0.38 or 6.26% and trading at $6.45.
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