Research Capital’s Gowing Initiates Magma Energy (MXY.TO) at BUY

Oct 20, 2009
Author: SCP Editor

October 20, 2009 – Analyst Comments – Matt Gowing of Research Capital initiated coverage on Magma Energy (MXY.TO) today with a BUY rating and a $2.75 price target.

Key Takeaways:

·         Magma has collected a total land portfolio which exceeds 330,000 acres and offers 800 MW of "potential" expansion. It has a target to achieve greater than 400 MW of production which should drive close to $200 million in annual EBITDA by F2015

·         Gowing said that “The capital intensive nature of geothermal project development creates significant barriers to entry. We believe that Magma has the balance sheet and the management team to succeed.”

·         Target price is based on the average of our NAV calculation and our EV/EBITDA derived target. To arrive at our $3/sh NAV, Gowing said he is not including the value of "early stage projects" which he calculates are worth close to $5 per share.