Record Earnings, 9.5% Yield, Big Growth In 2018, 10% Below Lowest Price Target

Mar. 24, 2018 9:37 AM ETEnviva Inc. (EVA)40 Comments

Summary

  • The yield is 9.5%, with 1.28x Q4 coverage, and management has raised the payout 10 straight times since its IPO.
  • It reported record revenue, EBITDA and DCF in Q4 '17.
  • Management guided to big growth in 2018, 38%-58% net income, 18%-24% DCF, and it is going to raise the distribution by a minimum of 7.2%.
  • It's now 10% below analysts' lowest price target.

Do you believe in climate change? Either way, a loudly expressed opinion on this subject is sure to raise the temperature in the room at your next cocktail party.

Many of the world's governments, particularly in Europe and the UK, have come down firmly on the side of climate change and have enacted tougher measures for carbon emissions, which has sent major utility companies scrambling for viable alternatives.

(Source: EVA site)

That's where Enviva Partners LP (NYSE:EVA) comes in. EVA is the world's largest producer of wood pellets, supplying ~ 14% of global production. It sources its feedstock from the forests of the southeastern US, which happens to be, by far, the cheapest source on the planet for wood pulp:

(Source: EVA site)

The company's sales strategy is to fully contract its production capacity. Its current capacity is matched with a portfolio of off-take contracts that has a weighted average remaining term of 9.5 years, worth $5.8B, from February 15, 2018.

One of the many things which sets EVA apart is its scale. Although this company is much smaller than other firms in the lumber production industry, it's backed by RiverStone, a $38B private investment firm with some very deep pockets, which owns EVA's sponsor/GP, which has invested heavily, $550M, in production facilities since EVA's 2015 IPO. It has also attracted another heavy hitter, the John Hancock Natural Resource Group, which has invested in two joint ventures so far.

(Source: EVA site)

This strong backing has allowed EVA to become a fully integrated operation as it controls both production and transportation assets, i.e. port terminals:

(Source: EVA site)

We began writing articles about EVA back in September 2015 when it was trading at $12.47. Since then, it has risen 109% and is currently trading at ~$26.10.

Distributions:

EVA is in

This article was written by

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Robert Hauver, MBA, was VP of Finance for an industry-leading corporation for 18 years, and publishes SA articles under the name DoubleDividendStocks. TipRanks rates DoubleDividendStocks in the Top 25 of all financial bloggers, and Seeking Alpha rates us in the Top 5 of several categories, including Dividend Ideas, Basic Materials, and Utilities. 

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Disclosure: I am/we are long EVA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We're also long EVA in client accounts

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