Pason Systems Quick Update - $PSI.to

Quick update after Q3 2023

Price: $14.55 CAD

MC: 1.2 billion CAD

EV: 1 billion(ish)

Yield: 3.3%

1 year performance:

PSI reported last night and held a call earlier today. Results were ahead of my expectations and the stock was up about 9-10% during the day.

Quarter Recap

• Revenue was up 1% yoy

  • They managed to offset lower activity by increasing revenue per industry day

  • North America revenue down 4%

  • International revenue down 3%

  • Solar and Energy storage revenue up 293% which made up the decline in the other business segments

• EBITDA was down 9% yoy

• Continued investment in Intelligent Wellhead Systems (IWS) for 5 mil

  • Added another 5 mil after end of the quarter

• Expecting capex in 2024 to be similar to 2023 (45 million)

Call Notes

There were some interesting comments on the call around their expectations of activity levels and IWS.

• IWS comments

  • They feel the business has lots of opportunity in front of them

  • IWS is active in every basin

  • IWS day rate is about 3x the other PSI business but is 1/3 the size

    • This nets out to about the same size of market

• Demand and Outlook

  • They are expecting activity in the land market to increase moving into 2024

• Feel that margins in the last 2 quarters are sustainable

  • this would be 41-42% ebitda margin

Closing Thoughts

PSI has done well with the lower activity levels. I like their presence in the marketplace. The IWS business allowed them to deploy some capital constructively. The solar and energy storage had a jump in revenue, but given the size of the business at this point the driver will be land activity.

They are trading at a tad under 6x EV/EBITDA and have almost $0.50 per share in cash. I’m expecting a dividend increase and continued NCIB if activity levels remain here or increase.

Thanks for reading.

Dean

* long PSI.to