RE Royalties and the Future

An opinion piece by Fabian Lorenz (Apaton Finance GmbH).

An interesting winner in the small-cap sector is RE Royalties. The Canadian company finances solar, wind, storage, and other energy projects and receives long-term revenue shares in return. More than 80% of its portfolio is located in North America. The continued high capital requirements of many small and medium-sized projects play right into RE Royalties' hands. Traditional banks are not sufficiently active in this segment. Since its founding, the company has already financed over 135 projects. The strong expansion of solar energy and battery storage in the US thus directly expands the potential market for new financing and additional royalties.

A positive factor for investors is that the business model is designed for long-term recurring revenue. Loans are often repaid after just a few years and can be reinvested. Royalty payments are received over significantly longer periods. One example is the financing of solar projects by partner Solaris Energy in the US, in which RE Royalties has secured long-term revenue shares for more than 25 years. The share has already gained 37% this year. However, the market capitalization of less than CAD 20 million still appears to be anything but high. Management shares this view. Various options to increase the company's long-term value are currently being explored. These options include strategic partnerships, co-investments, and even a complete sale of the company.

Read the full article here.