RE Royalties: The Financing Pioneer

An opinion piece by Matthias Schomber (Apaton Finance GmbH).

As a pioneer in renewable energy financing, the Canadian company RE Royalties is taking a different approach. As it enters its eleventh year of operation, management recently initiated a formal strategic review. This could be good for shareholders. The board, together with financial advisor PwC CF, is evaluating a wide range of options—from strategic partnerships and capital structure optimizations to a potential sale of the company—to maximize long-term value for shareholders. The foundation for such steps is extremely solid. The company is currently reviewing potential investments worth CAD 200 million and has already received non-binding letters of intent totalling approximately CAD 20 million.

The business model is lucrative yet structured to be risk-averse. RE Royalties extends short-term, secured loans at interest rates of 12-13% while securing long-term royalties that generate an average internal rate of return of 18%. With more than USD 83 million invested in over 135 projects and 27 successfully completed transactions, the portfolio is broadly diversified across sectors such as solar, wind, and battery storage.Also noteworthy is the annualized revenue growth of a whopping 63% between 2019 and 2023. With a current market capitalization of just around CAD 17 million and a share price of around CAD 0.39, the stock is an exciting candidate for investors.

Chart patterns, in particular, are currently sparking a lot of excitement. RE Royalties' stock has formed a distinctive pennant pattern, which it could break out of right now at the CAD 0.41-0.42 level. On the downside, there is stable horizontal support in the range of CAD 0.35-0.40, which keeps risk manageable. If the stock now actually rises sustainably above the CAD 0.42 mark, it should pick up considerable momentum again. According to technical analysis, an initial and logical price target would be in the region of CAD 0.50. Should this hurdle also be cleared with sufficient volume, the path to the CAD 0.60 mark will quickly open up. The technical signals, coupled with the fundamental tailwind, make the stock something of an insider tip.

Read the full article here.