Jefferies Comments on Westport (WPRT) Following CEO Meetings; Likes OEM, M&A Potential
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Price: $1.82 +0.55%
Rating Summary:
8 Buy, 13 Hold, 2 Sell
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Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
8 Buy, 13 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Jefferies issues comments on Westport Innovations (Nasdaq: WPRT) following meetings with CEO David Demers. The firm maintains a Buy rating and $38 price target on the shares.
With new integrated solution offerings available for OEMs, Westport may derive as much as 40 percent of its fiscal 2012 sales from passenger cars, Jefferies says. Additionally, increasing costs of testing safety standards and related testing requirements may make aftermarket retrofits more expensive, pushing more OEM installations.
Commenting, Jefferies said, "We estimate that switching to natural gas engines can reduce the life-cycle operating costs of locomotive and mine haul vehicles by 35 percent to 40 percent, and even more in regions like Xinjiang with high diesel costs. We expect Westport to announce at least one partnership in this area by the end of 2012, which would entail a $10 to $40 million investment."
As OEMs continue to take nat gas vehicles more seriously, Jefferies sees "deals available for Westport to be closer to royalty structures ($2,000-$4,000/vehicle). A JV like CWI or Weichai, with minimal investment and 50%+ ROIC in less than a decade, will probably not recur except for in small niche markets."
In terms of M&A potential, Jefferies believes strategic partnerships have increased the attractiveness of the company. The firm says any price below $44 "would favor the acquirer, whereas CWI alone should be benchmarked around $700m, or $15/share."
Click here for more analyst color, or here for a ratings history.
Wesport shares are down 3.2 percent Monday.
With new integrated solution offerings available for OEMs, Westport may derive as much as 40 percent of its fiscal 2012 sales from passenger cars, Jefferies says. Additionally, increasing costs of testing safety standards and related testing requirements may make aftermarket retrofits more expensive, pushing more OEM installations.
Commenting, Jefferies said, "We estimate that switching to natural gas engines can reduce the life-cycle operating costs of locomotive and mine haul vehicles by 35 percent to 40 percent, and even more in regions like Xinjiang with high diesel costs. We expect Westport to announce at least one partnership in this area by the end of 2012, which would entail a $10 to $40 million investment."
As OEMs continue to take nat gas vehicles more seriously, Jefferies sees "deals available for Westport to be closer to royalty structures ($2,000-$4,000/vehicle). A JV like CWI or Weichai, with minimal investment and 50%+ ROIC in less than a decade, will probably not recur except for in small niche markets."
In terms of M&A potential, Jefferies believes strategic partnerships have increased the attractiveness of the company. The firm says any price below $44 "would favor the acquirer, whereas CWI alone should be benchmarked around $700m, or $15/share."
Click here for more analyst color, or here for a ratings history.
Wesport shares are down 3.2 percent Monday.
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