Roth Capital Says, Amid Global Water's (GWRS) Muddle Q2, Key Catalysts Approach

Roth Capital affirms Global Water Resources (NASDAQ: GWRS) at Buy with a price target of $10.50 folloing Q2 results reported Thursday night.

Analyst Gery Sweeney commented today, Global is coming off a watershed 18 months where it divested of underperforming assets, strengthened the balance sheet, refinanced debt and is seeing growth in its core asset base. While the second quarter was muddied by one-time costs, Global began to highlight key initiatives for the next couple years including capital spending (positive for rate base and earnings) and improving acquisition landscape. All in we could see 7-10% revenue growth as these items take hold in 2017+.

On upcoming catalysts, Sweeney said, Global can offset a potential $52 mm gain from its Valencia sale with the investment in infrastructure or acquisitions of "like assets." Global will likely pull forward as much of its five year planned investment ($18-$20mm) as possible over next 18 months. This results in cap-ex of $8-10mm in 2016 & 2017 up from $2-3mm, but should help top line and operating expenses. Recent refinancing of debt offsets the increased spend. Acquisitions are the other potential catalyst. The Arizona regulator recognizes there are undercapitalized, poorly run systems which would benefit under the umbrella of well capitalized systems and is encouraging acquisitions. This should make accretive acquisition activity easier to achieve. Both moves essentially provide a 38% savings (tax rate) to both moves as they leverage the deferred tax gain.

For an analyst ratings summary and ratings history on Global Water Resources click here. For more ratings news on Global Water Resources click here.

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