Long Ridge And Repauno Developments Will Unlock New Business Opportunities

Key Takeaways

• Strategic refinancing, acquisitions, and contract conversions are set to significantly boost earnings, revenue, and EBITDA through increased power prices and capacity payments.
  
• Expansion into new business opportunities, including behind-the-meter data centers and potential M&A activities, offers avenues for substantial revenue growth and improved margins.
  
• Increasing debt and high execution risk on new projects could strain financial stability, impacting cash flow, margins, and future growth targets amidst external market dependencies.

Catalysts

Engages in the acquiring, developing, and operating assets and businesses that represent infrastructure for customers in the transportation, energy, and industrial products industries in North America.

• The refinancing and repricing of Long Ridge's power sale contracts, along with the acquisition of their partners' equity stake, are expected to significantly increase earnings and cash flow, positively impacting revenue and EBITDA by increasing power prices and capacity payments.
  
• The company has identified a pipeline of new business opportunities that, if converted into contracts, could drive annual EBITDA well above $400 million, positively impacting revenue and earnings significantly.
  
• The development of behind-the-meter data centers at Long Ridge is anticipated to generate an additional $50 million to $75 million in annual EBITDA, driving higher revenue and improved net margins in the long term.
  
• Repauno's Phase 2 development, supported by tax-exempt debt financing, will contribute approximately $50 million annually upon completion. This potential increase in revenue will also bring about cost efficiencies, improving net margins.
  
• Potential strategic M&A activities, especially in the busy Transtar market, provide opportunities for substantial growth in revenue and EBITDA, leveraging the current debt-free position and favorable financing conditions.

FTAI Infrastructure Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming FTAI Infrastructure's revenue will grow by 42.2% annually over the next 3 years.
• Analysts are not forecasting that FTAI Infrastructure will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate FTAI Infrastructure's profit margin will increase from -88.8% to the average US Transportation industry of 4.6% in 3 years.
• If FTAI Infrastructure's profit margin were to converge on the industry average, you could expect earnings to reach $44.2 million (and earnings per share of $0.32) by about April 2028, up from $-294.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 47.3x on those 2028 earnings, up from -1.4x today. This future PE is greater than the current PE for the US Transportation industry at 24.5x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.78%, as per the Simply Wall St company report.

FTAI Infrastructure Future Earnings Per Share Growth

Risks

• The refinancing efforts and purchases, such as the acquisition of the Long Ridge stake, add significant debt to the company's balance sheet, which can increase financial risk and impact net margins and earnings if not managed properly.
  
• The success of new business prospects, such as the third-party customer developments at Long Ridge and expansion opportunities at Jefferson and Transtar, carries execution risk, which could affect future revenues and growth potential.
  
• The substantial construction costs for Repauno’s Phase 2 and potential Phase 3 projects require significant capital investment, which, while potentially accretive, could strain cash flows and impact earnings if there are delays or cost overruns.
  
• The company relies on a favorable M&A environment for growth in Transtar, but competition and high asset prices could limit acquisition opportunities, affecting revenue and EBITDA growth targets.
  
• Dependency on external factors such as energy market prices and U.S. Steel's production levels can introduce volatility into revenue streams and earnings projections, particularly if there are unfavorable market changes.

Valuation

• The analysts have a consensus price target of $12.0 for FTAI Infrastructure based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $952.7 million, earnings will come to $44.2 million, and it would be trading on a PE ratio of 47.3x, assuming you use a discount rate of 7.8%.
• Given the current share price of $3.49, the analyst price target of $12.0 is 70.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.