Northwest Natural Holding Company

NWN Details

Northwest Natural Holding Company (NYSE: NWN) owns NW Natural Gas Company (NW Natural), NW Natural Water Company (NW Natural Water), as well as other business interests.

Q3FY21 Results Performance (For the Quarter Ended 30 September 2021)

• The company has reported an increase in its net loss to $0.67 per share in Q3FY21 from a net loss of $0.61 per share from continuing operations in Q3FY20.
• The results reflected the seasonal nature of the gas utility's earnings as most of the revenues are earned during the winter heating season in the first and fourth quarters each year.
• Further, the results also included the impact of higher operations and maintenance expenses and higher depreciation and general tax expenses, partially offset by customer growth and new rates in Oregon for its natural gas utility
• In the last 12 months, around 12,000 natural gas meters were added, which reflects a growth rate of 1.5% on 30 September 2021.

Source: Company Reports, Analysis by Kalkine Group

Recent Update

• The Vision 2050: Destination Zero report released on 17 November 2021, detailed options to achieve carbon neutrality by 2050 for the energy services it provides to its customers.
• As per the press release dated 15 November 2021, Archaea Energy Inc, an industry-leading renewable natural gas company declared that its subsidiary Archaea Holdings, LLC has entered into a long-term RNG purchase and sale agreement with NWN’s subsidiary - Northwest Natural Gas Company.

Key Risks

The group’s businesses are exposed to regulatory risk including changes in the regulatory environment or an adverse outcome in regulatory proceedings. Further, its NGD business is prone to the impact of increased competition. Moreover, NW Holdings’ and NW Natural’s businesses are susceptible to various development as well as operational risks.

Outlook

The company has made substantial advancements towards procuring RNG for its gas utility customers, representing the critical role the system is playing to help move to a low-carbon, renewable energy future. Driven by its new competitive renewables strategy, the company is able to support a broader group of customers with the energy transition, and its initial partnership and investment showcases its exciting initial step. Meanwhile, NWN has reaffirmed its earnings guidance for 2021, which is expected to remain in the range of $2.40 to $2.60 per share.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Orange Color Line Reflects RSI (14-Period)

Stock Recommendation

The stock has been valued using an EV/Sales multiple based relative valuation (on an illustrative basis) and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average) considering improvement in the current ratio in Q3 FY 2021 on the YoY basis as well as decent outlook.

For this purpose, peers like National Fuel Gas Co (NFG.N), New Jersey Resources Corp (NJR.N), among others have been considered.

Considering the aforementioned factors, we give a “Buy” recommendation on the stock at the current market price of $45.570 per share, down by 0.61% on 23^rd November 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.