Geopolitical stress, above-trend inflation, prospective monetary tightening, continued supply constraints and a slowdown in China all contributed to March being the worst month for bonds for decades. Common shares globally also fared badly except for Canada’s TSX index which was one of the best performers in the world at +3.6%, having reached an all-time high on March 29^th following a choppy rise from late February. Supporting this outcome was the fact that the Canadian economy was doing better, employment was above pre-pandemic levels and energy and commodity prices were very strong. As a result, the materials sector was up some 10% with energy, industrials and consumer staples not far behind. With this background, the following table sets out the top and bottom 5i coverage performers in the month.

Xebec Adsorption Inc (XBC)

As a top performer on our list, XBC shares were up 34.73%. This company is a global provider of clean energy solutions for renewable and low carbon gases used in energy, mobility and industrial applications. It specializes in deploying a portfolio of proprietary technologies for the distributed production of hydrogen, renewable natural gas, oxygen and nitrogen. Much improved 4^th quarter results (strong revenue growth and earnings per share at $0.02 compared to loss of $0.26 one year ago) announced on March 17^th underpinned this result. The announced retirement of the Chairman, President and CEO and a three-year plan with targets helped too. XBC has three targeted markets: biogas conversion to renewable gas (RNG) from agricultural digestors and the like; production of hydrogen; capture of carbon from natural gas streams (CCUS). While XBC used some $120 million of cash ($80 million for acquisitions) in 2021 it has almost $40 million remaining and is projecting annual revenue growth of 40%. The transition to a low carbon future plays to XBC’s strength and suggests a bright future for XBC.

Pason Systems Inc (PSI)

This company continues its strong performance being up 24.78% in the month and up 40.9% so far this year. PSI is an energy services company which provides data management systems for drilling rigs and enjoys a significant market share in North America and elsewhere. It is happily riding the strong performance of the energy market. In the fourth quarter of 2021, revenue was up 92% compared to the same period one year ago and earnings per share of $0.14 compared to a loss in the previous period. Management believes the outlook remains positive for continued growth in land-based drilling, possibly enhanced by oil supply shortages. PSI is in a position of strength with a prudent balance sheet and significant operating leverage as activity levels continue their recovery.

Lightspeed (LSPD)

LSPD was the third-best performer in March, up 19.8% after being a significant laggard in previous months. It offers a cloud-based commerce platform that connects suppliers, merchants and consumers while enabling omnichannel experiences. Its software platform provides its customers with the critical functionality they need to engage with consumers, manage their operations, accept payments, and grow their businesses. Revenue in the fourth quarter of 2021 was up 165%, but expenses were up more and net income declined to a loss of $65.5 million. On December 31, 2021, LSPD had $969 million cash on hand after spending $559 million on acquisitions in the previous nine months. The founder moved to executive chairman, but the impact of that move is unknown. There is little to explain the recent growth in its stock price other than as part of a general bounce in technology stocks which have been hit hard this year. The revenue runway seems large, but management’s ability to contain its expenses has yet to be demonstrated.

NFI Group Inc, (NFI)

NFI was the worst performer in the month with shares down 14.41% and 23.15% YTD. NFI is primarily a bus manufacturer with an offering that includes zero-emission vehicles (ZMB), charging infrastructure installations, telematics, and full parts and service aftermarket support. It serves a global market. Global supply chain and logistic challenges, coupled with another wave of Covid-19, continued to impact NFI’s manufacturing productivity in the final quarter of 2021. As a result, manufacturing revenue was down 5% on the quarter, adjusted EBITDA was down 59.7% resulting in a net loss of $0.12 per share and negative cash flow of $0.33 per share. In the first quarter of 2022, the dividend was cut by three quarters to $0.0531 per quarter. Management expects adjusted EBITDA to decrease the first half of 2022 due to the absence of Government wage subsidies, a fire at an anode supplier, and the continued impact of inflation and supply chain disruptions. NFI makes good products, is increasingly electric powered, and looks to restore its former productivity in 2023.

Enthusiast Gaming Holdings Inc (EGLX) 

The second worst performer was EGLX down 13.93% for the month and 16.94% YTD. It is an integrated gaming entertainment company, building the largest media and content platform for video game and esports fans to connect and engage worldwide. The share price dropped from a high of $4.67 on February 15^th to $3.02 at the end of March. On February 8^th, 2022, EGLX published preliminary 4^th quarter results which dwelt on increases to revenue (34%), gross profit (69%), direct sales and paid subscribers compared to the prior-year period. However, operating expenses were up some 85% leading to a net loss of $12.8 million (-$0.10 per share). 2021 full-year revenue was up 129.4%, but operating expenses were up 140.2% leading to a 91.8% higher net loss of $51.6 million. 

Dye and Durham Limited (DND)

The third-worst performer for the month was DND down 12.77% on the month and 43.36% YTD. DND is a leading provider of cloud-based software and technology solutions to improve efficiency and productivity for legal and business professionals. This provides a long runway of opportunity that DND is pursuing aggresively. It wants to become a billion-dollar adjusted EBITDA company and projects that adjusted EBITDA will not be less than $350 million for 12 month period ended June 30, 2023. The results for the 4^th quarter of 2021 were good: Revenues were up 225% over the corresponding prior year period; adjusted EBITDA was up 267% and net loss was down $17.5 million to $4 million. During the siz months ended December 31, 2021, debt increased by $1.2 billion; acquisitions of $791 million were made and cash increased by $464 million. On December 21, 2021, DND announced a deal to Acquire Link Group in Australia for some $3.2 billion to be financed by a term loan of Aus$3.5 billion, $841 million of exchangeable preferred shares and up to $109 million of common share at $53 each. This is quite a whale to swallow and that has no doubt worried investors. Additionally, DND has received some bad publicity lately as it is alleged to have raised its prices materially for some customers. The growth potential for shares in certainly still there, but given the significance of recent events, we think shareholders will require some patience with this one. 

These are just some of the more than 60 Canadian companies we cover at 5i Research. To view their recent reports you can search for their tickers in the Reports section. If you are not a member and would like to gain access to these reports as well as the Q&A service where you can ask and search questions on these companies, you can fill in your information below to sign up for a free trial.

Take Care,

^{Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in the securities mentioned.}