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Results: Tilt Renewables share price unmoved despite 250% surge in full-year earnings

The Tilt Renewables Ltd (ASX: TLT) share price has remained unchanged at $2.30 per share despite announcing a 253% increase in underlying earnings after tax this morning.

What were the full-year highlights?

Tilt reported a 14% increase on prior corresponding period (pcp) to 2,054 gigawatt hours (GWh) which saw revenue increase 22% on pcp to $193.3 million in the year.

Generation costs also increased by 21%, however a decrease in corporate/development costs saw the company record a 30% increase in earnings before interest, tax, depreciation, amortisation and other financial items (EBITDAF) to $134.8 million for the year.

However, net profit after tax (NPAT) fell 28% to $12.2 million despite the 253% increase in underlying earnings after tax once net fair value gains/losses on financial instruments are stripped out which reflects the difficult hedging environment in the Energy sector.

The company will not pay a final dividend, down from $1.80 per share last year, meaning the full-year dividend is simply the $1.60 interim dividend announced in the first half.

Why didn’t the Tilt share price react to the result?

For Tilt it’s not so much a matter of should, but if, you can buy the stock given its current shareholder base.

Tilt currently has a market cap of over $1 billion but is tightly controlled by Mercury NZ Ltd (ASX: MCY) and Infratil Limited (ASX: IFT), with a combined ownership of over 85%.

The company is extraordinarily illiquid for such a large company and regularly goes long periods with zero trading volume on the ASX, with today being no exception.

While I believe that Tilt and fellow renewable energy stocks on the ASX could surge higher in the next 3-5 years, particularly if a renewables-friendly Labor and/or Greens government were to be elected in May, the illiquidity risk is a bit too rich for my liking.

As a growth investor, I’d be wanting to see significant outperformance over peers to be purchasing such an illiquid stock and at present, I’m not sure there’s a compelling case to buy Tilt shares.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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