BDI BioEnergy Internat Buy

Transcription

1 20/08/13 20/10/13 20/12/13 20/02/14 20/04/14 20/06/14 20/08/14 20/10/14 20/12/14 20/02/15 20/04/15 20/06/15 MATELAN Research Update Note Price as of 20/08/15: August 2015 Company / Sector Fair Value Recommendation BDI BioEnergy Internat Buy Energy: Biofuels (unchanged) (unchanged) Strong case with multiple upsides Share price performance Share data Volume (000, l.s.) Close (EUR, r.s.) Reuters D7I.DE No. of shares (m) 3.80 Daily volume (3m) 1,017 Free float 19.6% Market cap. (m) 41.0 EV (m) n.m. Sales CAGR 13-17e 5.9% Valuation 2015e 2016e EV/Sales n.m. n.m. EV/ EBITDA n.m. n.m. EV/EBIT n.m. n.m. PER Div. yield 0.9% 1.9% RoCE n.m. 12.5% RoE 7.7% 5.7% Investment case We currently see a very strong case for BDI again. The current market cap trades below the net cash value again and holds an upside of 34% to our fair value, which is very conservatively calculated in many respects. We now expect an improved operating earnings situation in H2 and would not be surprised if our estimates for the coming years could be surpassed. In addition, the company s algae activities could develop into a third pillar for the company and drive valuation even further. POSITIVE OPERATING EARNINGS IN H2 Q2 results showed a better sales level again but the gross margin was still weak. However, the company s strong order book suggests both, further increasing sales levels and a rising profitability. H2 operating earnings should thus become slightly positive and make up for H1 losses. Moreover, the book already covers 90% of our sales estimates for the next three years. MAREKT CAP BELOW NET CASH AGAIN The sale of M&R has driven BDI s net cash positon even further north and the current market cap has now a 20% upside to the net cash value. Adding participations and operations even yields a 63% upside. Taking a discount on net cash, which we do in our fair value calculation, leaves a 34% upside. ADDITIONAL UPSIDE POTENTIAL We see upsides to our fair value calculation from the discount on cash, the value of participations and rather conservative estimates for the operational development. In addition, the company s algae activities could develop into a third pillar of operations for BDI from 2017 onwards, which is not yet part of our model. For additional disclosures please refer to the appendix Analysts Forecasts Hartmut Moers Sales ( m) Tel.: EBITDA ( m) hartmut.moers@matelan.de EBIT ( m) Adj. EPS ( ) Peter Wirtz Dividend ( ) Tel.: Oper. CF ( m) peter.wirtz@matelan.de Free CF ( m)

2 Sales back to former levels but gross margin remains volatile We had already highlighted in our First Impression note that the second quarter showed a major increase in sales level, while a rather low gross margin prevented the company from breaking-even on operating level. The following graph now shows the development over the past ten quarters. Here, we find that results had deteriorated in 2014 due to a much lower quarterly sales level and a much more volatile gross margin. The company had fewer contracts to work on, which left lower sales and the different stages of profitability in the contracts were no longer balancing each other out. In addition, market pressure in particular from the biogas side increased and restructuring provisions were widely used up now appears to show a return to former sales levels, though gross margin remains volatile so far. Total operating performance and gross profit Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Material costs Gross profit Gross margin 8% 7% 6% 5% 4% 3% 2% Source: BDI, Matelan Research, l.s. in EURm Mix prevents sales increase from leading to an adequate increase in profitability Looking into segmental results for the first half of the year, we find that the biodiesel operations come to slightly lower sales compared to the previous year s period, thereby leaving a slightly higher operating loss. The major improvement in sales comes from the biogas activities. This has reduced losses on this side a bit but due to the lower profitability of the biogas activities, the increase in sales did not lead to an adequate increase in earnings. Sales and EBIT by segment Biodiesel FVD Biogas Sales H1 14 Sales H1 15 EBIT H1 14 EBIT H1 15 Source: BDI, Matelan Research - 2 -

3 GP not yet sufficient to cover fix costs The company s fix cost base is rather stable. There is some volatility predominantly in the other operating result, coming from some one-off factors. However, on an underlying basis we find fix costs just above the EUR3.5m mark. Even including these one-offs, gross profit was higher than the fix cost base in each quarter of the year 2013, thus leaving the company with a slightly positive EBIT. This was no longer possible on the base of the low sales levels in The start of 2015 has still been negative on EBIT basis as sales were still depressed in Q1 and the margin was low in Q2. Gross profit and fix costs Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Other operating result Personnel costs Depreciation Gross profit Source: BDI, Matelan Research, in EURm Strong order book suggests increase in profitability Looking into the company s order book, we find good reasons that this situation should change in the second half of the year. Firstly, volumes should rise significantly in the second half of 2015 compared to the first half. Orders of more than EUR20m dedicated for H are already in the book. This is roughly twice the level of sales reported for H1, which should make it much easier for the company to cover fix costs. In addition, the order book suggests a shift towards biodiesel projects, which are currently more profitable than biogas projects. We thus expect H2 to be slightly positive on operating earnings level, thereby making up for H1 losses and leaving the company with a full year EBIT around the break-even line. Strong order book backs our sales estimates and suggests rise in profitability H1 15 H2 15e 2015e 2016e 2017e Biodiesel book Biogas book FVD book Sales Source: BDI, Matelan Research, excluding the order from Croatia - 3 -

4 and almost fully covers sales estimates for the next three years Estimates are increasingly conservative Moreover, BDI just announced another major biodiesel order from longstanding customer Argent. The order amounts to EUR30m and brings the order book to EUR115.8m. The previous chart also illustrates that almost 90% of our sales estimates for the years is now covered by the company s order book. This already excludes the EUR20m order from Croatia, which is still part of the book but doubtful to materialise due to financing issues. We also expect the EUR45m Amsterdam and the EUR30m Argent order to be executed over two years, starting from 2016 onwards. The gap to our sales estimate could well be closed only with the normal FVD business. As we do also expect some additional biogas business, our estimates appear rather conservative, even allowing for some further project delays. Against this background, we have only marginally fine-tuned our model. Our key parameters remain unchanged and we are well aware of the fact that this leaves some upside in case orders can be executed according to the current schedule and order intake does not cease to exist. Q1 15 review and change in estimates EURm Q2 15 Q2 14 Change FY 14 FY 15e old FY 15e new Order book % Sales % Gross profit % Gross margin 34.8% 40.9% 59.1% 42.4% 43.4% EBIT n.m EBIT margin n.m. n.m. n.m. 0.9% 0.9% Net profit a.m n.m Source: BDI, Matelan Research, in EURm No cash burn Apart from earnings, cash flow from operations is a factor when looking at BDI. Though the second quarter has turned slightly negative in terms of free cash flow, the half year period remains positive due to the significant reduction in net working capital in the first quarter. Although earnings have still been negative, the company is not burning cash. Cash flow development Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q Cash earnings Change in NWC Capex Free Cash Flow (r.s.) Source: BDI, Matelan Research, in EURm - 4 -

5 Market Cap Net Cash Participations Operations Pensions Equity value MATELAN Research Market cap is trading even below the net cash value In addition, BDI has realised proceeds of around EUR10m in the second quarter from the sale of its participation in M&R. Though the deal had already been announced earlier, it now becomes visible in the company s accounts, that the company s net cash position, one of the key factors in the valuation of the company, has further increased. Net cash now comes to EUR49.1m, which equates to EUR12.9 per share. Moreover, with the sale of M&R, BDI realised a book gain of around EUR4m. This not only boosts net result in the current year, it clearly indicates that the company s participations are valuable and we might hold even more hidden reserves. However, the current market cap of EUR41m has an almost 20% upside just to reach the company s net cash position. Adding only the book value of the remaining participations and the value of the operations resulting from the prudent scenario described above, we arrive at an equity value of EUR66.7m, which yields a 63% upside from the current market cap. It should be noted that in our fair value calculation we have included a 25% discount to the company s net cash position, which is a very generous reflection of the company s cash need to support the operations. However, even including this discount, the current market cap still has a 34% upside. Value and market cap Source: BDI, Matelan Research Algea activities reach industrial stage and could develop into a new pillar for BDI We have already highlighted that the calculation of our fair value is rather conservative with regard to our earnings estimates, the value of participations and the discount taken on the net cash position. A further topic that could lead to an additional upside is the company s algae activities. BDI has just announced that after a successful test phase it now intends to invest in an industrial size reactor. Investment should come to a small double-digit million Euro amount, which should be fully amortized in 5-10 years. The facility should come to operation in Q and should generate revenues of roughly half the investment on an annual basis, in particular from addressing the food supplements, cosmetics and pharmaceutical industries. This could add more than 10% of the company s sales in The market is expected to show rather high growth rates, albeit from a very low base. Still, the activity could develop into a third pillar for the company

6 Sales and EBIT margin Adj. EPS and DPS % 1% % -1% -2% -3% -4% Sales (EURm) EBIT margin (r.s.) Adj. EPS (EUR) DPS (EUR) In EURm Cash Flow In EUR RoCE % % 40% 0% % -80% % Capex (EURm) Change in NWC Intangibles PPE Cash Earnings Free Cash Flow (r.s.) NWC RoCE (r.s.) In EURm Balance Sheet In EURm Shareholder structure 7 Intangibles 19.6% 6 Tangibles 5 Working Cap. % 4 3 Other Assets Cash Equity 2.8% 1.2% 2 1 Assets Liabilities Pensions Financial debt Working Cap. Other Liab. 72.3% BDI Beteil. VTU Gössler Hammer Free float In EURm - 6 -

7 P & L EURm Sales Growth -53.9% 123.6% 11.0% 9.9% Material costs / Inv Gross profit Gross margin 44.3% 59.1% 43.4% 44.4% 44.4% Other operating costs EBITDA Margin 10.1% -18.1% 4.3% 10.9% 10.9% Depreciation EBIT Margin 7.3% -30.9% 0.9% 7.7% 7.9% Financial result EBT Taxes Net profit Minorities Net profit a.m Growth n.m. n.m. n.m % 10.2% No of shares EPS Adj. EPS Growth n.m. n.m. n.m % 10.2% Dividend Balance Sheet EURm Intangible assets Tangible assets LT financial assets Other non-current assets Non-current assets Inventories Receivables Cash Other current assets Current Assets Total assets Equity Minorities Total equity LT financial liabilities Pension provisions Other LT liabilities 1.0 Non-current liabilities ST financial liabilities Payables & Advances Other ST liabilities Current liabilities Total liabilities Cash Flow EURm EBIT Depreciation Other non-cash items Cash taxes Cash earnings Change in NWC CF from operations Capex Other investm./divestm CF from investing CF from fin. and other Change in cash Segments and adjusted earnings EURm BioDiesel plants Fine-vacuum dist BioGas plants Sales Biodiesel plants Magin 7.1% -27.8% 1.7% 8.0% 8.0% Fine-vacuum dist Margin % 0.7% 3.5% 7.0% 8.0% BioGas plants Margin 74.7% n.m. -4.3% % 7.0% EBIT Margin 7.3% -30.9% 0.9% 7.7% 7.9% Valuation multiples Share price x No of shares (m) Market Capitalisation Net financial debt Pension provision Minorities - Participations Enterprise Value Sales Adj. EBITDA Adj. EBIT Adj. Net profit a.m EV / Sales EV / EBITDA EV / EBIT PE Key operational indicators Equity ratio 66.5% 69.7% 68.1% 66.9% 65.8% Gearing Asset turnover NWC / sales 4.6% 3.6% 6.7% 6.7% 6.7% Payable days outstanding Receivable days outstanding Fix operating assets NWC Capital employed RoE % -3.6% 7.7% 5.7% % RoA 3.2% -7.4% 0.4% 3.9% 4.2% RoCE 20.7% -47.4% 2.5% 23.4% 24.9% Gross margin 44.3% 59.1% 43.4% 44.4% 44.4% EBITDA margin 10.1% -18.1% 4.3% 10.9% 10.9% EBIT margin 7.3% -30.9% 0.9% 7.7% 7.9% Net profit margin 9.1% -10.5% 10.9% 7.6% 7.7% - 7 -

8 ADDITIONAL DISCLOSURES This report has been prepared by Matelan Research GmbH, Koblenzer Str. 79, Bonn. All rights are reserved. Copyrights and database rights protection exists in this publication. It may not be reproduced or redistributed without prior express permission of Matelan. (1) Analyst certification The analysts responsible for the content of this research report hereby certify that (1) all views expressed in this report accurately reflect their views about any and all of the subject securities or issuers and (2) no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or view(s) of this report. Matelan may have sent extracts of this research report to the subject company for the purpose of verifying factual accuracy. The information provided by the latter was taken into consideration in the report. However, this entailed no change of the assessment. (2) Disclosures about potential conflicts of interest Matelan Research GmbH has/will receive(d) compensation for research and advisory services provided in the current calendar year from the company under review. (3) Rating definitions Security firms use a variety of rating terms and systems. Investors should carefully read the definitions of the rating system used in each research report. In addition, since the research report contains more complete information concerning analyst s views, investors should carefully read the entire research report and not infer its contents from the ratings alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor s decision to buy or sell a stock should depend on individual circumstances (such as the investor s existing holdings) and other considerations. MATELAN Research GmbH uses an absolute rating system, which varies considerably from relative rating systems (such as Overweight, Equal Weight or Underweight ). Stock ratings are defined as follows: Strong Buy: In the next 6 to 12 months, we expect a potential absolute change in value of over 20% with high forecast certainty. Buy: In the next 6 to 12 months, we expect a potential absolute change in value of more than 10%. Neutral: In the next 6 to 12 months, we expect a potential absolute change in value of over 0% up to a maximum of 10%. Reduce: In the next 6 to 12 months, we expect a potential absolute negative change in value of up to -10%. Sell: In the next 6 to 12 months, we expect a potential absolute negative change in value of over -10 % with high forecast certainty. The change in stock price results from the difference between the current share price and the analyst s performance expectations, which are generally based on a fair value calculation performed on the basis of a discounted cash flow model and a key comparison analysis but can also consider other effects such as market sentiment. (4) Rating distribution Stock ratings within the coverage universe of MATELAN Research GmbH as of the publication date of this report are distributed as follows: Strong Buy: 9.1% Buy: 45.5% Neutral: 45.5% Reduce: % Sell: % (5) Recommendation history Stock ratings for the company covered in this report have developed as follows: BDI Date Rating 15/11/13 Buy 16/02/11 Neutral - 8 -

9 (6) Additional information for clients in Germany and other countries This research report has been produced in Germany. It was approved and distributed by MATELAN Research GmbH, which is supervised by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). Laws and regulations in other countries may also restrict the distribution of this report. Persons in possession of this document should inform themselves about possible legal restrictions and observe them accordingly. In particular, this document may not be distributed in the United States, Canada, Australia or Japan or to any U.S. person. DISCLAIMER This research publication has been prepared by MATELAN analysts based on publicly available data that is believed to be accurate and complete. While reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, MATELAN provides no representation or warranty in relation to its accuracy, completeness or reliability. Possible errors or incompleteness of the information do not constitute grounds for liability, either with regard to indirect or to direct or consequential damages. In particular, MATELAN is not liable for the statements, plans or other details contained in the information concerning the examined companies, strategies, economic situations, market and competitive situations, regulatory environment, etc. Neither MATELAN nor its employees are liable for the accuracy and completeness of the statements, estimates and conclusions derived from the information contained in this report. To the extent this research report is being transmitted in connection with an existing contractual relationship, e.g. financial advisory or similar services, the liability of MATELAN shall be restricted to gross negligence and wilful misconduct. In any case, the liability of MATELAN is limited to typical, foreseeable damages and liability for any indirect damages is excluded. This report does not constitute an offer to sell, or a solicitation of an offer to purchase, any security. MATELAN may perform services to other companies mentioned in this report. Directors or employees of MATELAN may serve on the board of directors of companies mentioned in this report. Any opinions contained herein are subject to change without notice. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. MATELAN does not accept any liability for any loss or damage out of the use of all or any part of this report. Additional information will be made available upon request. Past performance is not necessarily indicative of future results. Investors should make their own investment decisions without relying on this publication. Only investors with sufficient knowledge and experience in financial matters to evaluate the merits and risks should consider an investment in any issuers or market discussed herein and other persons should not take any action on the basis of this publication. Any investments referred to herein may involve significant risk, are not necessarily available in all jurisdictions, may be illiquid and not be suitable for all investors. The price of securities may decrease or increase and as a result investors may lose the amount originally invested. Changes in exchange rates may also cause the value of investments to decrease or increase. Any documents or information we provide is solely for informational purposes and directed only to persons we reasonably believe to be investment professionals. All such communications and any activity to which they relate are available only to such investment professionals; any activity arising from such communications will only be carried out with investment professionals. Persons who do not have professional experience in matters relating to investments shout not rely upon such communications. CONTACT DATA For further information please contact: Matelan Research GmbH Koblenzer Straße Bonn Head Analyst: Hartmut Moers Tel: hartmut.moers@matelan.de - 9 -