Heliocentris Energy Solutions AG European Mid-Cap Software & IT Services

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1 Sunny side up Heliocentris has recently announced two important collaborations, which, in our view, clearly shows that the management s strategic growth plan is successfully unfolding. Collaboration I: Today, Heliocentris announced that is has signed a global framework agreement with one of the largest mobile network operators in northern Europe (we believe this could be Telenor). With around 186m mobile network customers, Telenor is one of the world s largest mobile network operators, market leader in Bangladesh and the second-largest mobile operator in Pakistan. The duration of this agreement is three years, with the option for renewal for another two years. Heliocentris estimates the revenue potential to be in the two-digit million euro range over the course of the next three years from Bangladesh and Pakistan alone. Collaboration II: At the end of May, the company disclosed that it has entered into a strategic collaboration with Japanese trading company Inabata & Co s subsidiary Inabata Europe. Under the deal, Inabata gains five-year exclusive distribution rights to all Heliocentris products in Japan, Korea and the US for applications not targeted by Heliocentris itself. Additionally, Inabata will inject EUR1m of fresh capital. We estimate that this collaboration has yielded a new customer, namely NEC, a large Japanese IT group with significant operations in Myanmar and South-East Asia. Q1 results not representative for full-year 2015: Heliocentris reported Q1 sales figures of EUR2.9m (up 305% yoy), which based on a run-rate calculation is far behind our full-year 2015 estimates of ceur44m. However, given that the collaborations mentioned above came in later than expected, we are still confident that it will reach our full-year sales forecast. Capital increase: Mid-May, Heliocentris raised gross proceeds of EUR18.7m through subscription rights and oversubscriptions. In our initiation note we estimated that it will face capital requirements ofeur10.2m in 2015 and 2016 and EUR9.1m in Given the newly raised capital, we estimate that its funding is secured until late Valuation: Our price target of EUR10.40 for Heliocentris is based on a DCF model, as a peer group comparison does not yet yield a meaningful result. 1 July 2015 BUY Current price Price target EUR 5.60 EUR /06/2015 XETRA Close Market cap (EUR m) 65 Reuters H2Fn.DE Bloomberg H2FA GY Changes made in this note Rating: Buy (no change) Price target: EUR (no change) Estimates changes 2014E 2015E 2016E old % old % old % Sales EBIT EPS Source: Berenberg estimates Share data Shares outstanding (m) 11 Enterprise value (EUR m) 64 Daily trading volume 5,141 Key data Price/book value 5.1 Net gearing 46.6% CAGR sales % CAGR EPS Y/E , EUR m E 2015E 2016E 2017E Sales EBITDA EBIT Net profit Y/E net debt (net cash) EPS (reported) EPS (recurring) CPS DPS Gross margin % 10.0% 32.0% 32.0% 32.0% EBITDA margin % -50.5% 3.0% 12.5% 14.4% EBIT margin % -58.2% -2.1% 9.8% 12.5% Dividend yield % 0.0% 0.0% 0.0% ROCE % -58.9% -3.5% 19.4% 32.9% EV/sales EV/EBITDA EV/EBIT P/E Source: Company data, Berenberg Gunnar Cohrs, CFA gunnar.cohrs@berenberg.com Daniel Richter daniel.richter@berenberg.com 1

2 BUY Investment thesis 1 July 2015 Heliocentris is one of the few competitors in the off-grid BTS energy savings solutions market that is able to provide a bespoke Current price Price target EUR 5.60 EUR Market cap (EUR m) 65 30/06/2015 XETRA Close EV (EUR m) 64 Non-institutional shareholders Alcazar: 7.8%; Conduit: 7.1%; Enertech: 5.5%; bmp: 4.8%; Entrepreneurs Fund: 3.9%; Management: 0.9% Business description German provider of energy efficiency solutions for autonomous power systems Trading volume 5,141 Free float 70.0% Share performance High 52 weeks EUR 7.90 Low 52 weeks EUR 4.70 Performance relative to SXXP SDAX 1mth 3.1% 1.8% 3mth -6.0% -13.7% 12mth 0.4% -8.1% turnkey solution for off-grid BTSs owned by mobile network operators. Since this client group is increasingly interested in outsourcing all tasks relating to the energy management of their BTSs, Heliocentris s turnkey offering is highly sought after. Several other competitors, including much larger ones, lack this important characteristic, placing Heliocentris at a competitive advantage. Moreover, since this feature cannot be easily replicated, as it requires significant resources in R&D in terms of time and money, the advantage is sustainable. We calculate a price target of EUR10.40, based on a DCF-only approach, as a peer group comparison does not yet yield a meaningful result. Profit and loss summary EURm E 2015E 2016E Revenues EBITDA EBITA EBIT Associates contribution Net interest Tax Minorities Net income adj EPS reported EPS adjusted Year end shares Average shares DPS Growth and margins E 2015E 2016E Revenue growth % 132.7% 111.3% EBITDA growth % % 780.5% EBIT growth % -91.6% % EPS adj growth % -84.5% % FCF growth % -34.5% -2.9% EBITDA margin % -50.5% 3.0% 12.5% EBIT margin % -58.2% -2.1% 9.8% Net income margin % -64.6% -4.3% 6.2% FCF margin % -79.8% -22.4% -10.3% Valuation metrics E 2015E 2016E P / adjusted EPS P / book value FCF yield % -13.1% -11.2% Dividend yield % 0.0% 0.0% EV / sales EV / EBITDA EV / EBIT EV / FCF EV / cap. employed Gunnar Cohrs, CFA gunnar.cohrs@berenberg.com Daniel Richter daniel.richter@berenberg.com Cash flow summary EURm E 2015E 2016E Net income Depreciation Working capital changes Other non-cash items Operating cash flow Capex FCFE Acquisitions, disposals Other investment CF Dividends paid Buybacks, issuance Change in net debt Net debt FCF per share Key ratios E 2015E 2016E Net debt / equity -24.5% -13.4% 63.2% 46.6% 27.8% Net debt / EBITDA Avg cost of debt % 10.6% 10.6% Tax rate - 0.4% 0.0% 0.0% 30.0% Interest cover Payout ratio 0.0% 0.0% 0.0% 0.0% 0.0% ROCE % -58.9% -3.5% 19.4% Capex / sales % 14.8% 7.1% 4.3% Capex / depreciation % 191.6% 139.2% 161.1% Key risks to our investment thesis Going-concern risk due to the small size of the company in relation to large but infrequent ticket sizes; a delay of future orders would cause a funding gap. The company may not be able to fund strong top-line growth and corresponding working capital needs via its operating cash flows alone. This would lead to external financing needs over the next few years. Increased country risk due to Heliocentris s large exposure to emerging markets. 73% of its costs are in USD, partially hedged through 63% top-line exposure, with no hedge in addition. 2

3 Please note that the use of this research report is subject to the conditions and restrictions set forth in the General investment stment-related disclosures and the Legal disclaimer at the end of this document. For analyst certification and remarks regarding g foreign investors and country-specific disclosures, please refer to the respective paragraph at the end of this document. Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz WpHG) Company Heliocentris Energy Solutions AG 3 Disclosures (1) Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as the Bank ) and/or its affiliate(s) was Lead Manager or Co- Lead Manager over the previous 12 months of a public offering of this company. (2) The Bank acts as Designated Sponsor for this company. (3) Over the previous 12 months, the Bank and/or its affiliate(s) has effected an agreement with this company for investment banking services or received compensation or a promise to pay from this company for investment banking services. (4) The Bank and/or its affiliate(s) holds 5% or more of the share capital of this company. (5) The Bank holds a trading position in shares of this company. Historical price target and rating changes for Heliocentris Energy Solutions AG in the last 12 months (full coverage) Date Price target - EUR Rating Initiation of coverage 09 February Buy 09 February 15 Berenberg Equity Research ratings distribution and in proportion to investment banking services, as of 1 July 2015 Buy % % Sell % 2.70 % Hold % % Valuation basis/rating key The recommendations for companies analysed by Berenberg s Equity Research department are made on an absolute basis for which the following three-step rating key is applicable: Buy: Sustainable upside potential of more than 15% to the current share price within 12 months; Sell: Sustainable downside potential of more than 15% to the current share price within 12 months; Hold: Upside/downside potential regarding the current share price limited; no immediate catalyst visible. NB: During periods of high market, sector, or stock volatility, or in special situations, the recommendation system criteria may be breached temporarily. Competent supervisory authority Bundesanstalt für Finanzdienstleistungsaufsicht -BaFin- (Federal Financial Supervisory Authority), Graurheindorfer Straße 108, Bonn and Marie-Curie-Str , Frankfurt am Main, Germany. General investment- related disclosures Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as the Bank ) has made every effort to carefully research all information contained in this financial analysis. The information on which the financial analysis is based has been obtained from sources which we believe to be reliable such as, for example, Thomson Reuters, Bloomberg and the relevant specialised press as well as the company which is the subject of this financial analysis. Only that part of the research note is made available to the issuer (who is the subject of this analysis) which is necessary to properly reconcile with the facts. Should this result in considerable changes a reference is made in the research note. Opinions expressed in this financial analysis are our current opinions as of the issuing date indicated on this document. The companies analysed by the Bank are divided into two groups: those under full coverage (regular updates provided); and those under screening coverage (updates provided as and when required at irregular intervals). 3

4 The functional job title of the person/s responsible for the recommendations contained in this report is Equity Research unless otherwise stated on the cover. The following internet link provides further remarks on our financial analyses: Legal disclaimer This document has been prepared by Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as the Bank ). This document does not claim completeness regarding all the information on the stocks, stock markets or developments referred to in it. On no account should the document be regarded as a substitute for the recipient procuring information for himself/herself or exercising his/her own judgements. The document has been produced for information purposes for institutional clients or market professionals. Private customers, into whose possession this document comes, should discuss possible investment decisions with their customer service officer as differing views and opinions may exist with regard to the stocks referred to in this document. This document is not a solicitation or an offer to buy or sell the mentioned stock. The document may include certain descriptions, statements, estimates, and conclusions underlining potential market and company development. These reflect assumptions, which may turn out to be incorrect. The Bank and/or its employees accept no liability whatsoever for any direct or consequential loss or damages of any kind arising out of the use of this document or any part of its content. The Bank and/or its employees may hold, buy or sell positions in any securities mentioned in this document, derivatives thereon or related financial products. The Bank and/or its employees may underwrite issues for any securities mentioned in this document, derivatives thereon or related financial products or seek to perform capital market or underwriting services. certification I, Gunnar Cohrs, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by the Bank or its affiliates. I, Daniel Richter, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by the Bank or its affiliates. Remarks regarding foreign investors The preparation of this document is subject to regulation by German law. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. United Kingdom This document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers. United States of America This document has been prepared exclusively by the Bank. Although Berenberg Capital Markets LLC, an affiliate of the Bank and registered US broker-dealer, distributes this document to certain customers, Berenberg Capital Markets LLC does not provide input into its contents, nor does this document constitute research of Berenberg Capital Markets LLC. In addition, this document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers. This document is classified as objective for the purposes of FINRA rules. Please contact Berenberg Capital Markets LLC ( ) if you require additional information. 4

5 Third-party research disclosures Company Heliocentris Energy Solutions AG Disclosures no disclosures (1) Berenberg Capital Markets LLC owned 1% or more of the outstanding shares of any class of the subject company by the end of the prior month.* (2) Over the previous 12 months, Berenberg Capital Markets LLC has managed or co-managed any public offering for the subject company.* (3) Berenberg Capital Markets LLC is making a market in the subject securities at the time of the report. (4) Berenberg Capital Markets LLC received compensation for investment banking services in the past 12 months, or expects to receive such compensation in the next 3 months.* (5) There is another potential conflict of interest of the analyst or Berenberg Capital Markets LLC, of which the analyst knows or has reason to know at the time of publication of this research report. * For disclosures regarding affiliates of Berenberg Capital Markets LLC please refer to the Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz WpHG) section above. Copyright The Bank reserves all the rights in this document. No part of the document or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without the Bank s prior written consent. May 2013 Joh. Berenberg, Gossler & Co. KG 5

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