BDI BioEnergy Internat. 14.5 Buy

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: 10.80 21 August 2015 Company / Sector Fair Value Recommendation BDI BioEnergy Internat. 14.5 Buy Energy: Biofuels (unchanged) (unchanged) Strong case with multiple upsides Share price performance 40 30 20 10 0 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 10.3 13.3 Div. yield 0.9% 1.9% RoCE n.m. 12.5% RoE 7.7% 5.7% 20 16 12 8 4 0 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) 35.45 16.32 36.50 40.50 44.50 Tel.: +49 228 227 99 240 EBITDA ( m) 3.57-2.95 1.56 4.43 4.87 hartmut.moers@matelan.de EBIT ( m) 2.59-5.04 0.33 3.11 3.52 Adj. EPS ( ) 0.85-0.45 0.26 0.81 0.90 Peter Wirtz Dividend ( ) 1.10 0 0.10 0.20 0.22 Tel.: +49 176 561 63 585 Oper. CF ( m) 10.18-4 3.45 4.39 4.72 peter.wirtz@matelan.de Free CF ( m) 7.98-5.20 8.35 3.59 3.82

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. 2015 now appears to show a return to former sales levels, though gross margin remains volatile so far. Total operating performance and gross profit 1 1 8.0 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 7.0 5.0 3.0 1.0-1.0 - Biodiesel FVD Biogas Sales H1 14 Sales H1 15 EBIT H1 14 EBIT H1 15 Source: BDI, Matelan Research - 2 -

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 2014. 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 5.0 3.0 1.0 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 H2 2015 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 5 4 3 2 1 H1 15 H2 15e 2015e 2016e 2017e Biodiesel book Biogas book FVD book Sales Source: BDI, Matelan Research, excluding the order from Croatia - 3 -

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 2015-2017 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 85.8 70.8 21.2% 73.9 7 10 Sales 7.4 4.2 75.1% 16.3 36.5 36.5 Gross profit 2.6 1.7 49.1% 9.7 15.5 15.8 Gross margin 34.8% 40.9% 59.1% 42.4% 43.4% EBIT -1.2-2.2 n.m. -5.0 0.3 0.3 EBIT margin n.m. n.m. n.m. 0.9% 0.9% Net profit a.m. 1.4-1.2 n.m. -1.7 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 Q2 15 - - - Cash earnings Change in NWC Capex Free Cash Flow (r.s.) Source: BDI, Matelan Research, in EURm - 4 -

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 80 70 60 50 40 30 20 10 0 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 Q3 2016 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 2017. 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. - 5 -

Sales and EBIT margin Adj. EPS and DPS 6 5 4 3 2 1 2% 1% % -1% -2% -3% -4% 1.20 1.00 0.80 0.60 0.40 0.20 0-0.20-0.40-0.60 Sales (EURm) EBIT margin (r.s.) Adj. EPS (EUR) DPS (EUR) In EURm Cash Flow In EUR RoCE 15.0 1 1 120% 1 5.0 5.0 1 1 1 8.0 80% 40% 0% -5.0-5.0-1 -40% -80% -1-15.0-120% 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 -

P & L EURm Sales 35.4 16.3 36.5 40.5 44.5 Growth -53.9% 123.6% 11.0% 9.9% Material costs / Inv. -19.7-6.7-20.7-22.5-24.7 Gross profit 15.7 9.7 15.8 18.0 19.8 Gross margin 44.3% 59.1% 43.4% 44.4% 44.4% Other operating costs -12.1-12.6-14.3-13.6-14.9 EBITDA 3.6-2.9 1.6 4.4 4.9 Margin 10.1% -18.1% 4.3% 10.9% 10.9% Depreciation -1.0-2.1-1.2-1.3-1.3 EBIT 2.6-5.0 0.3 3.1 3.5 Margin 7.3% -30.9% 0.9% 7.7% 7.9% Financial result 1.3 2.1 5.0 1.0 1.0 EBT 3.8-2.9 5.3 4.1 4.5 Taxes -0.6 1.2-1.3-1.0-1.1 Net profit 3.2-1.7 3.1 3.4 Minorities Net profit a.m. 3.2-1.7 3.1 3.4 Growth n.m. n.m. n.m. -22.5% 10.2% No of shares 3.8 3.8 3.8 3.8 3.8 EPS 0.85-0.45 1.05 0.81 0.90 Adj. EPS 0.85-0.45 0.26 0.81 0.90 Growth n.m. n.m. n.m. 210.8% 10.2% Dividend 1.10 0 0.10 0.20 0.22 Balance Sheet EURm Intangible assets 8.9 8.0 8.0 8.0 8.0 Tangible assets 1.9 2.5 2.6 3.2 LT financial assets 25.0 25.7 25.7 25.7 25.7 Other non-current assets 12.8 14.3 7.7 7.7 7.7 Non-current assets 48.7 5 43.9 4 44.6 Inventories 0.7 0.7 1.5 1.7 1.8 Receivables 11.4 7.1 11.1 12.3 13.5 Cash 20.1 10.5 19.4 22.3 24.7 Other current assets 0.1 0.1 0.1 0.1 Current Assets 32.3 18.5 32.1 36.4 40.1 Total assets 80.9 68.5 7 80.4 84.7 Equity 53.8 47.7 51.7 54.5 57.1 Minorities Total equity 53.8 47.7 51.7 54.5 57.1 LT financial liabilities Pension provisions 2.2 3.1 3.7 4.3 Other LT liabilities 1.0 Non-current liabilities 2.2 3.1 3.7 5.0 6.3 ST financial liabilities Payables & Advances 10.5 7.3 10.2 11.3 12.4 Other ST liabilities 14.4 10.3 10.4 10.6 10.9 Current liabilities 24.9 17.6 20.6 21.9 23.3 Total liabilities 80.9 68.5 7 81.4 86.7 Cash Flow EURm EBIT 2.6-5.0 0.3 3.1 3.5 Depreciation 1.0 2.1 1.2 1.3 1.3 Other non-cash items 2.6-1.6 5.1 1.3 1.3 Cash taxes -0.2-0.7-1.3-1.0-1.1 Cash earnings 6.1-5.2 5.3 4.7 5.0 Change in NWC 4.1 1.2-1.8-0.3-0.3 CF from operations 10.2-3.4 4.4 4.7 Capex -0.5-1.3-0.7-0.8-0.9 Other investm./divestm. -1.7 0.1 5.6 CF from investing -2.2-1.2 4.9-0.8-0.9 CF from fin. and other -0.6-4.4 0.6-0.7-1.5 Change in cash 7.4-9.6 8.9 2.9 2.3 Segments and adjusted earnings EURm BioDiesel plants 27.8 10.2 23.0 30.5 3 Fine-vacuum dist. 7.2 6.5 6.8 7.0 BioGas plants 0.5 0.2 7.0 3.3 3.5 Sales 35.4 16.3 36.5 40.5 44.5 Biodiesel plants -2.8 0.4 2.4 2.7 Magin 7.1% -27.8% 1.7% 8.0% 8.0% Fine-vacuum dist. 0.3 0.2 0.5 0.6 Margin % 0.7% 3.5% 7.0% 8.0% BioGas plants 0.3-2.3-0.3 0.2 0.2 Margin 74.7% n.m. -4.3% % 7.0% EBIT 2.6-5.0 0.3 3.1 3.5 Margin 7.3% -30.9% 0.9% 7.7% 7.9% Valuation multiples Share price 7.31 11.86 10.80 10.80 10.80 x No of shares (m) 3.8 3.8 3.8 3.8 3.8 Market Capitalisation 27.8 45.1 41.0 41.0 41.0 + Net financial debt -45.1-36.2-45.1-48.0-50.4 + Pension provision 2.2 3.1 3.7 4.3 + Minorities - Participations -12.8-14.3-7.7-7.7-7.7 Enterprise Value -27.9-2.3-8.1-10.7-12.7 Sales 35.4 16.3 36.5 40.5 44.5 Adj. EBITDA 3.6-2.9 1.6 4.4 4.9 Adj. EBIT 2.6-5.0 0.3 3.1 3.5 Adj. Net profit a.m. 3.2-1.7 3.1 3.4 EV / Sales -0.8-0.1-0.2-0.3-0.3 EV / EBITDA -7.8 0.8-5.2-2.4-2.6 EV / EBIT -10.8 0.5-24.6-3.4-3.6 PE 8.6-26.3 10.3 13.3 1 Key operational indicators Equity ratio 66.5% 69.7% 68.1% 66.9% 65.8% Gearing Asset turnover 0.4 0.2 0.5 0.5 0.5 NWC / sales 4.6% 3.6% 6.7% 6.7% 6.7% Payable days outstanding 108.2 163.1 101.8 101.8 101.8 Receivable days outstanding 117.9 159.5 111.0 111.0 111.0 Fix operating assets 10.9 1 10.5 10.6 11.2 NWC 1.6 0.6 2.4 2.7 3.0 Capital employed 12.5 10.6 12.9 13.3 14.1 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 -

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