giuseppe.d'orta
Forumer storico
Qualche settimana fa, su FOL, è stato postato un report proveniente da "fonte riservata" e che riguarda Enertad.
Se aspetto di avere tempo per la traduzione finisce che non lo copio più, quindi lo posto contando sulla...bontà d'animo...di qualcuno che traduca almeno le parti principali.
Il prezzo-obiettivo attribuito alla società è 5.90
• ENERTAD is the result of the divorce between Falck and Agarini families, which were partners in CMI. In 2002 the CMI’s spin-off created two companies: ENERTAD, held by Agarini, and ACTELIOS, held by Falck.
• In August 2002, Agarini merges into ENERTAD his Steel Distribution Activities.
• In June 2003, ENERTAD launches a capital increase and a Convertible Bond.
WTE
• ENERTAD is active in the Waste to Energy (WTE) business, that is the collection of waste and rubbish and their transformation into energy. This could be made with particular power plants. On average a 10MW power plant is able to burn 10,000ton/year of waste (the quantity/year produced by an Italian medium town). The cost of such a power plant is considerably higher than a normal one: around Euro 4m/MW or 8x higher. However, a 10MW plant should generate a turnover of Euro 16-17m with a 60-65% Ebitda margin during its first 8 years of life (thanks to CIP6 incentives). After the CIP6 period, we estimate turnover should decrease by 50% and Ebitda margin fall to 40% of turnover. The pay-back of the investment is estimated lower than 4 years. Note that the higher profitability of such a plant is due to the fact that instead of paying for fuel, it is paid for it as normal waste disposal tariffs are charged.
• ENERTAD is still at a start-up stage. Currently its installed capacity in WTE is 20MW (which gave their contribution in 2003 only for few months). The company should reach a planned capacity of 70MW by 2007.
WIND
• The company has recently changed its industrial plan due to a delay in the authorisation process for WTE plants and the willingness of the Italian Government to limit the installation of wind power plants in coming years. Therefore, ENERTAD decided to anticipate its investment in the wind power generation: around 200MW within the end of 2004. The cost of the investment is around Euro 1m/MW, but 200MW should generate a turnover of Euro 75-80m with an 85% Ebitda margin. Conservatively we currently estimate a contribution to consolidated Ebitda of Euro 40m. Note that differently by WTE, for which we need to wait around 18 months for cash generation, wind power plants (600-800 Kw each) are almost immediately cash generative. This means that first blades (maybe installed in mid-2004) will help to finance last blades.
• The current installed capacity is 12MW, which gave their contribution in 2003 only for few months.
STEEL DISTRIBUTION
• Steel distribution (stainless steel niche) is the core business of the Agarini family. We do not consider it very attractive, but this is a not risky activity and generates a stable cash flow (roughly Euro 12-14m per year), which is fundamental for the finance equilibrium of the company, as all the other activities are in a start-up stage with negative free cash flow.
ENVIRONMENTAL SERVICES
• ENERTAD manages an important rubbish dump which collect wastes from Naples area. Turnover in this business is Euro 12m with a 35% Ebitda margin.
• ENERATD has a Joint-Venture with Trenitalia (Italian Railway) for water treatment. Today this JV is a captive company, as its unique customer is Trenitalia itself, however, starting from 2006, it should operate also for third parties reaching a turnover of Euro 33m in 2008 with a 50% Ebitda margin.
OTHERS
• ENERTAD has a 33% stake in a project for the building of an 800MW turbogas power plant in Calabria (South of Italy). However, the aim of the company is to sell this stake gaining a capital gain and maintaining a small 5% stake.
• ENERTAD is also active in the collection of special and risky waste.
• ENERTAD has a 6.3% stake in Ansaldo Fuel Cell Spa (FINMECCANICA GROUP), and it could grow its stake to 23%. The company is currently developing experimental fuel cell power generators with a total capacity of 10MW.
FINANCIAL POSITION
• We estimate ENERTAD should invest in the period 2004-2007 Euro 430m, of which Euro 170m in 2004. The breakdown of investments should be Euro 200m for wind power generation, Euro 185m for WTE, Euro 35m for environmental services and only Euro 10m for steel distribution.
• We believe the company, after the Euro 31m capital increase of June 2003 (around 12.5m shares @ Euro 2.5 per share) and the issue of the Euro 76.5m convertible bond, should have the necessary financial resources to support this aggressive industrial plan, also thanks to its growing cash flow generation.
• Note that, for the nature of its businesses, we do not estimate any investment in NWC.
• All investments in power generation are financed by project financing for a percentage of around 60%, reducing risk for shareholder.
• We estimate Net Debt should increase from Euro 163m in 2002 to Euro 196m in 2003, peaking in 2006 to Euro 403m (excluding the conversion of the convertible bond). However, D/E ratio should achieve 1.6x in 2003, peaking to 2.4x in 2004 and 2005. In 2007, at the end of the industrial plan D/E should be 1.5x excluding the bond conversion, or 0.95x in the case of bond conversion.
TARGETS
• We estimate the company should realise a turnover of Euro 235m in 2003, achieving Euro 458m in 2007 (CAGR 03-07 +18%). The company’s 2007 target is higher than Euro 485m.
• Ebitda should be Euro 32m in 2003, achieving Euro 133m in 2007 (CAGR 03-07 +43%). The company’s 2007 target is around Euro 150m.
VALUATION
• Our target price is Euro 5.90 per share (+48% upside potential) on fully diluted basis. We achieve this target thanks to a DCF model with the following assumptions:
1. we have calculated specific cash flows for the period 2003-2007;
2. we have calculated specific cash flows for the period 2008-2010, assuming in 2008 a 40% decrease of CF due to the end of CIP6 incentives (however expected not earlier than 2010);
3. we assume a perpetual nominal growth rate of 2% (lower than GDP growth prospects);
4. we estimate maintenance investments of Euro 15m per year;
5. WACC of 7.25% is the result of a Cost of Equity of 10.90% (beta is 1.2x!) and of a Cost of Debt of 3.70% (after taxes). We assume a 50%-50% Debt-Equity long-term structure.
• At our target ENERTAD trades 8.2x 07-EV/Ebitda; 10.3x 07-EV/Ebit and 13.7x 07-P/E.
CATALYSTS
• According to Kyoto agreement, reduction in Europe of CO2 by 8% with respect to 1999 within 2010.
• In EU, doubling of power generation from renewable sources from 6% to 12%.
• In Italy, target of 25% of power generation from renewable sources within 2010, also thanks the system of “green certificates”.
Se aspetto di avere tempo per la traduzione finisce che non lo copio più, quindi lo posto contando sulla...bontà d'animo...di qualcuno che traduca almeno le parti principali.
Il prezzo-obiettivo attribuito alla società è 5.90
• ENERTAD is the result of the divorce between Falck and Agarini families, which were partners in CMI. In 2002 the CMI’s spin-off created two companies: ENERTAD, held by Agarini, and ACTELIOS, held by Falck.
• In August 2002, Agarini merges into ENERTAD his Steel Distribution Activities.
• In June 2003, ENERTAD launches a capital increase and a Convertible Bond.
WTE
• ENERTAD is active in the Waste to Energy (WTE) business, that is the collection of waste and rubbish and their transformation into energy. This could be made with particular power plants. On average a 10MW power plant is able to burn 10,000ton/year of waste (the quantity/year produced by an Italian medium town). The cost of such a power plant is considerably higher than a normal one: around Euro 4m/MW or 8x higher. However, a 10MW plant should generate a turnover of Euro 16-17m with a 60-65% Ebitda margin during its first 8 years of life (thanks to CIP6 incentives). After the CIP6 period, we estimate turnover should decrease by 50% and Ebitda margin fall to 40% of turnover. The pay-back of the investment is estimated lower than 4 years. Note that the higher profitability of such a plant is due to the fact that instead of paying for fuel, it is paid for it as normal waste disposal tariffs are charged.
• ENERTAD is still at a start-up stage. Currently its installed capacity in WTE is 20MW (which gave their contribution in 2003 only for few months). The company should reach a planned capacity of 70MW by 2007.
WIND
• The company has recently changed its industrial plan due to a delay in the authorisation process for WTE plants and the willingness of the Italian Government to limit the installation of wind power plants in coming years. Therefore, ENERTAD decided to anticipate its investment in the wind power generation: around 200MW within the end of 2004. The cost of the investment is around Euro 1m/MW, but 200MW should generate a turnover of Euro 75-80m with an 85% Ebitda margin. Conservatively we currently estimate a contribution to consolidated Ebitda of Euro 40m. Note that differently by WTE, for which we need to wait around 18 months for cash generation, wind power plants (600-800 Kw each) are almost immediately cash generative. This means that first blades (maybe installed in mid-2004) will help to finance last blades.
• The current installed capacity is 12MW, which gave their contribution in 2003 only for few months.
STEEL DISTRIBUTION
• Steel distribution (stainless steel niche) is the core business of the Agarini family. We do not consider it very attractive, but this is a not risky activity and generates a stable cash flow (roughly Euro 12-14m per year), which is fundamental for the finance equilibrium of the company, as all the other activities are in a start-up stage with negative free cash flow.
ENVIRONMENTAL SERVICES
• ENERTAD manages an important rubbish dump which collect wastes from Naples area. Turnover in this business is Euro 12m with a 35% Ebitda margin.
• ENERATD has a Joint-Venture with Trenitalia (Italian Railway) for water treatment. Today this JV is a captive company, as its unique customer is Trenitalia itself, however, starting from 2006, it should operate also for third parties reaching a turnover of Euro 33m in 2008 with a 50% Ebitda margin.
OTHERS
• ENERTAD has a 33% stake in a project for the building of an 800MW turbogas power plant in Calabria (South of Italy). However, the aim of the company is to sell this stake gaining a capital gain and maintaining a small 5% stake.
• ENERTAD is also active in the collection of special and risky waste.
• ENERTAD has a 6.3% stake in Ansaldo Fuel Cell Spa (FINMECCANICA GROUP), and it could grow its stake to 23%. The company is currently developing experimental fuel cell power generators with a total capacity of 10MW.
FINANCIAL POSITION
• We estimate ENERTAD should invest in the period 2004-2007 Euro 430m, of which Euro 170m in 2004. The breakdown of investments should be Euro 200m for wind power generation, Euro 185m for WTE, Euro 35m for environmental services and only Euro 10m for steel distribution.
• We believe the company, after the Euro 31m capital increase of June 2003 (around 12.5m shares @ Euro 2.5 per share) and the issue of the Euro 76.5m convertible bond, should have the necessary financial resources to support this aggressive industrial plan, also thanks to its growing cash flow generation.
• Note that, for the nature of its businesses, we do not estimate any investment in NWC.
• All investments in power generation are financed by project financing for a percentage of around 60%, reducing risk for shareholder.
• We estimate Net Debt should increase from Euro 163m in 2002 to Euro 196m in 2003, peaking in 2006 to Euro 403m (excluding the conversion of the convertible bond). However, D/E ratio should achieve 1.6x in 2003, peaking to 2.4x in 2004 and 2005. In 2007, at the end of the industrial plan D/E should be 1.5x excluding the bond conversion, or 0.95x in the case of bond conversion.
TARGETS
• We estimate the company should realise a turnover of Euro 235m in 2003, achieving Euro 458m in 2007 (CAGR 03-07 +18%). The company’s 2007 target is higher than Euro 485m.
• Ebitda should be Euro 32m in 2003, achieving Euro 133m in 2007 (CAGR 03-07 +43%). The company’s 2007 target is around Euro 150m.
VALUATION
• Our target price is Euro 5.90 per share (+48% upside potential) on fully diluted basis. We achieve this target thanks to a DCF model with the following assumptions:
1. we have calculated specific cash flows for the period 2003-2007;
2. we have calculated specific cash flows for the period 2008-2010, assuming in 2008 a 40% decrease of CF due to the end of CIP6 incentives (however expected not earlier than 2010);
3. we assume a perpetual nominal growth rate of 2% (lower than GDP growth prospects);
4. we estimate maintenance investments of Euro 15m per year;
5. WACC of 7.25% is the result of a Cost of Equity of 10.90% (beta is 1.2x!) and of a Cost of Debt of 3.70% (after taxes). We assume a 50%-50% Debt-Equity long-term structure.
• At our target ENERTAD trades 8.2x 07-EV/Ebitda; 10.3x 07-EV/Ebit and 13.7x 07-P/E.
CATALYSTS
• According to Kyoto agreement, reduction in Europe of CO2 by 8% with respect to 1999 within 2010.
• In EU, doubling of power generation from renewable sources from 6% to 12%.
• In Italy, target of 25% of power generation from renewable sources within 2010, also thanks the system of “green certificates”.
