Sale of Protomaster has been concluded. TP slightly reduced, Neutral maintained

Size: px

Start display at page:

Download "Sale of Protomaster has been concluded. TP slightly reduced, Neutral maintained"

Coral Goodman
6 years ago
Views:

1 G E S C O A G Next Cap x Page 1/5 Equity flash Target price lowered Holding companies Germany Neutral Target EUR vs EUR Price (12/12/2017) : EUR Upside : -11 % Est.chg 2018e 2019e EPS -51.0% 0.0% #One-off charge to burden results, but we still expect a strong operating performance Publication date :46 Writing date : Sep 14Dez 14Mrz 15Jun 15Sep 15Dez 15Mrz 16Jun 16Sep 16Dez 16Mrz 17Jun 17Sep 17Dez 17 Source : Oddo BHF Securities, Fininfo Capital GSC1 GY GSC1n.DE Relative to Capital Goods (Rebased) Market Cap (EURm) 341 Enterprise value (EURm) Extrema 12 months Free Float (%) 71.9 Performance (%) 1m 3m 12m Absolute Perf. rel. Country Index Perf. rel. Capital Goods P&L 03/18e 03/19e 03/20e Sales (EURm) EBITDA (EURm) Current EBIT (EURm) Attr. net profit (EURm) Adjusted EPS (EUR) Dividend (EUR) P/E (x) P/B (x) Dividend Yield (%) FCF yield (%) ns EV/Sales (x) EV/EBITDA (x) EV/Current EBIT (x) Gearing (%) Net Debt/EBITDA(x) Next Events Q3 Results FY Results Q1 Results Annual General meeting 455 Investigations by Germany s Federal Cartel Office to result in one-off expenses in , amount uncertain Yesterday (12 December), GESCO announced that the Federal Cartel Office is investigating Dörrenberg Edelstahl GmbH, a 90% subsidiary of, as part of its investigation of manufacturers of steel products on suspicion of anti-competitive agreements and their actions in the years 2003 to The Federal Cartel Office has informed Dörrenberg that it might refrain from initiating fine proceedings if Dörrenberg pays a high single-digit m amount. Management will examine this option in detail and consult with its legal advisors, and then decide on how to proceed. The outcome is currently open. Obligations in connection with this legal dispute would negatively impact earnings at Dörrenberg Edelstahl GmbH and thus GESCO s group earnings as well. Trimming our reported EBIT estimate by 9.8m, our adjusted EBIT estimate remains unchanged GESCO stated that it will take the effects of this issue into account in its financial statements, but that the economic impact is currently not concretely quantifiable. We assume GESCO will book the expenses related to this issue in this year s accounts either i) directly for the payment or ii) as a provision for a later payment or the expected litigation costs. In our model, we assume an expense of 9.8m regardless of which of the above options GESCO choses. We thus lower our reported EBIT estimate from 34.2m to 24.4m, but leave our adjusted EBIT estimate unchanged at 34.2m. Additionally, we assume the payment will not be tax-deductible, leading to a total tax rate of >50% for Since 10% of the results from Dörrenberg are attributable to minority interests, we slightly lower our estimate for the minority interests in the group s net result. Overall, our adjustments lead to a decline in our EPS estimate of 51%. For the following years we leave our estimates unchanged. Sale of Protomaster has been concluded On 8 December 2017 GESCO had already announced that it sold its stake in Protomaster GmbH as part of an MBO. As we had assumed in our estimates, the transaction has no impact on GESCO s guidance. In , GESCO incurred a negative one-off effect of ~ 6.6m (both before and after tax) from the impairment of fixed assets due to its decision to sell Protomaster. As we have already stated in previous updates, the resulting sales decline is more than offset by the December 2016 acquisition of Pickhardt & Gerlach Group, a leading strip steel processor with sales of ~ 30m. This switch in the portfolio resulted in a clear improvement in GESCO s risk/return profile, in our view. TP slightly reduced, Neutral maintained Our updated DCF model renders a fair value per share of (old: 31.11). We accordingly reduce our target price from to That its hitherto very successful will be tarnished by such an extraordinary charge, is a bitter pill for GESCO to swallow. We emphasise, however, that the charge will be one-off and non-operational in nature. The company told us that there are no signs that further fiscal years of Dörrenberg Edelstahl or other subsidiaries might also be subject to investigations of the Federal Cartel Office. We maintain our Neutral rating on the share. Martin Decot (Analyst) +49 (69) martin.decot@bhf-bank.com Conflict of interests: ODDO BHF CORPORATES & MARKETS, a division of ODDO BHF SCA, limited sharepartnership - Bank authorised by ACPR. ODDO BHF and/or one of its subsidiaries could be in a conflict of interest situation with one or several of the groups mentioned in this publication. Please refer to the conflict of interests section at the end of this document.

2 8 Page 2/5 Figure 1: DCF model PHASE 1 PHASE 2 PHASE 3 EURm 2017/18e 2018/19e 2019/20e 2020/21e 2021/22e 2022/23e 2023/24e 2024/25e 2025/26e 2026/27e Sales YoY grow th 10.3% 0.4% 1.6% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% EBIT EBIT margin 4.6% 6.8% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% Income tax on EBIT Depreciation and amortisation Change in net working capital Net capital expenditure incl. acquisitions Free cash flow Present values Present value Phase Risk free rate 0.78% Target equity ratio 70.0% Present value Phase Equity risk premium 7.23% Beta (fundamental) 1.2 Present value Phase Debt risk premium 2.00% WACC 7.2% Total present value Tax shield 31.8% Terminal growth 1.5% + Liquid funds* Financial debt / long-term provisions* Source: Company data, Oddo BHF Securities Sensitivity analysis Terminal growth (Phase 3) - Minority interests (est. market value) % 1.0% 1.5% 2.0% 2.5% WACC 6.2% % Fair value of equity % Number of shares (m) % Fair value per share (EUR) %

3 Page 3/5 GSC1n.DE GSC1 GY Neutral Price 34.23EUR Holding companies Germany Upside % TP 30.40EUR PER SHARE DATA (EUR) 03/13 03/14 03/15 03/16 03/17 03/18e 03/19e 03/20e Adjusted EPS Reported EPS Growth in EPS(%) -14.9% -13.5% -31.8% 30.6% -10.5% -42.3% ns 13.2% Net dividend per share FCF to equity per share Book value per share Number of shares market cap Number of diluted shares VALUATION 03/13 03/14 03/15 03/16 03/17 03/18e 03/19e 03/20e 12m highest price m lowest price (*) Reference price Capitalization Restated Net debt Minorities (fair value) Financial fixed assets (fair value) Provisions Enterprise Value P/E (x) P/CF (x) Net Yield (%) 3.7% 3.0% 2.4% 2.8% 1.5% 0.9% 2.2% 2.5% FCF yield (%) 3.3% ns ns 0.8% 9.5% ns 4.5% 3.7% P/B incl. GW (x) P/B excl. GW (x) ns ns ns ns ns EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) (*) historical average price PROFIT AND LOSS (EURm) 03/13 03/14 03/15 03/16 03/17 03/18e 03/19e 03/20e Sales EBITDA Depreciations Current EBIT Published EBIT Net financial income Corporate Tax Net income of equity-accounted companies Profit/loss of discontinued activities (after tax) Minority interests Attributable net profit Adjusted attributable net profit BALANCE SHEET (EURm) 03/13 03/14 03/15 03/16 03/17 03/18e 03/19e 03/20e Goodwill Other intangible assets Tangible fixed assets WCR Financial assets Ordinary shareholders equity Minority interests Shareholders equity n-current provisions Net debt CASH FLOW STATEMENT (EURm) 03/13 03/14 03/15 03/16 03/17 03/18e 03/19e 03/20e EBITDA Change in WCR Interests & taxes Others Operating Cash flow CAPEX Free cash-flow Acquisitions / disposals Dividends Net capital increase Others Change in net debt GROWTH MARGINS PRODUCTIVITY 03/13 03/14 03/15 03/16 03/17 03/18e 03/19e 03/20e Sales growth 6.0% 2.9% -0.4% 9.4% -2.3% 10.3% 0.4% 1.6% Lfl sales growth Current EBIT growth -4.5% -14.3% -14.7% 15.2% -29.6% 10.3% 48.7% 11.7% Growth in EPS(%) -14.9% -13.5% -31.8% 30.6% -10.5% -42.3% ns 13.2% Net margin 4.7% 4.0% 2.7% 3.3% 3.0% 1.7% 3.8% 4.2% EBITDA margin 11.8% 10.7% 10.2% 10.8% 10.3% 9.7% 12.0% 12.5% Current EBIT margin 8.5% 7.1% 6.0% 6.4% 4.6% 4.6% 6.8% 7.5% CAPEX / Sales -5.1% -6.0% -6.9% -5.0% -4.2% -4.0% -4.2% -4.5% WCR / Sales 23.5% 24.7% 26.4% 26.9% 27.9% 27.3% 27.2% 27.4% Tax Rate 32.8% 31.9% 42.4% 35.8% 49.3% 50.4% 32.3% 31.8% rmative tax rate 32.8% 31.9% 42.4% 35.8% 49.3% 50.4% 32.3% 31.8% Asset Turnover ROCE post-tax (normative tax rate) 12.4% 9.4% 6.2% 7.3% 3.7% 3.7% 7.6% 8.6% ROCE post-tax hors GW (normative tax rate) 13.0% 9.9% 6.5% 7.7% 3.9% 4.0% 8.0% 9.1% ROE 14.0% 11.4% 7.4% 9.3% 7.6% 4.5% 9.5% 10.0% DEBT RATIOS 03/13 03/14 03/15 03/16 03/17 03/18e 03/19e 03/20e Gearing 29% 36% 46% 44% 43% 40% 27% 18% Net Debt / Market Cap Net debt / EBITDA EBITDA / net financial charges Source: ODDO BHF Securities, Fininfo

4 Page 4/5 Valuation method Our target prices are established on a 12-month timef rame and we use three v aluation methods to determine them. First, the discounting of av ailable cash f lows using th e discounting parameters set by the Group and indicated on Oddo BHF' website. Second, the sum -of -the-parts method based on the most pertinent f inancial aggregate depending on the sector of activ ity. Third, we also use the peer comparison method which f acilitates an ev aluation of the company relat iv e to similar businesses, either because they operate in identical sectors (and are theref ore in competition with one another) or because they benef it f rom comparable f inancial dy namics. A mixtu re of these v aluation methods may be used in specif ic instances to more accurately ref lect the specif ic characteristics of each com pany cov ered, thereby f ine-tuning its ev aluation. Sensitivity of the result of the analysis/ risk classification: The opinions expressed in the f inancial analy sis are opinions as per a particular date, i.e. the date indicated in the f inanc ial analy sis. The recommendation (cf. explanation of the recommendation sy stematic) can change owing to unf oreseeable ev ents which may, f or instance, hav e repercussions on both the c ompany and on the whole industry. Our stock market recommendations Our stock market recommendations ref lect the RELATIVE perf ormance expected f or each stock on a 12-month timef rame. Buy : perf ormance expected to exceed that of the benchmark index, sectoral (large caps) or other (small and mid caps). Neutral: perf ormance expected to be comparable to that of the benchmark index, sectoral (large caps) or other (small and mid caps). Reduce: perf ormance expected to f all short of that of the benchmark index, sectoral (large caps) or other (small and mid caps ). The prices of the financial instruments used and mentioned in this document are the closing prices. All publications by Oddo BHF concerning the companies covered and mentioned in this document are available on the research si te: Recommendation and target price changes history over the last 12 months for the company analysed in this report Date Reco Price Target (EUR) Price (EUR) Analyst Neutral Martin Decot Neutral Martin Decot Neutral Martin Decot Neutral Martin Decot Neutral Martin Decot In accordance with Article 20 of European Regulation. 596/2014 (Market Abuse Regulation), a list of all recommendations on any f inancial instrument or issuer that hav e been disseminated ov er the past twelv e months is av ailable by clicking on the f ollowing link Web lien Recommendation split Buy Neutral Reduce Our whole cov erage (415) 48% 41% 11% Liquidity prov iders cov erage (133) 41% 51% 8% Research serv ice cov erage (57) 53% 46% 2% Inv estment banking serv ices (51) 69% 25% 6% Risk of conflict of interest: Investment banking and/or Distribution Has Oddo BHF, managed or co-managed in the past 12 months a public of f ering of securities f or the subject company /ies? Has Oddo BHF, receiv ed compensation f or inv estment banking serv ices f rom the subject company /ies in the past 12 months or expects to receiv e or intends to seek compensation f or inv estment banking serv ices f rom the subject company /ies in the last 12 months? Research contract between Oddo group & the issuer Oddo BHF and the issuer hav e agreed that Oddo BHF will produce and disseminate inv estment recommendations on the said issuer as a serv ice to the issuer Liquidity provider agreement and market-making At the date of the distribution of this report, does Oddo BHF,act as a market maker or has Oddo BHF, signed a liquidity prov ider agreement with the subject company /ies? Yes Significant equity stake Does Oddo BHF, own 5% or more of any class of common equity securities of the subject company /ies? Does the subject company benef icially own 5% or more of any class of common equity of Oddo BHF or its af f iliates? Disclosure to Company Has a copy of this report ; with the target price and/or rating remov ed, been presented to the subject company /ies prior to its distribution, f or the sole purpose of v erif y ing the accuracy of f actual statements? Hav e the conclusions of this report been amended f ollowing disclosure to the company /ies and prior its distribution? Additional material conflicts Is Oddo BHF, aware of any additional material conf lict of interest? Personal conflicts of interest Hav e those responsible f or the draf ting of the present document acquired securities f rom the issuer concerned by the present f inancial analy sis? Hav e those responsible f or the draf ting of the present document receiv ed remuneration directly linked to inv estment f irm serv ice transactions or any other kind of transaction they carry out or any trading commissions they, or any legal person who is part of the same group, receiv e? Statement of conflict of interests of all companies mentioned in this document may be consulted on Oddo BHF:

5 Page 5/5 Disclaimer: Disclaimer f or Distribution by ODDO BHF SCA to n-united States Inv estors: This research publication is produced by ODDO BHF Corporate & Markets, a div ision of ODDO BHF SCA ( ODDO ), which is licensed by the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and regulated by the Autorité des Marchés Financiers ( AMF ). The research, when distributed outside of the U.S., is intended exclusiv ely for non-u.s. customers of ODDO and cannot be div ulged to a third-party without prior written consent of ODDO. This document is not and should not be construed as an of f er to sell or the solicitation of an of f er to purchase or sub scribe f or any inv estment. This research has been prepared in accordance with regulatory prov isions designed to promote the independence of inv estment research. Chinese walls (inf ormation barriers) hav e been implemented to av ert the unauthorized dissemination of conf idential inf ormation and to prev ent and manage situations of conf lict of interest. This research has been prepared in accordance with French regulatory prov isions designed to promote the independence of inv estment research. The recommendation presented in this document is rev iewed and updated at least quarterly f ollowing each Quarterly Report published by the issuer that is the subject of this Research Report. At the time of publication of this document, ODDO and/or one of its subsidiaries may hav e a conf lict of interest with the iss uer(s) mentioned. While all reasonable ef f ort has been made to ensure that the inf ormation contained is not untrue or misleading at the time of publication, no representation is made as to its accuracy or completeness and it should not be relied upon as such. Past perf ormances of f er no guarantee as to f uture perf ormances. All opinions expressed in the present document ref lect the current context which is subject to change without notice. The v iews expressed in this Research Report accurately ref lect the analy st s personal v iews about the subject securities and/or issuers and no part of his compensation was, is, or will be directly or indirectly related to the specif ic v iews contained in the Research Report. Th is Research Report does not constitute a personal recommendation or take into account the particular inv estment objectiv es, financial situations, or needs of indiv idual clients. Clients should consider whether any adv ice or recommendation in this research is suitable f or their particular circumstances and, if appropriate, seek prof essional adv ice, including tax adv ice. This Research Report is f or institutional inv estors only. It may not contain inf ormation necessary f or others to make inv estment decisions. Consult y our f inancial adv iser or an inv estment prof essional if y ou are not an institutional inv estor. Disclaimer f or Distribution by Oddo New York to United States Inv estors: This Research Report is produced by ODDO BHF Corporate & Markets, a div ision of ODDO. This research is distributed to U.S. in v estors exclusiv ely by ODDO BHF New York Corporation ( ONY ), MEMBER: FINRA/SIPC, and is intended exclusiv ely for U.S. customers of ONY and cannot be div ulged to a third-party without prior written consent of ONY. This document is not and should not be construed as an of f er to sell or the solicitation of an of f er to purchase or subscribe f or any inv estment. This research has been prepared in accordance with regulatory prov isions designed to promote the independence of inv estment research. Chinese walls (inf ormation barriers) hav e been implemented to av ert the unauthorized dissemination of conf idential inf ormation and to prev ent and manage situations of conf lict of interest. This research has been prepared i n accordance with French regulatory prov isions designed to promote the independence of inv estment research. The recommendation pres ented in this document is rev iewed and updated at least quarterly f ollowing each Quarterly Report published by the issuer that is the subject of this Research Report. At the time of publication of this document, ODDO, and/or one of its subsidiaries may hav e a conf lict of interest with the issuer(s) mentioned. While all reasonable ef f ort has been made to ensure that the inf ormation contained is not untrue or misleading at the time of publication, no representation is made as to its accuracy or completeness and it should not be relied upon as such. Past perf ormances of f er no guarantee as to f uture perf ormances. All opinions expressed in the present document ref lect the current context which is subject to change without notice. The v iews expressed in this Research Report accurately ref lect the analy st s personal v iews about the subject securities and/or issuers and no part of his compensation was, is, or will be directly or indirectly related to the specif ic v iews contained in the Research R eport. This Research Report does not constitute a personal recommendation or take into account the particular inv estment objectiv es, financial situations, or needs of indiv idual clients. Clients should consider whether any adv ice or recommendation in this research is suitable f or their particular circumstances and, if appropriate, seek prof essional adv ice, including tax adv ice. This Research Report is f or institutional inv estors only. It may not contain inf ormation necessary f or others to make inv estm ent decisions. Consult y our f inancial adv iser or an inv estment prof essional if y ou are not an institutional inv estor. Rule 15a-6 Disclosure: Under Rule 15a-6(a)(3), any transactions conducted by ODDO, and/or one of its subsidiaries with U.S. persons in the securities described in this f oreign research must be ef f ected through ONY. As a member of FINRA, ONY has rev iewed this material f or distribution to U.S. persons as required by FINRA Rules 2241(h) applicable to dissemination of research produced by its af f iliate ODDO. FINRA Disclosures: Neither ONY, ODDO, nor ODDO BHF Corporate & Markets benef icially owns 1% or more of any c lass of common equity securities of the subject company. The research analy st of ODDO BHF Corporate & Markets, at the time of publication of this research report, is not aware, nor does he or she know or hav e reason to know of any actual, material conf lict of interest of himself or herself, ODDO, ODDO BHF Corporate & Markets or ONY, except those mentioned in the paragraph entitled Risks of Conf licts of Interest. ODDO BHF Corporate & Markets or ODDO may receiv e or seek compensation f or inv estment banking serv ices in the next 3 months f rom the subject company of this Research Report, but ONY would not participate in those arrangements. Neither ONY, ODDO, ODDO BHF Corporate & Markets has receiv ed compensation f rom the subject company in the past 12 months f or prov iding inv estment banking serv ices except those mentioned in the paragraph of Risks of Conf lict of Interest. Neither ONY, ODDO, ODDO BHF Corporate & Markets has managed or co-managed a public of f ering of securities f or the subject company in the past 12 months except those mentioned in the paragraph of Risk of Conf lict of Interest. ONY does not make (and nev er has made) markets and, accordingly, was not making a market in the subject company 's securitie s at the time that this research report was published. Regulation AC: ONY is exempt f rom the certif ication requirements of Regulation AC f or its distribution to a U.S. person in th e United States of this Research Report that is prepared by an ODDO BHF Corporate & Markets research analy st because ODDO has no of f icers or persons perf orming similar f unctions or employ ees in common with ONY and ONY maintains and enf orces written policies and procedures reasonably designed to prev ent it, any controlling persons, of f ice rs or persons perf orming similar f unctions, and employ ees of ONY f rom inf luencing the activ ities of the third party research analy st and the content of research reports prep ared by the third party research analy st. Contact Inf ormation of f irm distributing research to U.S. inv estors: ODDO BHF New York Corporation, MEMBER: FINRA/SIPC, is a wholly owned subsidiary of ODDO BHF SCA; Philippe Bouclainv ille, President (pbouclainv ille@oddony.com) 150 East 52nd Street New York, NY

Very solid Q3; excellent story, but priced in; TP upped to 60.00; downgrade to neutral. Q3 2016: Very solid quarter, better than expected

Very solid Q3; excellent story, but priced in; TP upped to 60.00; downgrade to neutral. Q3 2016: Very solid quarter, better than expected B a sl er A G # $T ypcap$ 1576 14 1 1 x 6495 2 Page 1/6 First Take Reco. lowered Neutral vs Buy Electronics Germany Neutral Target price : 60.00 EUR vs 52.00 EUR Price (11/01/2016) : 58.04 EUR Upside :