Deoleo has chosen CVC

Transcription

1 EQUITIES FOOD & HPC DEOLEO UNDERPERFORM EUR0.43 TARGET PRICE EUR0.32 (DOWNSIDE 25%) Deoleo has chosen CVC 11 APRIL 2014 Francisco Ruiz (+34) CVC to acquire a 29.9% stake and launch a subsequent public offer Deoleo announced yesterday that it had chosen CVC s bid to proceed with the group s shareholder and debt restructuring. Although the details are still not fully clear, CVC will acquire the stakes held by Bankia (16.5%) and BMN (4.8%) and subscribe to a capital increase without pre-emptive rights to end up with a 29.99% stake. After this CVC will launch a takeover bid for 100% of the company at EUR0.38/s, 10% below yesterday s closing price (EUR0.42/s). Press reports state that some of the current shareholders will not subscribe to the bid (Hojiblanca, Kutxa, Unicaja and Caixa) so the most likely scenario is that the stock remains listed. Refinancing was also announced The deal implies the refinancing of the entire debt with a 7-year bullet loan, but no data regarding the new refinancing cost has been released. If the refinancing is not enough, CVC has agreed to make a rights issue that could amount up to EUR100m less the amount of the first capital increase. Q1 14 results: some signs of stabilisation Sales decreased 17% due to the pressure from low cost producers taking advantage of the drop in raw material prices. Past restructuring efforts led to a 390bp increase in the EBITDA margin vs Q1 13, but a bp decrease vs Q3 13 and Q4 13. Net profit was 17% lower and net debt increased by EUR33m due to the increase in working capital, as we anticipated in Q4. Conclusion We do not have enough data to be precise in the new valuation (price of the capital increase, new refinancing cost). On the positive side OLE has been able to refinance the debt and find a strong partner for the future (with a guarantee of further financing if needed). However, a capital increase at the same price as the bid would dilute EPS by c.4% in 2014 on our estimates. A second capital increase could further weigh on EPS, while improving the group s capital structure and risk profile. The results point to stabilising margins, higher working capital requirements and high business volatility due to tough competition. With the data we have we maintain our Underperform rating. Price (10 April 2014) EUR0.43 Performance (1) 1w 1m 3m 12m Market cap () 491 Absolute(%) 5 2 (10) 60 Free float () 186 Rel. Food & HPC(%) 3 (1) (14) 54 EV () 914 Rel. MSCI SMID(%) 7 3 (12) 28 3m avg volume () 2.5 Reuters / Bloomberg OLEO.MC / OLE SM Country / Sub Sector Spain / Food Products Please refer to important disclosures at the end of this report Financials 12/12 12/13 12/14e 12/15e Valuation metrics (2) 12/12 12/13 12/14e 12/15e EPS, Adjusted (EUR) P/E (x) EPS, IBES (EUR) (0.24) Net yield (%) Net dividend (EUR) FCF yield (%) (0.8) 7.1 EV/Sales (x) Sales () EV/EBITDA (x) EBITA, Adj. () EV/EBITA (x) Net profit, Adj.() EV/CE (x) ROCE (%) Net Debt/EBITDA, Adj. (x) Source: Exane BNPP (estimates), Thomson Reuters (consensus) (1) In listing currency, with dividend reinvested (2) Yearly average prices for FY to end- 12/12, 12/13

2 Figure 1: Current shareholding structure Bankia 17% Other Shareholders 44% BMN 5% Unicaja 11% Ebro FoodsKutxa Bank 3% 5% Caixabank 5% Hojiblanca (Dcoop) 10% Source: Company, Exane BNP Paribas Figure 2: We estimate 4% dilution Var previous Price of Right issue (EUR/s) 0.38 New number of shares % Total size () 38.1 Impact of lower financial costs () 1.5 New Net profit 2014 () % EPS14 (EUR/s) % Source: Exane BNP Paribas estimates Figure 3: Q1 14 results Q3 12 9M 12 Q Q1 13 Q2 13 H1 13 Q3 13 9M 13 Q4 13A 2013A Q1 14 Sales % change Rec. EBITDA EBITDA mg (%) EBITDA growth Net Profit % change -13.8% -68.4% n.m n.m n/a n.m n.m n.m n.m n.m n.m -17.5% Source: Exane BNP Paribas estimates Exane BNP Paribas Research Deoleo 11 April 2014 page 2

3 Forthcoming events Date Event 27 May 2014 AGM 30 Jul H Results 7 Nov Q Results Analyst certification: I hereby certify that all of the views expressed in this report accurately reflect my personal and independent views about the subject theme(s), company or companies, and its or their securities. Francisco Ruiz, Exane SA. No part of the research analyst's compensation was, is, or will be, directly, or indirectly, related to the specific recommendations or views expressed by the research analyst in this research report. This document contains material that has been prepared by the Exane entity, or entities, identified in the Analyst Certification above. Exane SA is regulated by the Autorité des Marchés Financiers (AMF). Exane Limited is authorised and regulated by the Financial Conduct Authority (FCA). Commitment of transparency (see for details. Complete disclosures available on including a specific disclaimer concerning analysts location. Exane is independent of BNP Paribas (BNPP) and the agreement between the two companies is structured to guarantee the independence of Exane's research, published under the brand name Exane BNP Paribas. Nevertheless, to respect a principle of transparency, we separately identify potential conflicts of interest with BNPP regarding the company/(ies) covered by this research document. Exane Amended after Disclosure to company Additional material conflicts Investment Liquidity Corporate Analyst s Equity stake Disclosure to Distributor banking provider links personal interest company US Law French Law NO NO NO NO NO NO NO NO NO NO Source: Exane BNP Paribas Potential conflicts of interest: None. Source: BNP Paribas Exane BNP Paribas Research Deoleo 11 April 2014 page 3

4 DEOLEO (Underperform) Price at 10 Apr. 14 / 12m Target Price EUR0.43 / EUR % Reuters / Bloomberg: OLEO.MC / OLE SM Analyst: Francisco Ruiz (+34) Food Products Food & HPC - Spain Com pany Highlights 10.0 Enterprise value 914 Market capitalisation Free float 186 3m average volume Performance (*) 1m 3m 12m Absolute 2% (10%) 60% Rel. Sector (1%) (14%) 54% 1.0 Rel. MSCI SMID 3% (12%) 28% 12m Hi/Lo (EUR) : % / % 0.5 CAGR 2005/ /2015 Target Price EPS restated (**) NC 8% 0 CFPS (13%) 6% Price Relative to MSCI SMID Price (yearly avg from Dec. 04 to Dec. 13) PER SHARE DATA (EUR) Dec. 04 Dec. 05 Dec. 06 Dec. 07 Dec. 08 Dec. 09 Dec. 10 Dec. 11 Dec. 12 Dec. 13 Dec. 14e Dec. 15e No of shares year end, basic, (m) Avg no of shares, diluted, excl. treasury stocks (m) EPS, company definition (0.84) (0.66) (0.28) 0.00 (0.24) EPS restated, fully diluted 0.09 (0.00) 0.03 (0.02) (0.12) (0.04) % change NC NS NS NS (406.6%) 67.6% NS (67.8%) (81.5%) 203.3% 71.3% 8.4% CFPS (1.00) (0.95) (0.32) Book value (BVPS) (a) Net dividend STOCKM ARKET RATIOS De c. 04 De c. 05 De c. 06 De c. 07 De c. 08 Dec. 09 Dec. 10 Dec. 11 Dec. 12 Dec. 13 Dec. 14e Dec. 15e P / E (P/ EPS restated) 30.6x NC NS NC NC NC 10.0x 14.9x 57.0x 17.5x 12.9x 11.9x P / E relative to MSCI Small Cap 167% NC NS NC NC NC 10% 43% 287% 89% 76% 84% P / CF 12.9x 34.7x 56.0x 38.4x NC NC NC 7.1x 3.9x 6.9x 8.7x 8.2x FCF yield 1.1% (9.0%) 13.3% (2.0%) (26.1%) 6.2% (12.8%) 36.8% 30.3% 41.0% (0.8%) 7.1% P / BV PS 1.42x 2.32x 2.71x 3.22x 5.82x 2.28x 1.32x 0.65x 0.66x 0.62x 0.74x 0.70x Net yield 0.0% 0.3% 0.1% 0.1% 0.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Pay out 0.0% NC 32.5% NC NC 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% EV / Sales 0.77x 1.05x 1.45x 2.02x 2.72x 1.58x 0.79x 1.19x 1.14x 0.97x 1.13x 1.05x EV / Restated EBITDA 12.0x 27.8x 31.2x 33.8x 93.3x 20.0x 9.6x 15.7x 10.8x 10.1x 9.7x 8.9x EV / Restated EBITA 17.0x 46.9x 46.2x 46.0x NS 27.0x 13.5x 21.8x 13.8x 13.1x 12.1x 11.0x EV / OpFCF 30.3x NS 8.4x 67.1x NS 16.3x 33.7x 5.5x 6.7x 4.5x 26.9x 12.0x EV / Capital employed (incl. gross goodw ill) 1.0x 1.3x 1.6x 1.8x 1.6x 1.2x 0.5x 0.8x 0.8x 0.7x 0.7x 0.7x ENTERPRISE VALUE ( ) 778 1,337 2,158 2,542 3,420 2, , Market cap 558 1,006 1,615 1,911 1, Adjusted net debt ,798 1, Other liabilities and commitments Revalued minority interests Revalued investments P & L HIGHLIGHTS ( ) Dec. 04 Dec. 05 Dec. 06 Dec. 07 Dec. 08 Dec. 09 Dec. 10 Dec. 11 Dec. 12 Dec. 13 Dec. 14e Dec. 15e Sales 1, , , , , , , Restated EBITDA (b) Depreciation (18.8) (19.6) (22.4) (19.9) (19.7) (27.7) (24.2) (20.3) (19.6) (18.0) (18.4) (18.7) Restated EBITA (b) (**) Reported operating profit (loss) (191.7) (101.0) (29.3) 22.2 (134.2) Net financial income (charges) (14.9) (21.6) (39.4) (48.5) (130.7) (130.8) (29.9) (31.2) (29.0) (23.8) (21.4) (20.7) Aff iliates (0.6) (0.7) (0.2) (1.2) (1.9) 0.1 (0.5) (0.0) Other Tax (3.1) (10.1) (82.4) (16.4) (16.3) (17.7) Minorities (0.7) (0.0) (1.0) (2.3) (2.1) 1.0 (0.6) (0.0) (0.0) (0.0) (0.0) (0.0) Goodw ill amortisation (0.3) Net attributable profit reported (192.8) (177.4) (50.2) 1.1 (245.6) Net attributable profit restated (c) 17.9 (0.6) 7.4 (5.7) (28.4) (10.3) CASH FLOW HIGHLIGHTS ( ) Dec. 04 Dec. 05 Dec. 06 Dec. 07 Dec. 08 Dec. 09 Dec. 10 Dec. 11 Dec. 12 Dec. 13 Dec. 14e Dec. 15e EBITDA (reported) (172.0) (73.3) (5.1) EBITDA adjustm ent (b) (12.9) (1.8) (3.6) (47.2) Other items (0.4) (2.1) (116.8) (260.7) (94.9) Change in WCR 1.6 (59.8) (43.2) (202.5) (40.2) (4.6) Operating cash flow 65.7 (13.8) (282.7) Capex (40.1) (60.7) (46.6) (46.1) (37.9) (9.3) (4.7) (10.1) (15.4) (4.8) (19.9) (20.7) Operating free cash flow (OpFCF) 25.6 (74.5) (320.5) Net financial items + tax paid (19.4) (17.1) (37.7) (77.5) (149.4) (89.7) (49.1) (16.0) (29.9) (24.5) (37.7) (38.4) Free cash flow 6.2 (91.6) (39.6) (470.0) 41.2 (24.9) (3.7) 34.7 Net financial investments & acquisitions 10.4 (37.8) (185.3) 10.7 (522.2) (8.1) Other 0.0 (153.6) (259.2) (47.6) (16.0) (89.9) (77.4) (27.1) Capital increase (decrease) (0.8) (86.7) Dividends paid 0.0 (3.4) (2.4) (2.4) (4.7) Increase (decrease) in net financial debt (108.3) ,099.6 (282.4) (678.3) (164.8) (40.1) (141.0) 3.7 (34.7) Cash flow, group share (230) (243) (58) BALANCE SHEET HIGHLIGHTS ( ) Dec. 04 Dec. 05 Dec. 06 Dec. 07 Dec. 08 Dec. 09 Dec. 10 Dec. 11 Dec. 12 Dec. 13 Dec. 14e Dec. 15e Net operating assets ,008 1,557 1,521 1,331 1,271 1,065 1,104 1,105 1,107 WCR Restated capital employed, incl. gross goodwill 757 1,048 1,312 1,379 2,168 1,842 1,682 1,497 1,264 1,204 1,246 1,252 Shareholders' funds, group share Minorities Provisions/ Other liabilities Net financial debt (cash) ,798 1, FINANCIAL RATIOS (%) Dec. 04 Dec. 05 Dec. 06 Dec. 07 Dec. 08 Dec. 09 Dec. 10 Dec. 11 Dec. 12 Dec. 13 Dec. 14e Dec. 15e Sales (% change) NC 27.0% 16.9% (15.7%) 0.1% 7.8% (23.9%) (7.0%) (13.7%) (1.9%) (0.6%) 4.1% Organic sales grow th 12.3% 2.8% (10.6%) 0.1% (17.3%) (23.9%) 4.6% (13.7%) (1.9%) (0.6%) 4.1% Restated EBITA (% change) (**) NS (37.7%) 63.7% 18.4% (69.2%) 366.8% (24.1%) (12.8%) 30.8% (12.5%) 26.1% 5.1% Restated attributable net profit (% change) (**) NC NC NC NC (396.1%) 63.8% NC 84.1% (81.5%) 224.4% 80.7% 8.4% Personnel costs / Sales 7.1% 6.3% 6.3% 6.2% 6.5% 7.6% 8.2% 6.3% 7.6% 5.9% 6.2% 6.1% Restated EBITDA margin 6.4% 3.8% 4.6% 6.0% 2.9% 7.9% 8.2% 7.6% 10.6% 9.6% 11.6% 11.7% Restated EBITA margin 4.5% 2.2% 3.1% 4.4% 1.4% 5.8% 5.8% 5.5% 8.3% 7.4% 9.4% 9.5% Tax rate 7.1% NC NC NC NC NC NC NC NC 45.2% 30.0% 30.0% Net margin 3.9% 1.4% 0.9% 2.3% (15.1%) (13.1%) (4.8%) 0.1% (29.6%) 2.4% 4.7% 4.9% Capex / Sales 4.0% 4.8% 3.1% 3.7% 3.0% 0.7% 0.5% 1.1% 1.9% 0.6% 2.5% 2.5% OpFCF / Sales 2.5% (5.8%) 17.1% 3.0% (25.4%) 9.6% 2.3% 21.8% 17.2% 21.6% 4.2% 8.7% WCR / Sales 17.9% 26.3% 21.4% 29.4% 48.5% 23.7% 34.0% 23.5% 24.0% 12.3% 17.4% 17.2% Capital employed (excl. gdw./intangibles) / Sales 40.9% 48.2% 43.5% 56.6% 74.0% 45.0% 51.4% 40.9% 40.2% 29.5% 34.8% 34.2% ROE 4.3% (0.1%) 1.2% (0.9%) (9.1%) (3.5%) 2.3% 4.3% 1.2% 3.4% 5.7% 5.9% Gearing 60% 66% 103% 112% 555% 500% 101% 83% 113% 79% 75% 65% EBITDA / Financial charges 4.3x 2.2x 1.8x 1.6x 0.3x 0.8x 2.8x 2.3x 3.0x 3.3x 4.4x 4.8x Adjusted financial debt / EBITDA 4.0x 8.2x 8.9x 9.3x 49.0x 14.2x 9.9x 9.2x 7.2x 6.3x 5.3x 4.7x ROCE, excl. gdw./intangibles 7.2% 3.0% 4.7% 5.2% 1.4% 9.7% 10.8% 9.4% 14.0% 13.7% 18.8% 19.4% ROCE, incl. gross goodw ill 3.9% 1.8% 2.3% 2.7% 0.6% 3.2% 3.4% 2.5% 3.7% 2.7% 4.3% 4.5% WACC 16.4% 15.5% 14.8% 14.4% 15.3% 12.7% 13.3% 15.0% 11.5% 10.2% 11.3% 11.3% Latest Model update: 28 Feb. 14 (a) Intangibles: EUR964.26m, or EUR1 per share. (b) adjusted for capital gains/losses, impairment charges, exceptional restructuring charges, capitalized R&D, pension charge replaced by service cost (c) adj.for capital gains losses, imp.charges, capitalized R&D, am. of intangibles from M&A, exceptional restructuring, (*) In listing currency, w ith div. reinvested, (**) also adjusted for am. of intangibles from M&A, or for am. of gw ill for pre IFRS year Exane BNP Paribas Research Deoleo 11 April 2014 page 4

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