Advanced Vision Techn Buy

Transcription

1 16/9/13 16/11/13 16/1/14 16/3/14 16/5/14 16/7/14 16/9/14 16/11/14 16/1/15 16/3/15 16/5/15 16/7/15 MATELAN Research Update Note Closing price as of 13/8/15: August 215 Company / Sector Fair Value Recommendation Advanced Vision Techn. 1.5 Buy Technology ( 1.7) (unchanged) Q2 weak but order intake shows increase in dynamics Share price performance Share data Volume Close Reuters VSJG.DE Bloomberg VSJ No. of shares (m) 6.1 Daily turnover 8,174 Free float 42.% Market cap (USDm) 59.7 EV (USDm) 36.2 Valuation 215e 216e EV/Sales.7.6 EV/ EBITDA EV/EBIT PER Div. yield 2.3% 3.% RoCE 22.8% 25.6% RoE 1.2% 12.3% Investment case Currency and one-offs burdened Q2 sales, earnings and cash flow. The dividend payment could thus not be compensated and net cash fell to EUR19m. On the other hand order intake makes us more optimistic for H2 and we raised our forecast. On balance, our fair value changes only marginally and still leaves 14% upside from the current share price. We stick to our Buy rating. CURRENCY AND ONE-OFFS WEIGH ON Q2 The devaluation-hit EMEA business (-2%) weighed on Q2 revenues (-4%). Gross margin (53.9%) suffered to a lesser extent than expected but together with the expansion related opex increase and one-off costs from the transaction with E+L, net profit was still halved. Moreover, higher working capital needs reduced operating cash flow (USD-.6m vs. USD3.2m in H1 14). OCF could thus not compensate for the dividend payment of USD6.1m so that net cash decreased to USD19m. ORDER INTAKE RAISES HOPES FOR H2 In contrast, order intake increased by 5.6% (currency adjusted +14%), indicating that the company's expansion strategy pays off and making us a bit more optimistic for H2. FAIR VALUE ALMOST UNCHANGED While mgmt has reiterated its guidance, we slightly increase our revenues and earnings forecast. On the other hand, we strip out the dividend and increase the working capital assumption. Our fair value thus changes only marginally to EUR1.5 (EUR1.7). For additional disclosures please refer to the appendix Analyst USD e 216e 217e Dr. Anne Gronski Sales (m) Tel.: EBITDA (m) anne.gronski@matelan.de EBIT (m) Adj. EPS Adrian Hopkinson CFA Dividend Tel.: Oper. CF (m) adrian.hopkinson@matelan.de Free CF (m)

2 Q2 215 review Q2 15 Q2 14 H1 15 H1 14 FY 15e USD m reported reported % reported reported new old % Mgmt guidance for 215 Revenues % % % USD53-55m Gross profit % % % Gross margin 53.9% 55.2% 46.5% 52.8% 53.5% 52.% EBIT % % % USD4-5m EBIT margin 6.8% 13.% 8.3% 7.5% EBT % % % Net income % % % Net margin 5.% 9.7% 5.8% 5.3% EPS (USD) % % % Order intake % Source: AVT, Matelan Research estimates, in USDm Currency and costs weigh on earnings, but orders gain in dynamics Q2 sales (USD13.1/-4%) were again marked by the strong y-o-y devaluation of the Euro which burdened the EMEA activities (-2%). At a constant USD/Euro rate, a moderate decline here (e: -5%) would have been slightly over-compensate by double digit growth in the Americas (+13%) and moderate growth in AsPac (+3%). The weak Euro also largely attributed to the decline in gross margin by 13bps. The gross margin neverthelss remained clearly above our estimate of 52% for the full year. EBIT was additionally burdened by higer opex of USD.4m arising from approx. USD.2m (e) of legal costs related to the E+L transaction and higher R&D due to an increase in personnel and consultants. As a result, earnings on all levels halved. Order intake, on the other hand, showed an increase by 5.9% and, adjusted for the Euro depreciation, even by 14% (e). Regional development, actual and at constant USD/EUR rate (e) USDm Q1 15 Q2 15 H1 15 EMEA % change, y-o-y 6% -2% -8% USD/Euro decline, % -16% -19% -17% EMEA, currency adjusted (e) % change, y-o-y 23% -5% 8% Americas % change, y-o-y -19% 13% -4% AsPac % change, y-o-y 15% 3% 9% Total % change, y-o-y -3.2% -4.% -3.6% Total, currency adjusted (e) % change, y-o-y 3.6% 3.3% 3.4% Order intake % change, y-o-y -1.5% 5.9% 2.2% Order intake, currency adjusted (e) % change, y-o-y 4.9% 14.3% 1% Source: AVT, currency adjusted EMEA figuresmatelan Working capital negatively affects operating cash flow... Despite the significant decline in net income, H1 gross operating cash flow (excl. changes in net working capital) remained at last year's level (USD3.2m), mainly because of a temporary increase in 'accrued expenses and other liabilities' (USD1.3m vs. USD.2m in H1 14). Operating cash flow, however, shrank from USD3.2m in H1 14 to USD-.6m. The reason for this was higher cash requirements for trade receivables (USD-2.8m vs. USD-.2m) induced by longer terms of payments for some new large customers. As a result, DSO of trade receivables jumped to an all time high of 74 days (FY days). Mgmt expects their payment during H2. In addition, the disbursement of last year's extraordinary dividend led to a cash outflow of USD-6.1m)

3 Cash flow development H1 14 H Gross operating cash flow CAPEX Source: AVT, Matelan Research estimates, in USDm Change in NWC FCF (r. s.)... and net cash Outlook reiterated We become a bit more optimistic for FY earnings As a result, AVT's net cash position (incl. short-term deposits) was reduced from USD26.5m (Q1 15) to USD19.4m. However, this would allow the company to pay another extraordinary dividend of one Euro/share from the remaining capital of USD6m which mgmt has designated for this by the means of last year's capital reduction. For FY 215, mgmt reiterated its targets of achieving revenues and EBIT in the ranges of USD53-55m and USD4-5m, respectively. Mgmt reported positive trading conditions in most of AVT's relevant markets and a good order pipeline for H2. Nevertheless, mgmt stated that the USD/Euro rate remains a burden if it stays at its current level. Based on Q2 results and mgmt's statements we have slightly increased our FY 215 revenues forecast to USD54m (USD53m) and our gross margin assumption to 53.5%. In addition, we increased our forecast for the opex marginally. Our FY 15 EBIT forecast increased to USD4.5m (USD4m). A summary of the key changes in our forecast can be seen in the table on top of the second page. Our forecast bases on the assumption that the USD/Euro rate remains at the current level, which implies a y-o-y decline of 16% in Q3 and - as a result of the already lower level in Q % in Q4. The table below shows that AVT has already achieved 48% of our revenues and 51% of our EBIT forecast. Looking at the pattern of previous years this would seem conservative. But as a result of the negative impact of the USD/Euro exchange rate we regard a safety cushion as adequate. H1 as %age of FY H e Revenues 47% 49% 49% 5% 48% EBIT 33% 4% 46% 53% 51% EPS 3% 38% 31% 49% 49% Source: AVT, Matelan Research estimates Fair value comes to EUR1.5 We have fed our new forecast into our DCF model and also lowered the amount of excess liquidity. The net effect on our fair value is marginally negative. Our new fair value is EUR1.5 which still provides the share with an upside of 14% to the current share price

4 Sales and EBIT margin Adj. EPS and DPS % 13.% 11.% 9.% 7.% 5.% 3.% 1.% -1.% e 216e 217e EMEA Americas AsPac EBIT margin (r.s.) e 216e 217e Adj. EPS DPS EPS growth (r.s.) 4.% 3.% 2.% 1.%.% -1.% -2.% -3.% -4.% Cash Flow In USD RoCE e 216e 217e e 216e 217e 4.% 35.% 3.% 25.% 2.% 15.% 1.% 5.%.% Cash Earnings Capex Change in NWC Free Cash Flow (r.s.) Intangibles NWC PPE RoCE (r.s.) Balance Sheet Shareholder structure 6 Intangibles 5 4 Tangibles Working Cap. Other Assets 47.9% 39.1% 3 Cash 2 Equity Pensions 1 Assets Liabilities Financial debt Working Cap. Other Liab. 13.% Union Investments (IL) Own Shares Other - 4 -

5 P & L USDm e 216e 217e Revenues Growth 5.2% 7.2% -.2% 12.% 8.% Material costs Gross profit Gross margin 53.7% 52.3% 53.5% 53.% 53.% Other operating costs EBITDA Margin 13.3% 12.6% 1.1% 1.8% 11.1% Depreciation EBIT Margin 11.4% 11.% 8.3% 9.1% 9.4% Financial result EBT Taxes Net profit Minorities..... Net profit a.m Growth 34.2% -29.8% -32.8% 32.2% 11.7% No of shares EPS Dil. EPS Growth 27.3% -32.5% -32.8% 32.2% 11.7% Dividend Balance Sheet USDm e 216e 217e Intangible assets Tangible assets Participations..... Other non-current assets Non-current assets Inventories Receivables Cash Other current assets Current Assets Total assets Equity Minorities..... Total equity LT financial liabilities..... Pension provisions..... OtherLT liabilities Non-current liabilities ST financial liabilities..... Payables Other ST liabilities Current liabilities Total liabilities Cash Flow USDm e 216e 217e EBIT Depreciation Other non-cash items Cash taxes Cash earnings Change in NWC CF from operations Capex Other investm./divestm CF from investing CF from fin. and other Change in cash Segments USDm e 216e 217e EMEA Growth -2.9% 19.1% -19.3% 9.1%.6% Americas Growth 15.2% 4.8% 1.% 11.% 8.% AsPac Growth -.4% -1.7% 2.% 2.% 2.% Sales Growth 5.2% 7.2% -.2% 12.% 8.% Valuation multiples e 216e 217e Share price (USD) x No of shares Market Capitalisation Net financial debt Pension provision Minorities Participations..... Enterprise Value Sales Adj. EBITDA Adj. EBIT Adj. Net profit a.m EV / Sales EV / EBITDA EV / EBIT PE Source: MATELAN Research Key operational indicators e 216e 217e Equity ratio 63.4% 63.% 63.% 63.% 63.% Gearing..... Asset turnover NWC / sales 23.% 2.6% 24.7% 24.7% 22.8% Payable days outstanding Receivable days outstandi Fix operating assets NWC Capital employed RoE 19.9% 14.1% 1.2% 12.3% 13.7% RoA 11.3% 11.7% 9.2% 1.3% 11.5% RoCE 3.3% 33.9% 22.8% 25.6% 28.6% Gross margin 53.7% 52.3% 53.5% 53.% 53.% EBITDA margin 13.3% 12.6% 1.1% 1.8% 11.1% EBIT margin 11.4% 11.% 8.3% 9.1% 9.4% Net profit margin 13.% 8.5% 5.8% 6.8% 7.% - 5 -

6 ADDITIONAL DISCLOSURES This report has been prepared by MATELAN Research GmbH, Koblenzer Str. 79, Bonn. All rights are reserved. Copyrights and database rights protection exists in this publication. It may not be reproduced or redistributed without prior express permission of Matelan. (1) Analyst certification The analysts responsible for the content of this research report hereby certify that (1) all views expressed in this report accurately reflect their views about any and all of the subject securities or issuers and (2) no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or view(s) of this report. Matelan may have sent extracts of this research report to the subject company for the purpose of verifying factual accuracy. The information provided by the latter was taken into consideration in the report. However, this entailed no change of the assessment. (2) Disclosures about potential conflicts of interest MATELAN Research GmbH has/will receive(d) compensation for research and advisory services provided in the current calendar year from the following companies Advanced Vision Technologies Ltd., ISRA Vision AG. (3) Rating definitions Security firms use a variety of rating terms and systems. Investors should carefully read the definitions of the rating system used in each research report. In addition, since the research report contains more complete information concerning analyst s views, investors should carefully read the entire research report and not infer its contents from the ratings alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor s decision to buy or sell a stock should depend on individual circumstances (such as the investor s existing holdings) and other considerations. MATELAN Research GmbH uses an absolute rating system, which varies considerably from relative rating systems (such as Overweight, Equal Weight or Underweight ). Stock ratings are defined as follows: Strong Buy: In the next 6 to 12 months, we expect a potential absolute change in value of over 2% with high forecast certainty. Buy: In the next 6 to 12 months, we expect a potential absolute change in value of more than 1%. Neutral: In the next 6 to 12 months, we expect a potential absolute change in value of over % up to a maximum of 1%. Reduce: In the next 6 to 12 months, we expect a potential absolute negative change in value of up to -1%. Sell: In the next 6 to 12 months, we expect a potential absolute negative change in value of over -1 % with high forecast certainty. The change in stock price results from the difference between the current share price and the analyst s performance expectations, which are generally based on a fair value calculation performed on the basis of a discounted cash flow model and a key comparison analysis but can also consider other effects such as market sentiment. (4) Rating distribution Stock ratings within the coverage universe of MATELAN Research GmbH as of the publication date of this report are distributed as follows: Strong Buy: 5.6% Buy: 5.% Neutral: 38.9% Reduce: 5.6% Sell:.% (5) Additional information for clients in Germany and other countries This research report has been produced in Germany. It was approved and distributed by MATELAN Research GmbH, which is authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). Laws and regulations in other countries may also restrict the distribution of this report. Persons in possession of this document should inform themselves about possible legal restrictions and observe them accordingly. In particular, this document may not be distributed in the United States, Canada, Australia or Japan or to any U.S. person

7 (6) Recommendation history Stock ratings for the companies covered in this report have developed as follows: AVT Date Rating 23/3/15 Buy 25/2/13 Str. Buy DISCLAIMER This research publication has been prepared by MATELAN analysts based on publicly available data that is believed to be accurate and complete. While reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, MATELAN provides no representation or warranty in relation to its accuracy, completeness or reliability. Possible errors or incompleteness of the information do not constitute grounds for liability, either with regard to indirect or to direct or consequential damages. In particular, MATELAN is not liable for the statements, plans or other details contained in the information concerning the examined companies, strategies, economic situations, market and competitive situations, regulatory environment, etc. Neither MATELAN nor its employees are liable for the accuracy and completeness of the statements, estimates and conclusions derived from the information contained in this report. To the extent this research report is being transmitted in connection with an existing contractual relationship, e.g. financial advisory or similar services, the liability of MATELAN shall be restricted to gross negligence and wilful misconduct. In any case, the liability of MATELAN is limited to typical, foreseeable damages and liability for any indirect damages is excluded. This report does not constitute an offer to sell, or a solicitation of an offer to purchase, any security. MATELAN may perform services to other companies mentioned in this report. Directors or employees of MATELAN may serve on the board of directors of companies mentioned in this report. Any opinions contained herein are subject to change without notice. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. MATELAN does not accept any liability for any loss or damage out of the use of all or any part of this report. Additional information will be made available upon request. Past performance is not necessarily indicative of future results. Investors should make their own investment decisions without relying on this publication. Only investors with sufficient knowledge and experience in financial matters to evaluate the merits and risks should consider an investment in any issuers or market discussed herein and other persons should not take any action on the basis of this publication. Any investments referred to herein may involve significant risk, are not necessarily available in all jurisdictions, may be illiquid and not be suitable for all investors. The price of securities may decrease or increase and as a result investors may lose the amount originally invested. Changes in exchange rates may also cause the value of investments to decrease or increase. Any documents or information we provide is solely for informational purposes and directed only to persons we reasonably believe to be investment professionals. All such communications and any activity to which they relate are available only to such investment professionals; any activity arising from such communications will only be carried out with investment professionals. Persons who do not have professional experience in matters relating to investments shout not rely upon such communications. CONTACT DATA For further information please contact: Matelan Research GmbH Koblenzer Straße Bonn Head Analyst: Dr. Anne Gronski Tel: anne.gronski@matelan.de - 7 -