AlphaValue Corporate Services Fundamental Analysis FR
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Cementir Holding

CR
Bloomberg   CEM IM
Cement & Aggregates  /  Italy  Web Site   |   Investors Relation
Also operates in : Holding Companies
White knight with green armour
Target
Upside 43.1%
Price (€) 6.08
Market Cap (€M) 967
Benchmarks Current multiplesWeightValues (€)Upside 
DCF (Edit and simulate)  35%9.8362%
NAV/SOTP per share   20%9.3654%
EV/Ebitda Peers 4.8 x 20%9.2352%
P/E Peers 11.5 x 10%7.0616%
Dividend Yield Peers 2.3% 10%5.02-17%
P/Book Peers 0.8 x 5%6.6610%
Target Price  100%8.7043% 
Valuation matters

Cementir’s DCF is built on a rather conservative margin expansion, from about 20% in 2018-19 to 21% by 2029, which is our lowest margin expansion forecast amongst our cement companies, despite the fact that Cementir seems to have a stronger business model than the average cement company. Indeed, an EBITDA growth rate of 2% is used to generate the projection beyond 2021.

Our DCF model is based on a conservative FCF growth between 2018 and 2029 with FCF seen at €140m in 2029, a slow rise from the €123m computed for 2021.

The change in WCR deserves a comment. We decided to apply a simple rule: each euro of incremental revenue to be generated needs investment of about €0.10 in working capital. This seems to be conservative enough, in our opinion.

On the capex side, we assume that €70m in FY 19 is conservative enough with capex growing in line with depreciation expenses in 2020 and 2021, as well as by a 2% CAGR from 2021 onwards.

All in all, the perpetual FCF margin lies at about 9%. We consider this number to be conservative for a company with a strong business model and high FCF generation (EBITDA-to-FCF conversion rate of ~45%°.

SOTP valuation

Our SOTP/NAV is replacement-cost-based on a geographical basis and product basis. We have used multiples of €170 per ton of cement capacity for grey cement in developed markets (Denmark and Belgium), a low multiple of €100 per ton of cement capacity for Turkey’s grey cement plants due to the difficult business environment in which the division is evolving.

Concerning white cement, we have used multiples of €100 for Malaysia, €120 for China, €150 for Egypt, as well as €250 for Denmark and the US.

Peers valuation

We decided to neither apply a premium nor a discount for most multiples, despite the stronger business model than the average cement company (premium), because of the low free float (discount), with the exception of the yield to which we applied a premium of 30% because of the lower payout ratio of Cementir (20%) than peers.

Note that Lafarge bought Orascom in 2007 at 11.6x EBITDA, HeidelbergCement bought Hanson in 2007 at 12.8x EBITDA, Holcim acquired Cemex’s Australian assets in 2009 for 6.6× 2009 EBITDA, Camargo swallowed Cimpor for 8.7x EV/EBITDA in 2012 and CRH bought LafargeHolcim’s assets for 8.7x EBITDA pre-synergies and 7.7x EBITDA post-synergies.

Comparison Based Valuation
Computed on 18 month forecastsMcap (€M]P/E (x)Ev/Ebitda (x)P/Book (x)Yield(%)
Peers ratios 13.4 6.85 0.90 3.98
Cementir Holding's ratios 11.5 4.85 0.82 2.30
Premium 0.00% 0.00% 0.00% 30.0%
Default comparison based valuation (€) 7.06 9.23 6.66 5.02
LafargeHolcim 24,898 16.07.051.044.59
Heidelbergcement 10,800 10.66.880.703.70
Buzzi 4,288 11.35.590.990.74
Vicat 1,316 9.776.170.605.12
DCF Valuation Per Share Help View DCF history
WACC % 7.63
PV of cashflow FY1-FY11 €M 535
FY11CF €M 148
Normalised long-term growth"g" % 2.00
ESG weighted "g" % 2.11
Terminal value €M 2,682
PV terminal value €M 1,286
PV terminal value in % of total... % 70.6
Total PV €M 1,821
Avg net debt (cash) at book v... €M 144
Provisions €M 69.0
Unrecognised actuarial losses... €M 0.00
Financial assets at market price €M 95.4
Minorities interests (fair value) €M 138
Equity value €M 1,565
Number of shares Mio 159
Implied equity value per share 9.83
Assessing The Cost Of Capital Help
Synthetic default risk free rate % 3.50
Target equity risk premium % 5.00
Tax advantage of debt financ... % 30.0
Average debt maturity Year 5
Sector asset beta x 0.83
Debt beta x 0.60
Market capitalisation €M 967
Net debt (cash) at book value €M 172
Net debt (cash) at market value €M 120
Company debt spread bp 300
Marginal Company cost of debt % 6.50
Company beta (leveraged) x 0.90
Company gearing at market v... % 17.8
Company market gearing % 15.1
Required return on geared eq... % 8.01
Cost of debt % 4.55
Cost of ungeared equity % 7.65
WACC % 7.63
DCF Calculation Help
  12/19A 12/20E 12/21E 12/22E Growth 12/23E
Sales €M   1,212 1,173 1,228 1,264 1.00% 1,277   
EBITDA €M   264 231 260 280 1.50% 284   
EBITDA Margin %   21.8 19.7 21.2 22.1 22.2   
Change in WCR €M   12.4 0.75 -5.90 -5.28 1.00% -5.33   
Total operating cash flows (pre tax) €M   261 202 224 245 279   
Corporate tax €M   -37.5 -25.8 -32.5 -37.8 1.00% -38.2   
Net tax shield €M   -7.62 -6.42 -5.51 -4.61 1.00% -4.65   
Capital expenditure €M   -63.3 -60.0 -96.0 -110 1.00% -111   
Capex/Sales %   -5.22 -5.11 -7.82 -8.66 -8.66   
Pre financing costs FCF (for DCF purposes) €M   153 110 90.5 92.7 125   
Various add backs (incl. R&D, etc.) for DCF... €M   -30.0 -55.0 -50.0   
Free cash flow adjusted €M   153 110 60.5 37.7 75.3   
Discounted free cash flows €M   153 110 56.2 32.6 60.4   
Invested capital   1,573 1,584 1,601 1,618 1,585   
NAV/SOTP Calculation
 % ownedValuation technique Multiple used Valuation at 100%
(€M)
Stake
valuation
(€M)
In currency per share
(€)
% of gross assets
Turkey grey cement 100% Volume based valuation 100 540 540 3.39 30.4%
Belgium grey cement 100% Volume based valuation 170 391 391 2.46 22.0%
Denmark grey cem... 100% Volume based valuation 170 357 357 2.24 20.1%
Denmark white cem... 100% Volume based valuation 250 213 213 1.34 12.0%
Egypt white cement 71.1% Volume based valuation 150 165 117 0.74 6.61%
China white cement 100% Volume based valuation 120 84.0 84.0 0.53 4.74%
US white cement 63.0% Volume based valuation 250 75.0 47.3 0.30 2.66%
Malaysia white cem... 70.0% Volume based valuation 100 35.0 24.5 0.15 1.38%
Other
Total gross assets 1,774 11.1 100%
Net cash/(debt) by year end -172 -1.08 -9.70%
Commitments to pay -207 -1.30 -11.7%
Commitments received 95.4 0.60 5.38%
NAV/SOTP 1,490 9.36 84.0%
Number of shares net of treasury shares - year end (Mio) 159
NAV/SOTP per share (€) 9.36
Current discount to NAV/SOTP (%) 35.1 View history

Changes to Story : 07/08/2020, Changes to Forecasts : 07/08/2020.