AlphaValue Corporate Services Fundamental Analysis FR
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This research has been commissioned and paid for by the company and is deemed to constitute an acceptable minor non-monetary benefit as defined in MiFID II

Drone Volt

CR
Bloomberg   ALDRV FP
Aerosp. & Defence Equipt.  /  France  Web Site   |   Investors Relation
Contract execution for a potentially record year
Target
Upside 134%
Price (€) 0.06
Market Cap (€M) 23.4
Benchmarks Current multiplesWeightValues (€)Upside 
DCF (Edit and simulate)  35%0.21237%
NAV/SOTP per share   20%0.20208%
EV/Ebitda Peers -6.0 x 20%0.13100%
P/E Peers -100.2 x 10%0.03-50%
Dividend Yield Peers 0.0% 10%0.00-100%
P/Book Peers 0.6 x 5%0.13100%
Target Price  100%0.15134% 
Valuation matters
DCF

We had previously assumed an expected market growth of c. 14% CAGR over 2019-27. However, to date, very few drone companies have managed to sustain this growth rate. With the recent mega contract wins with Aquiline Drones and the Hungarian customer, the years from FY21-23 are expected to be major growth years. We therefore apply a more conservative growth rate in our DCF going forward, namely 7% growth over 2023-30, as we do not anticipate other major catalysts of this amplitude after FY23. Thanks to cost containment measures along with positive volume effects, we believe that an EBITDA long-term growth of 9.5% is applicable. The US business based on royalties is adding significantly to our DCF. Our base case scenario with Aquiline Drones is currently limited to half the size of what was announced in the LOI.

NAV

For the NAV, in order to reflect the strong growth potential and to compensate for the still early stage of the company, with sharp volatility in profitability, we have chosen to base our valuation on sales multiples. We value the company through its different segments, based on three-year average forecast sales, to which we apply a multiple. We value Distribution at 1x its estimated three-year average sales. This multiple is in line with similar distribution activities of European companies, taking into account the limited value-added and growth prospects. For Drone Volt Factory, we have fine-tuned our valuation as we split this into three different parts. First, we value the holding of 50% of Aerialtronics separately. Secondly, and in order to bring to the fore Training, which we believe will be a key asset for Drone Volt as regulation is taking more importance, we value this activity on a standalone basis, based on our rolling three-year revenue estimates to which we apply a multiple of 3x (equivalent to a 50% premium over drone companies), accounting for its strong profitability. Thirdly, we value the remaining business of DVF (corresponding to drone and camera sales, as well as services) based on the current trading multiples gathered on Bloomberg for competitors, or c. 2x of their revenue. In addition, we value separately the revenue derived from the recent partnership with Aquiline Drones. We applied here a 5x multiple on three-year estimated average royalties. Finally, the Aquiline Drones partnership involves an equity swap for 10% of each company. Given the fact that Aquiline Drones is a non-listed company, with no access to its accounts, we decided to value this stake based on the revenue derived from our base-case scenario (described above), to which we apply a 2x multiple on sales.

Peers

With regard to peers, finding a similar company to Drone Volt is quite a pitfall since there is currently no perfect match in our coverage, nor on the listed market. We, however, address this issue by valuing Drone Volt in line with the relevant players of the drone industry, such as Elbit Systems, Irobot, Aerovironment and ECA Group, as well as the robotic company like Kuka.

Comparison Based Valuation
Computed on 18 month forecastsMcap (€M]P/E (x)Ev/Ebitda (x)P/Book (x)Yield(%)
Peers ratios 35.8 16.1 2.70 0.17
Drone Volt's ratios ns -5.96 0.62 0.00
Premium -50.0% 0.00% 0.00% 0.00%
Default comparison based valuation (€) 0.03 0.13 0.13 0.00
IsraelElbit Systems(Consensus) 6,541 19.613.6n/a0.11
KUKA 2,888 47.615.62.810.35
United StatesIrobot(Consensus) 1,522 22.813.92.540.00
United StatesAerovironment(Consensus) 1,253 41.622.82.68n/a
DCF Valuation Per Share Help View DCF history
WACC % 9.08
PV of cashflow FY1-FY11 €th 17,249
FY11CF €th 5,774
Normalised long-term growth"g" % 2.00
Sustainability "g" % 1.80
Terminal value €th 79,362
PV terminal value €th 33,292
PV terminal value in % of total... % 65.9
Total PV €th 50,541
Avg net debt (cash) at book v... €th -21,745
Provisions €th 281
Unrecognised actuarial losses... €th 0.00
Financial assets at market price €th 6,712
Minorities interests (fair value) €th 300
Equity value €th 78,418
Number of shares Th 367,054
Implied equity value per share 0.21
Sustainability impact on DCF % -1.19
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 1.12
Debt beta x 0.60
Market capitalisation €th 23,087
Net debt (cash) at book value €th -22,292
Net debt (cash) at market value €th -22,292
Company debt spread bp 300
Marginal Company cost of debt % 6.50
Company beta (leveraged) x 0.50
Company gearing at market v... % -96.6
Company market gearing % -2,802
Required return on geared eq... % 6.00
Cost of debt % 4.55
Cost of ungeared equity % 9.08
WACC % 9.08
DCF Calculation Help
  12/20A 12/21E 12/22E 12/23E Growth 12/24E
Sales €th   5,836 9,972 13,654 18,931 7.00% 20,257   
EBITDA €th   -2,065 -524 1,016 4,063 9.50% 4,449   
EBITDA Margin %   -35.4 -5.25 7.44 21.5 22.0   
Change in WCR €th   1,685 245 -62.0 349 7.00% 373   
Total operating cash flows (pre tax) €th   -1,371 -564 729 4,231 4,822   
Corporate tax €th   2,209 802 400 -387 7.00% -415   
Net tax shield €th   -202 -102 -79.9 -83.6 7.00% -89.4   
Capital expenditure €th   -1,810 -1,995 -1,955 -1,994 3.00% -2,054   
Capex/Sales %   -31.0 -20.0 -14.3 -10.5 -10.1   
Pre financing costs FCF (for DCF purposes) €th   -1,174 -1,859 -906 1,766 2,264   
Various add backs (incl. R&D, etc.) for DCF... €th     
Free cash flow adjusted €th   -1,174 -1,859 -906 1,766 2,264   
Discounted free cash flows €th   -1,174 -1,859 -831 1,485 1,744   
Invested capital   7.58 7.62 8.00 7.99 8.23   
NAV/SOTP Calculation
 % ownedValuation technique Multiple used Valuation at 100%
(€th)
Stake
valuation
(€th)
In currency per share
(€)
% of gross assets
Royalties 100% EV/Sales 5 16,750 16,750 0.05 34.1%
Drone Volt Factory 100% EV/Sales 2 13,120 13,120 0.04 26.7%
Aquiline Drones 9.90% EV/Sales 2 85,000 8,415 0.02 17.1%
Aerialtronics 50.0% NAV 15,100 7,550 0.02 15.4%
Distribution 100% EV/Sales 1 3,500 3,500 0.01 7.12%
Training 100% EV/Sales 3 2,400 2,400 0.01 4.88%
Other -2,562 -0.01 -5.21%
Total gross assets 49,173 0.13 100%
Net cash/(debt) by year end 22,420 0.06 45.6%
Commitments to pay
Commitments received
NAV/SOTP 71,593 0.20 146%
Number of shares net of treasury shares - year end (Th) 367,054
NAV/SOTP per share (€) 0.20
Current discount to NAV/SOTP (%) 67.5 View history

Changes to Story : 13/12/2021, Changes to Forecasts : 13/12/2021.