AlphaValue Corporate Services Fundamental Analysis FR
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AlphaValue Corporate Services
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Ecoslops

CR
Bloomberg   ALESA FP
Other Energies  /  France  Web Site   |   Investors Relation
The cleantech making oil residues green
Target
Upside 82.8%
Price (€) 12.9
Market Cap (€M) 56.9
Money Making

Ecoslops aims at being a high value-added player: it collects hydrocarbon residues and sells renewed fuels.

Ecoslops is a play on its ability to grow the volume of value-added products:

1) business development (expanding the asset base with new projects);
2) availability of slops;
3) smooth running of the plant;
4) commercial conditions in buying and collecting slops;
5) fuel product prices.

The company has climbed a steep learning curve during the ramp-up of its Sines plant. Such an engineering development and industrial optimisation have taken several years. Ecoslops is the only player mastering this know-how and is partnered with Heurtey Petrochem, the downstream engineering specialist.

This, coupled with a track record (being able to show a successful project in operation), represents a strong moat and contributes to position Ecoslops as the solution of choice to the slops conundrum across global ports.

The effective roll-out of upcoming units should confirm Ecoslops’s proposition and enhance its attractiveness, while benefiting from the acquired experience.

P&L

We base our revenue estimates on the expected evolution of product prices, which is linked to AlphaValue’s crude oil (Brent) price forecasts and on a standard product slate.

The price paid for slops is also affected by the oil price, in a non-linear manner: we assume a lesser sensitivity to oil at lower prices, as the slops are less of a convenient option for cement plants and steel mills to buy as heating fuel.


Source: AlphaValue estimates


Source: AlphaValue estimates

Opex depends on local economics affecting the cost structure of the project (e.g. likely different labour costs in Portugal vs. Marseille). We expect c.€2.5m for a standard unit. A larger plant offers economies of scale, as in the case of the Antwerp project, where nominal capacity is assumed at 200t/day.

Assuming Ecoslops is the only shareholder of projects (actual ownership structure may vary), the EBITDA should turn seamlessly into cash flow.

The profitability of its project depends on a number of variables, and most notably the price of oil, slops and oil products.

Capex

A “standard” project of the size of Sines or Marseille (25-30kt / year) requires set-up investments of around €15m (or generally in a $12-18m range).

The bulk of the investments should occur in 2019-21 (as we assume the build-up of two plants and some mini P2Rs).

We expect each P2R project to require six-twelve months of studies, 12 months for construction.

We allowed for the addition of 1 Mini P2R from 2020 and 2 in 2021 with capex at €3.5m per unit.

Return on capital

Capacity ramp-up and estimates of Brent at $70/bbl should result in a ROCE of around 25% in 2022. The ROE would stand at c. 40%, boosted by a 41% EBIT margin, 84% asset rotation and a 1.9x financial leverage.

Change 19E/18 Change 20E/19E
  12/18A 12/19E 12/20E 12/21E €th of % total €th of % total
Total -380 278 1,736 7,424 658 100% 1,458 100%
Sines 1,500 2,828 3,424 3,472 1,328 202% 596 41%
Marseille 0.00 -300 730 3,131 -300 -46% 1,030 71%
ARA 0.00 0.00 0.00 2,490 0 0% 0 0%
Mini P2R projects 0.00 0.00 333 1,331 0 0% 333 23%
Other/cancellations -1,880 -2,250 -2,750 -3,000 -370 -56% -500 -34%
 
12/18A
12/19E
12/20E
12/21E
 
Total
-5.10%
2.66% 11.0% 21.0%  
Sines
20.1%
27.0% 30.3% 30.0%  
Marseille
19.9% 32.6%  
ARA
22.7%  
Mini P2R projects
42.2% 42.2%  
       
Changes to Story : 26/09/2019, Changes to Forecasts : 26/09/2019.