AlphaValue Corporate Services Fundamental Analysis FR
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AlphaValue Corporate Services
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Bloomberg   ALESA FP
Other Energies  /  France  Web Site   |   Investors Relation
The cleantech making oil residues green
Initiation cov.08/11/2016

The path to green-solving slops

We initiate coverage of Ecoslops (BUY): the company renews the oil residues from shipping (slops and sludge), turning them into fuels through its unique technology. The current market capitalisation stands at c. €28m with the share price at €9.1; we see a large upside potential (+114%) based on the company’s project pipeline.

Refining slops

The world fleet generates more than 100m tons of oil residues. These wastes are rich in residues and heavy metals and therefore represent an environmental challenge.
Ecoslops offers an integrated solution to port authorities, allowing them to comply with the regulations while recycling residues on shore.

The company’s innovation lies in combining advanced refining techniques within a small processing plant, compared to typical refineries.

Ecoslops operates its first industrial scale treatment unit (nominal capacity of over 30kt of recycled fuel) in the port of Sinès, Portugal. The group aims at signing contracts for three new projects by the end of 2017. It plans to build one in Marseille (we expect it to be a standard size, i.e. nominal capacity at 100t/day); we expect a larger plant in the ARA region (nominal capacity at 300 t/day) and another standard one in Abidjan (Ivory Coast).

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.

Growth runway

By 2020, Ecoslops should be refining c. 210kt per year. This represents c. 0.2% of the world’s slops production and underlies a huge growth runway for the firm, which proposes a proven green solution to this by-product of global maritime trade. Therefore, there is a wide scope to expand the project pipeline beyond the next three units we are accounting for based on current visibility.

Upside 114%
Price (€) 11.15
Market Cap (€M) 49.2
Perf. 1W: -5.91%
Perf. 1M: 2.76%
Perf. 3M: 54.9%
Perf Ytd: -2.19%
10 day relative perf. to stoxx600: -4.49%
20 day relative perf. to stoxx600: 5.59%