AlphaValue Corporate Services Fundamental Analysis FR
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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
Benchmarks Current multiplesWeightValues (€)Upside 
DCF (Edit and simulate)  40%19.753%
NAV/SOTP per share   40%36.5183%
P/E Peers -67.0 x 5%6.45-50%
EV/Ebitda Peers 30.3 x 5%0.00-100%
P/Book Peers 2.2 x 5%14.210%
Dividend Yield Peers 0.3% 5%1.31-90%
Target Price  100%23.683% 
Valuation matters

Ecoslops is a play on its ability to build and operate new projects and on the refining margin it can capture as it renews slops into fuels.

We expect the company to build three new plants (investing over 2019-21)

  • Marseille (standard nominal capacity, i.e. 130 tons per day);
  • Antwerp (larger, at 200t/d);
  • For each Mini P2R (20t/d).

We then apply AlphaValue’s deck of estimates on refined products and slops prices.

Our valuation approach to Ecoslops emphasises intrinsic methods: the DCF and the SOTP.

SOTP

We value production units on an EV/EBITDA basis as the Sines plant’s solid operations in 2018 highlight its effective cash generation; delivering top-line growth of 23% yoy despite only 9 months of real activity in 2018.

The same technique is used for projects in the pipeline as the technology is the same. The EV/EBITDA multiple is lower to recognise the time element.

The value associated with the Mini P2R units has been segregated in the NAV as it is likely to involve a different business model. Modelling the profits per Mini P2R unit has been discounted back at 12% as a dividend flow from the firm using the same assumptions in terms of product realisation prices as for the P2R. This works out as a NPV of €1.3m per unit, assuming ownership and an 80% debt funding at 8%. So that the first four units may well be worth a combined €5m. Like any modelling that looks like a licence to print money, it is better to wait for the prototype to deliver before going for more ambitious schemes.

DCF

Our DCF is articulated around the company’s plan to add two plants to its portfolio:

  • stabilisation of Sines: the unit has climbed a steep learning curve up to 2017;
  • starting the new projects with capex in 2019-21 amounting to €43m, and expanding mini P2R local sales and implantation;
  • refining capacity ramp-up should result in runs at c. 210,000t/year in 2022.

Given the project’s dependency on cash flows, we input our estimates on an annual basis until 2021. In the following years, the annualised growth rates applied to EBITDA and capex are geared solely to the existing visible capex plans (3 units + Mini P2R).

Our estimates are based on AlphaValue’s expectations on commodity prices (Brent crude oil, fuel products and slops).

Peers

The peers metrics are attributed a marginal weight in our valuation, as the company’s projects are in their start-up stage or yet to be contracted.

We use a mix of pure refiners (Neste, which innovated on the refining theme, Saras and Hellenic Petroleum), Portuguese oil company (with a tilt on downstream) Galp Energia, and Acciona (renewable energy constitutes the core of profits for the Spanish player that operates wind farms).

Comparison Based Valuation
Computed on 18 month forecastsMcap (€M]P/E (x)Ev/Ebitda (x)P/Book (x)Yield(%)
Peers ratios 15.0 7.90 2.41 3.40
Ecoslops's ratios ns 30.3 2.19 0.34
Premium 0.00% 0.00% 0.00% 0.00%
Default comparison based valuation (€) 6.45 0.00 14.2 1.31
Neste 26,484 17.412.34.012.87
Galp Energia 12,314 16.76.812.214.44
Acciona 5,737 18.47.921.522.00
Hellenic Petroleum 2,595 6.323.940.924.71
Saras 1,272 4.992.690.948.02
DCF Valuation Per Share Help View DCF history
WACC % 8.66
PV of cashflow FY1-FY11 €th 86.9
FY11CF €th 16,579
Normalised long-term growth"g" % 2.00
ESG weighted "g" % 1.95
Terminal value €th 247,018
PV terminal value €th 107,638
PV terminal value in % of total... % 99.9
Total PV €th 107,725
Avg net debt (cash) at book v... €th 20,737
Provisions €th 187
Unrecognised actuarial losses... €th 0.00
Financial assets at market price €th 0.00
Minorities interests (fair value) €th 0.00
Equity value €th 86,801
Number of shares Th 4,412
Implied equity value per share 19.7
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 0.97
Debt beta x 1.20
Market capitalisation €th 56,874
Net debt (cash) at book value €th 17,677
Net debt (cash) at market value €th 13,198
Company debt spread bp 600
Marginal Company cost of debt % 9.50
Company beta (leveraged) x 1.13
Company gearing at market v... % 31.1
Company market gearing % 23.7
Required return on geared eq... % 9.13
Cost of debt % 6.65
Cost of ungeared equity % 8.34
WACC % 8.66
DCF Calculation Help
  12/18A 12/19E 12/20E 12/21E Growth 12/22E
Sales €th   7,449 10,454 15,745 35,308 12.0% 39,545   
EBITDA €th   -380 278 1,736 7,424 14.0% 8,464   
EBITDA Margin %   -5.10 2.66 11.0 21.0 21.4   
Change in WCR €th   -906 -226 -1,256 -3,302 0.00% -3,302   
Total operating cash flows (pre tax) €th   -1,608 158 481 4,122 5,162   
Corporate tax €th   330 668 668 262 0.00% 262   
Net tax shield €th   -87.1 -191 -370 -401 0.00% -401   
Capital expenditure €th   -2,672 -14,922 -12,372 -14,822 -25.0% -11,117   
Capex/Sales %   -35.9 -143 -78.6 -42.0 -28.1   
Pre financing costs FCF (for DCF purposes) €th   -4,037 -14,286 -11,593 -10,838 -6,093   
Various add backs (incl. R&D, etc.) for DCF... €th     
Free cash flow adjusted €th   -4,037 -14,286 -11,593 -10,838 -6,093   
Discounted free cash flows €th   -4,037 -14,286 -10,669 -9,179 -4,749   
Invested capital   20.2 34.2 44.8 58.6 44.0   
NAV/SOTP Calculation
 % ownedValuation technique Multiple used Valuation at 100%
(€th)
Stake
valuation
(€th)
In currency per share
(€)
% of gross assets
Antwerp 100% EV/EBITDA 6.2 80,600 80,600 18.3 49.1%
Sines 100% EV/EBITDA 7.5 46,500 46,500 10.5 28.3%
Marseille 75.0% EV/EBITDA 6.5 42,250 31,688 7.18 19.3%
Mini P2R 100% DCF 5,400 5,400 1.22 3.29%
Other
Total gross assets 164,188 37.2 100%
Net cash/(debt) by year end -2,980 -0.68 -1.81%
Commitments to pay 0.00 0.00 0.00%
Commitments received
NAV/SOTP 161,208 36.5 98.2%
Number of shares net of treasury shares - year end (Th) 4,412
NAV/SOTP per share (€) 36.5
Current discount to NAV/SOTP (%) 64.7 View history

Changes to Story : 26/09/2019, Changes to Forecasts : 26/09/2019.