Earnings Release • Apr 20, 2011
Earnings Release
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14 February 2011 COLEXON Energy AG FIRST BERLIN Equity Research
Primary Exchange: Frankfurt Bloomberg symbol: HRP ISIN: DE0005250708
UPDATE
COLEXON Energy AG has issued a profit warning for 2010. Instead of an adjusted EBIT of €13-15m the company now expects only €9-11m. We reduce our estimates for 2010 and the following years. The price target is lowered to €3.40 (previously: €5.10). As the stock remains undervalued we keep our Buy rating.
Profit warning for 2010 COLEXON reduced its adjusted EBIT guidance to €9-11m (before: €13-15m). The main reason is the delay of 3 projects in Italy and the write-off of project rights due to uncertain legislation regarding state funding for PV.
Feed-in tariff (FIT) reductions in various countries hit project sales and margins COLEXON looks set to suffer from FIT reductions in France, Germany, Italy and Spain as project selling prices and margins will be reduced. Currently, it remains uncertain whether some projects in France which COLEXON developed can be built. We have reduced our 2011 EBIT margin projection for the project business to 4% from 5%.
Trading sales and margins turn south In the past COLEXON generated high trading margins by selling premium thin film modules (segment EBIT margin 9m 2010: 13.1%). The massive increase in (Chinese) crystalline module capacity and lower demand due to the various FIT cuts will lead to module oversupply, which will reduce COLEXON's trading margins more than previously anticipated. We have reduced our segment EBIT margin estimate to 5% down from 9.5%.
| 2007 | 2008 | 2009 | 2010e | 2011e | 2012e | |
|---|---|---|---|---|---|---|
| Revenue (€m) | 85.37 | 142.75 | 117.18 | 198.00 | 201.00 | 205.00 |
| Y-o-y growth | 37.2% | 67.2% | -17.9% | 69.0% | 1.5% | 2.0% |
| EBIT (€m) | 0.22 | 12.17 | 17.82 | -53.44 | 10.14 | 10.81 |
| EBIT margin | 0.3% | 8.5% | 15.2% | -27.0% | 5.0% | 5.3% |
| Net income (€m) | -0.28 | 7.24 | 5.63 | -65.24 | 1.55 | 1.99 |
| EPS (diluted) (€) | -0.06 | 1.42 | 0.59 | -3.87 | 0.09 | 0.12 |
| EV / Sales (x) | 1.9 | 1.1 | 1.4 | 0.6 | 0.6 | 0.6 |
| EV / EBIT (x) | 740.7 | 13.1 | 9.0 | n.a. | 11.5 | 10.9 |
| P/E (x) | n.a. | 1.2 | 2.9 | n.a. | 19.1 | 14.3 |
| DPS (€) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Yield | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| FCF (€m) | -12.86 | 1.01 | 20.61 | -11.44 | 0.69 | -1.98 |
| Net gearing | 22.0% | 20.0% | 109.9% | 163.9% | 158.0% | 156.0% |
| Liquid assets (€m) | 4.74 | 2.60 | 32.26 | 22.95 | 24.63 | 24.65 |
Risks include but are not limited to unfavourable changes in the regulatory environment, project risks, and financing risks.
COLEXON Energy AG is a solar company with a broad range of downstream activities such as project development, module and components trading, own plant operation and solar services. The company is based in Hamburg, Germany, and as of 30 September 2010 had 127 employees.
| Closing price (11.02.11) | €1.72 |
|---|---|
| Shares outstanding | 17.74m |
| Market capitalisation | €30.42m |
| 52-week range | €1.58 / 3.81 |
| Average volume (12 months) | 34,493 |
| Liquid assets (incl. securities) | €12.99m |
|---|---|
| Current assets | €68.17m |
| Intangible assets | €8.73m |
| Total assets | €255.56m |
| Current liabilities | €51.62m |
| Shareholders' equity (incl. minorities) | €55.79m |
| DKA Consult | 5.0% |
|---|---|
| Synerco | 12.0% |
| Others | 12.0% |
| Own shares | 5.0% |
| Freefloat | 66.0% |
Analyst: Dr. Karsten von Blumenthal, Tel. +49 (0)30 - 80 93 96 85
Only insignificant increase in own plant operation capacity in 2011e A lower operating cash flow resulting from the lower EBIT means less cash is available to increase the own plant operation business. The 9m 2010 operating cash flow was €-12m. Despite the cash inflow of €9m from the sale of 13 MW of COLEXON's own plant portfolio in Germany we forecast a negative operating cash flow of €-5.3m for 2010. As cash is needed to pre-finance projects we now assume that only a few MW will be added to the own plant operation business. We forecast an own plant portfolio capacity of 42.4 MW in 2013. Our original projection of an additional 15 MW in 2011 will only be reached if the company raises further capital. We therefore reduce our segment sales estimate to €14.9m and the segment EBIT estimate to €6.9m.
Reduction of estimates We reduce our 2010 adjusted EBIT estimate to €10m (previously: €14.2m). However, we only slightly reduce our sales estimate as our prior estimate was too conservative. We also reduce our estimates for 2011 and the following years (see table).
Valuation remains attractive although short-term trigger is missing Our sum-ofthe-parts valuation yields €2.00 per share for the project/trading/service business and €1.40 per share for the own plant operation segment. The new price target is €3.40 (old: €5.10). We reiterate our Buy rating.
| 2010E | 2011E | 2012E | |||||||
|---|---|---|---|---|---|---|---|---|---|
| All figures in €m | old | new | change | old | new | change | old | new | change |
| Sales | 200.30 | 198.00 | -1.1% | 218.10 | 201.00 | -7.8% | 237.50 | 205.00 | -13.7% |
| EBIT | -49.15 | -53.44 | - | 14.11 | 10.14 | -28.1% | 16.67 | 10.81 | -35.1% |
| Margin (%) | -24.5% | -27.0% | - | 6.5% | 5.0% | - | 7.0% | 5.3% | - |
| Net income | -60.95 | -65.24 | - | 4.14 | 1.55 | -62.5% | 5.15 | 1.99 | -61.4% |
| Margin (%) | -30.4% | -33.0% | - | 1.9% | 0.8% | - | 2.2% | 1.0% | - |
| EPS diluted (€) | -3.62 | -3.87 | - | 0.25 | 0.09 | -64.0% | 0.31 | 0.12 | -61.3% |
Table 1 Source: First Berlin
| Report No.: |
Date of publication |
Previous day closing price |
Recommen dation |
Price target |
|---|---|---|---|---|
| Initial Report |
4 November 2010 | €2.23 | Buy | €5.40 |
| ↓ | ↓ | ↓ | ↓ | |
| 2 | 11 November 2010 |
€2.32 | Buy | €5.40 |
| 3 | 6 January 2011 | €2.05 | buy | €5.10 |
| 4 | Today | €1.72 | Buy | €3.40 |
Dr. Karsten von Blumenthal First Berlin
Equity Research GmbH
Mohrenstraße 34 10117 Berlin
Tel. +49 (0)30 - 80 93 96 85 Fax +49 (0)30 - 80 93 96 87
[email protected] www.firstberlin.com
In an effort to assure the independence of First Berlin research neither analysts nor the company itself trade or own securities in subject companies. In addition, analysts' compensation is not directly linked to specific financial transactions, trading revenue or asset management fees. Analysts are compensated on a broad range of benchmarks. Furthermore, First Berlin receives no compensation from subject companies in relation to the costs of producing this report.
I, Dr. Karsten von Blumenthal, certify that the views expressed in this report accurately reflect my personal and professional views about the subject company; and I certify that my compensation is not directly linked to any specific financial transaction including trading revenue or asset management fees; neither is it directly or indirectly related to the specific recommendation or views contained in this research. In addition, I possess no shares in the subject company.
First Berlin's investment rating system is five tiered and includes an investment recommendation and a risk rating. Our recommendations, which are a function of our expectation of total return (forecast price appreciation and dividend yield) in the year specified, are as follows:
STRONG BUY: Expected return greater than 50% and a high level of confidence in management's financial guidance BUY: Expected return greater than 25% ADD: Expected return between 0% and 25% REDUCE: Expected negative return between 0% and -15% SELL: Expected negative return greater than -15%
Our risk ratings are Low, Medium, High and Speculative and are determined by ten factors: corporate governance, quality of earnings, management strength, balance sheet and financing risk, competitive position, standard of financial disclosure, regulatory and political uncertainty, company size, free float and other company specific risks. These risk factors are incorporated into our valuation models and are therefore reflected in our price targets. Our models are available upon request to First Berlin clients.
Up until 16 May 2008, First Berlin's investment rating system was three tiered and was a function of our expectation of return (forecast price appreciation and dividend yield) over the specified year. Our investment ratings were as follows: BUY: expected return greater than 15%; HOLD: expected return between 0% and 15%; and SELL: expected negative return.
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