ERM Power

AU: EPWX

AU$385.2m market cap

AU$1.52 last close

ERM Power is an Australian commercial and industrial energy retailer and trader. It operates an electricity supply business and two gas-fired generation plants. A key area of growth is energy solutions, while the company recently announced the sale of its US business.

Investment summary

ERM Power is refocusing its business on the core Australian activities, with the sale of the US business for A$38m (completed in early January 2019) and the acquisition for up to A$16m of Out Performers, a provider of energy services to large energy customers. In Q418 we raised our forecasts for FY19-2021 underlying net income from continuing operations by 6%, to reflect earnings accretion from the acquisition of Out Performers and cash inflow from the sale of the US business.

Y/E Jun
Revenue (A$m)
EBITDA (A$m)
PBT (A$m)
EPS (fd) (c)
P/E (x)
P/CF (x)
2017A 3127.0 78.4 14.7 (10.5) N/A 2.4
2018A 2047.0 97.5 43.1 12.0 12.6 N/A
2019E 2074.0 96.7 39.2 11.2 13.5 3.1
2020E 2133.0 107.1 49.4 14.5 10.4 3.7
Last updated on 20/02/2019
Industry outlook

While electricity supply activities in Australia remain very competitive with limited growth opportunities, ERM Power has experienced significant positive momentum which led to a double upgrade to Australian medium-term profit guidance over the last 18 months. The energy market in Australia (and globally) is undergoing significant transformation as a result of the energy transition, the emergence of new technology and customer demand for higher energy efficiency and sustainable solutions. We expect the growing Energy Solutions business to take advantage of these changes.

Last updated on 20/02/2019
Sector
Industrials
Share price graph
Balance sheet
Forecast net debt (A$m) 54
Forecast gearing ratio (%) 12
Price performance
%
1m
3m
12m
Actual (6.5) (10.4) (2.3)
Relative* (10.0) (16.4) (4.3)
52-week high/low A$1.9/A$1.3
*% relative to local index
Key management
Jon Stretch CEO
James Spence FD
Olga Alexandratos Investor Relations