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Global Bioenergies — Update 8 April 2016

Global Bioenergies — Update 8 April 2016

Global Bioenergies

Analyst avatar placeholder

Written by

Global Bioenergies

Spend to deliver

2015 results

Alternative energy

8 April 2016

Price

€17.9

Market cap

€56m

Net debt (€m) at 31 December 2015

0.0

Shares in issue

3.1m

Free float

40%

Code

ALGBE

Primary exchange

Alternext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(9.7)

(32.7)

(48.6)

Rel (local)

(6.1)

(30.5)

(38.3)

52-week high/low

€59.1

€17.9

Business description

Global Bioenergies is in the scale-up stage to convert renewable resources into isobutene, the first of a number of olefins that will be licensed out to partners once the process is proved in an industrial pilot

Next events

H116 results

October 2016

Analysts

Catharina Hillenbrand-Saponar

+44 (0)20 3077 5700

Roger Johnston

+44 (0)20 3077 5722

Global Bioenergies is a research client of Edison Investment Research Limited

Global Bioenergies (GBE) is scaling up its operations as planned ahead of its next important steps to commercialisation. 2015 results are evidence of managed expenses, while capex spend is peaking as the company builds its second demo plant. GBE has also achieved further improvement in isobutene purity, which opens new, higher value-added end markets. We believe the company is on track with its operations and funded through to 2017. Our valuation range remains unchanged at €32-59 per share.

Year end

Revenue
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/sales
(x)

12/14

3.2

(9.2)

(2.9)

0.0

17.5

12/15

2.2

(12.2)

(4.0)

0.0

25.5

12/16e

4.7

(10.9)

(2.9)

0.0

11.9

12/17e

11.6

(4.9)

(1.3)

0.0

4.8

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Results show execution in line, but high capex spend

GBE has reported 2015 results broadly in line with our expectations. Even though revenues of €2.2m were below our forecast of €3.0m due to the timing of subsidy payments, EBIT loss was broadly in line at €12.0m (Edison €11.6m). The adjusted net loss of €10.3m was also in line with our estimate of €10.2m. Capex exceeded our expectation materially, at €4.5m (Edison €2m). The bulk of this was due to the Leuna demo plant, which is key for the company’s forthcoming step-up to commercialisation. We see 2015 as the peak in capex and forecast cash burn to reduce again from this year. The company finished 2015 with cash of €10.4m (net debt nil) and raised another €6.5m in gross proceeds from equity in Q116, with which it should be funded through to 2017, according to our calculations.

Forecast broadly unchanged

Our 2016 forecast remains largely unchanged at this stage. We expect revenues to be essentially driven by subsidies and grants, while expenses will continue to increase as the company continues to scale up. Higher levels of debt stemming from the new bank loans for the financing of the Leuna plant among others, lead to greater interest expense vs 2015. Our 2016 net loss estimate increases slightly to €9.2m (from €8.9m), while EPS loss estimate decreases to €2.93 from €2.98, as a result of the increased share count following the recent share issue.

Valuation: Unchanged €32-59 per share

We value GBE on a DCF basis with risk-weighted cash flows. Our valuation range remains unchanged, at €32-59 per share. As the company gets closer to commercialisation, its future cash flows should de-risk as it delivers further evidence. However, we recognise that there is a strong correlation between GBE shares and the oil price and this correlation might prevail for some time, affecting the share price performance.

Spending to deliver

Results in line with our expectations

No surprise and good expense control

GBE has continued on the path of steady execution and reported results broadly in line with our expectations. Revenues were €2.2m, below our expectation of €3m due to a timing issue on subsidies. The company received fewer subsidies than expected. However, it will recover these this year. EBIT loss came in at €12.0m, just below our forecast of €11.6m. As expected, there was an increase in operating expenses as a result of GBE’s larger operations when compared to last year. Finance charges also increased as expected. This stems from the higher levels of debt after the company had contracted bank loans as part of its expansion. Net loss was €10.3m, broadly in line with our forecast of €10.2m.

Exhibit 1: 2015 results vs expectations

2014

2015e

2015a

% change y-o-y

Revenues (€m)

3.2

3.0

2.2

(29.6)

EBITDA (€m)

(9.0)

(10.5)

(11.0)

22.7

EBIT (€m)

(9.5)

(11.6)

(12.0)

26.4

Net income adj (€m)

(7.6)

(10.2)

(10.3)

36.4

Source: Global Bioenergies, Edison Investment research

Capex spike reflects peak of scaling up ahead of commercialisation

Capex was materially higher than we anticipated, at €4.5m. This was connected to the construction of the second demo plant in Leuna, Germany, for the most part. We estimate that with this, the company has reached the peak of its expansion capex spend. The Leuna plant will be key for the next steps towards commercialisation (see below). Cash burn after financing (including debt movements and grants) was €5.5m, above the company’s target of €4m. We had expected net cash outflow of €4.3m for 2015. However, the company finished the year with net debt in line with our forecast, due to financing inflows. We expect capex to reduce as the bulk on Leuna has been spent, and forecast cash burn to come back into line with our expectations of c €6m. With that and the placement announced earlier this year (see our last update, published January 2016), we estimate that the company is financed through 2017.

We note that the initial ADEME and government funding programme will draw to a close at the end of this year. The company will then need to ensure it generates commercial revenues and/or consider further financing going forward.

Our 2016 forecast remains largely unchanged at this stage. Our EPS estimates increase slightly for 2016 and decrease for 2017, mainly due to larger interest expenses.

Exhibit 2: Updated forecasts

2016e

2017e

Old

New

Old

New

EBIT (€m)

(10.1)

(10.4)

(4.0)

(4.4)

EPS (€)

(2.98)

(2.93)

(1.15)

(1.25)

Source: Edison Investment research

Further progress on isobutene

The company has announced that it has achieved 99.77% purity on its isobutene from its demo plant. GBE had previously achieved c 95% purity for output from the Pomacle plant. 95% purity is a level that is suitable for many end applications. However, there are some end markets, notably in polymers, eg plastics, that require higher levels of purity. This result is positive as it enables the company to access a wider range of applications within its target markets. Furthermore, these applications with higher purity also tend to be higher value added markets, thus they should eventually command higher profitability for the company’s process. In an otherwise difficult market context due to weak commodity prices, this is encouraging.

Valuation unchanged

Our valuation range remains unchanged, at €32-59 per share.


Exhibit 3: Financial summary

€m

2013

2014

2015

2016e

2017e

December

FGAAP

FGAAP

FGAAP

FGAAP

FGAAP

PROFIT & LOSS

Grants

0.03

1.36

0.86

1.20

0.60

Other revenue

2.43

1.81

1.37

3.50

11.00

Revenue

 

 

2.46

3.17

2.23

4.70

11.60

Operating Expenses

(6.36)

(7.85)

(6.97)

(7.49)

(7.82)

Gross Profit

(3.90)

(4.69)

(4.75)

(2.79)

3.78

EBITDA

(6.55)

(8.99)

(11.04)

(9.35)

(3.34)

Operating Profit (before amort. and except.)

 

(6.66)

(9.50)

(12.01)

(10.42)

(4.39)

Amortisation

0.00

0.00

0.00

0.00

0.00

Exceptionals

(0.00)

0.00

0.11

0.00

0.00

Other

0.00

0.00

0.00

0.00

0.00

Operating Profit

(6.67)

(9.50)

(11.90)

(10.42)

(4.39)

Net Interest

0.13

0.29

(0.26)

(0.45)

(0.54)

Profit Before Tax (norm)

 

 

(6.54)

(9.21)

(12.16)

(10.87)

(4.93)

Tax

1.41

1.59

1.99

1.66

0.00

Minority interests

0.00

0.00

0.00

0.00

0.00

Net income (Adj NP)

(5.12)

(7.62)

(10.29)

(9.21)

(3.93)

Net income (Reported)

(5.12)

(7.62)

(10.18)

(9.21)

(4.93)

Average Number of Shares Outstanding (m)

2.5

2.6

2.6

3.1

3.1

EPS - normalised fully diluted (c)

 

 

(2.05)

(2.93)

(3.96)

(2.93)

(1.25)

EPS - (Reported) (€)

 

 

(2.05)

(2.93)

(3.91)

(2.93)

(1.57)

Gross Margin (%)

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

1.76

3.97

7.43

7.72

9.83

Intangible Assets

0.09

0.14

0.11

0.11

0.11

Tangible Assets

1.58

3.72

7.18

7.47

9.58

Investments

0.09

0.11

0.14

0.14

0.14

Current Assets

 

 

25.72

20.65

14.78

11.18

8.14

Stocks

2.02

0.29

0.30

0.21

0.21

Debtors

0.00

0.00

0.34

1.35

2.83

Cash

23.70

15.66

10.42

5.91

1.37

Other

0.00

4.71

3.73

3.73

3.73

Current Liabilities

 

 

(0.72)

(2.40)

(3.18)

(2.59)

(5.08)

Creditors

(0.72)

(2.40)

(3.18)

(2.59)

(5.08)

Short term borrowings

0.00

0.00

0.00

0.00

0.00

Long Term Liabilities

 

 

(3.74)

(5.64)

(11.10)

(11.13)

(12.64)

Long term borrowings

(2.46)

(4.16)

(10.44)

(10.44)

(11.95)

Other long term liabilities

(1.28)

(1.48)

(0.66)

(0.69)

(0.69)

Net Assets

 

 

23.02

16.58

7.93

5.18

0.25

CASH FLOW

Operating Cash Flow

 

 

(4.33)

(8.01)

(8.84)

(9.65)

(2.89)

Net Interest

0.00

0.00

0.00

0.00

0.00

Tax

0.00

0.00

0.00

0.00

0.00

Capex

(0.79)

(2.80)

(4.49)

(1.36)

(3.16)

Acquisitions/disposals

0.00

0.00

0.00

0.00

0.00

Financing

21.73

1.07

1.81

6.50

0.00

Dividends

0.00

0.00

0.00

0.00

0.00

Net Cash Flow

16.62

(9.74)

(11.52)

(4.51)

(6.05)

Opening net debt/(cash)

 

 

(4.62)

(21.24)

(11.50)

0.02

4.53

Other

0.00

0.00

0.00

0.00

0.00

FX adjustments

0.00

0.00

0.00

0.00

(0.00)

Closing net debt/(cash)

 

 

(21.24)

(11.50)

0.02

4.53

10.58

Source: Global Bioenergies, Edison Investment Research

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