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Global Bioenergies — Update 3 May 2017

Global Bioenergies — Update 3 May 2017

Global Bioenergies has completed a stage of significant expansion with the completion of its Leuna demo plant and a raft of industrial agreements in 2016. 2016 results reflected this expansion in line with our expectations and the company closed the year having comfortably funded its cash spend for 2017. It now needs to deliver commercial revenues to reach profitability. We have updated our forecasts to reflect a more conservative revenue expectation and the Syngip acquisition. Our valuation range remains €34-51 per share. We highlight funding risk from 2018.

Analyst avatar placeholder

Written by

Global Bioenergies

Towards scale and revenues

Trading update

Alternative energy

3 May 2017

Price

€19.90

Market cap

€68m

Net debt (€m) at 31 December 2016

3.4

Shares in issue

3.4m

Free float

40%

Code

ALGBE

Primary exchange

Alternext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(12.3)

(19.0)

(16.7)

Rel (local)

(16.0)

(26.9)

(30.3)

52-week high/low

€29.9

€19.2

Business description

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

Next events

H117 results

September 2017

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 has completed a stage of significant expansion with the completion of its Leuna demo plant and a raft of industrial agreements in 2016. 2016 results reflected this expansion in line with our expectations and the company closed the year having comfortably funded its cash spend for 2017. It now needs to deliver commercial revenues to reach profitability. We have updated our forecasts to reflect a more conservative revenue expectation and the Syngip acquisition. Our valuation range remains €34-51 per share. We highlight funding risk from 2018.

Year
end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/15

2.2

(12.2)

(4.0)

0.0

N/A

N/A

12/16

3.3

(12.4)

(3.4)

0.0

N/A

N/A

12/17e

3.7

(15.7)

(4.0)

0.0

N/A

N/A

12/18e

3.7

(16.7)

(4.2)

0.0

N/A

N/A

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

2016 results in line and cash spend covered

GBE has reported 2016 results in line with expectations. Revenues were €3.3m vs our forecast of €2.2m. The bulk of revenues were subsidies, generated by progress in line with targets for the Leuna plant build. In addition, two new partnerships produced R&D revenues. The operating loss came in at €11.9m, in line with our forecast of €11.7m. The company reported a net loss of €10.6m, in line with our forecast of €10.5m. Capex, mostly for Leuna, of €6.1m was more than our €5.3m forecast, nevertheless cash at the year-end stood at €8.0m, materially above our expected €5.3m. This was because of stronger operating cash flow and greater than expected financing inflows. With that, our forecast 2017 capex of €2.4m, which is much reduced from previous years now that the bulk of Leuna capex has been spent, is comfortably covered.

Industrial and commercial progress

GBE started operations at the Leuna plant, which was a big step ahead in scaling up. It has further signed a number of industrial agreements during the year, notably with Audi, L’Oréal, Clariant and Aspen, all of which have expanded the company’s future market potential. The recent acquisition of Syngip also widens market access, in addition to diversifying technology.

Valuation: €34-51/share

We value GBE on a DCF methodology with risk-weighted cash flows to reflect the early stage nature of the business. We have rolled forward our DCF but also slightly increased our WACC to account for higher risk stemming from higher losses and the funding requirements. Altogether, our valuation remains €34-51/share, as these effects offset each other. Successful expansion of production at Leuna and meaningful commercial revenues will be the key elements that could de-risk cash flow, alongside feedstock diversification.

Updating our forecasts

We have updated our forecasts to reflect the 2016 results, as well as the Syngip acquisition and outlook going forward. We have reduced our 2017 revenue forecast as we now understand that the upfront payments (in total €5m) for IBN-ONE, the first JV with Cristal Union as partner, will most likely be staggered over three years, 2016, 2017 and 2018. Further, we increase the company’s cost base in order to take account of Syngip. Lastly, following the US presidential election, there may be shift in clean energy in the US, as policy seems to become less supportive of alternative fuels and climate change. That could mean less attractive support schemes for alternative energy and fuel processes. This in turn may increase the challenge for the company to sign new licensing deals. Nevertheless, our 2018 forecast includes IBN-ONE revenues of €2m as well as €1.3m of new commercial revenues, some of which relate to fab construction and engineering services. We estimate the company will have to seek financing in 2018.

As a result of our revisions, we forecast an increased loss in 2017 vs 2016 and for 2018 vs 2017. Our 2017 EPS is reduced to a loss of €3.96 per share (from a loss of €2.73). Our 2018e EPS is a loss of €4.23.

Exhibit 1: Earnings revision

2017e

2018e

Old

New

New

EBIT (€m)

(10.4)

(15.2)

(16.0)

EPS (€)

(2.73)

(3.96)

(4.23)

Source: Edison Investment Research

Valuation

Our forecast revisions also feed through to our valuation. However, we also roll forward our DCF. At the same time, we reflect a higher risk premium of 100bps into our WACC in order to account for higher risk as a result of a longer period of higher losses. Altogether, our fair value range remains unchanged at €34-51 per share. We highlight that this does not reflect the funding risk that we see from 2018. We believe the company may require at least €8m of new funding in 2018, which would equate to €2.5/share under the assumption of debt funding. Other models may have a lower impact per share.

Exhibit 2: Financial summary

€m

2013

2014

2015

2016

2017e

2018e

Year end 31 December

FGAAP

FGAAP

FGAAP

FGAAP

FGAAP

FGAAP

PROFIT & LOSS

Grants

0.03

1.36

0.86

1.20

1.17

0.40

Other revenue

2.43

1.81

1.37

2.09

2.50

3.30

Revenue

 

 

2.46

3.17

2.23

3.29

3.67

3.70

Operating Expenses

(6.36)

(7.85)

(6.97)

(7.49)

(9.48)

(9.98)

Gross Profit

(3.90)

(4.69)

(4.75)

(4.20)

(5.81)

(6.28)

EBITDA

(6.55)

(8.99)

(11.04)

(10.85)

(12.29)

(13.19)

Operating Profit (before amort. and except.)

 

(6.66)

(9.50)

(12.01)

(11.92)

(15.21)

(15.98)

Amortisation

0.00

0.00

0.00

0.00

0.00

0.00

Exceptionals

(0.00)

0.00

0.11

0.05

0.00

0.00

Other

0.00

0.00

0.00

0.00

0.00

0.00

Operating Profit

(6.67)

(9.50)

(11.90)

(11.87)

(15.21)

(15.98)

Net Interest

0.13

0.29

(0.26)

(0.53)

(0.50)

(0.71)

Profit Before Tax (norm)

 

 

(6.54)

(9.21)

(12.16)

(12.40)

(15.71)

(16.69)

Tax

1.41

1.59

1.99

1.90

2.25

2.30

Minority interests

0.00

0.00

0.00

0.00

0.00

0.00

Net income (adj NP)

(5.12)

(7.62)

(10.29)

(10.56)

(13.46)

(14.39)

Net income (reported)

(5.12)

(7.62)

(10.18)

(10.51)

(13.46)

(14.39)

Average Number of Shares Outstanding (m)

2.5

2.6

2.6

3.1

3.4

3.4

EPS - normalised fully diluted (c)

 

 

(204.82)

(293.11)

(395.61)

(335.71)

(395.82)

(423.28)

EPS - (Reported) (€)

 

 

(2.05)

(2.93)

(3.91)

(3.34)

(3.96)

(4.23)

Gross Margin (%)

N/A

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

N/A

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

N/A

BALANCE SHEET

Fixed Assets

 

 

1.76

3.97

7.43

12.40

11.84

9.98

Intangible Assets

0.09

0.14

0.11

0.07

0.07

0.07

Tangible Assets

1.58

3.72

7.18

12.18

11.63

9.76

Investments

0.09

0.11

0.14

0.15

0.15

0.15

Current Assets

 

 

25.72

20.65

14.78

13.14

8.29

1.97

Stocks

2.02

0.29

0.30

5.07

0.26

0.27

Debtors

0.00

0.00

0.34

0.00

3.64

1.69

Cash

23.70

15.66

10.42

8.07

4.38

0.00

Other

0.00

4.71

3.73

0.00

0.00

0.00

Current Liabilities

 

 

(0.72)

(2.40)

(3.18)

(4.12)

(3.17)

(2.60)

Creditors

(0.72)

(2.40)

(3.18)

(4.12)

(3.17)

(2.60)

Short term borrowings

0.00

0.00

0.00

0.00

0.00

0.00

Long Term Liabilities

 

 

(3.74)

(5.64)

(11.10)

(11.48)

(12.11)

(19.89)

Long term borrowings

(2.46)

(4.16)

(10.44)

(10.44)

(11.48)

(19.26)

Other long term liabilities

(1.28)

(1.48)

(0.66)

(1.04)

(0.63)

(0.63)

Net Assets

 

 

23.02

16.58

7.93

9.93

4.85

(10.54)

CASH FLOW

Operating Cash Flow

 

 

(4.33)

(8.01)

(8.84)

(9.45)

(9.81)

(10.53)

Net Interest

0.00

0.00

0.00

(0.53)

(0.50)

(0.71)

Tax

0.00

0.00

0.00

0.00

0.00

0.00

Capex

(0.79)

(2.80)

(4.49)

(6.12)

(2.37)

(0.93)

Acquisitions/disposals

0.00

0.00

0.00

0.00

0.00

0.00

Financing

21.73

1.07

1.81

12.70

9.00

0.00

Dividends

0.00

0.00

0.00

0.00

0.00

0.00

Net Cash Flow

16.62

(9.74)

(11.52)

(3.40)

(3.68)

(12.16)

Opening net debt/(cash)

 

 

(4.62)

(21.24)

(11.50)

0.02

3.42

7.10

Other

0.00

0.00

0.00

0.00

0.00

0.00

FX adjustments

0.00

0.00

0.00

0.00

0.00

0.00

Closing net debt/(cash)

 

 

(21.24)

(11.50)

0.02

3.42

7.10

19.26

Source: Global Bioenergies accounts, Edison Investment Research. Note: 2016/17 financing includes convertible funding, which was modelled as an equity transaction assuming the conversion price of €25/share. We assume that three tranches are exercised in 2016 and the remainder in 2017.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Global Bioenergies and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Global Bioenergies and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

Abzena — Fund-raising could drive transformational growth

Abzena recently announced a placing of £25m gross (issuing 75.8m new shares at 33p) to expand its service offering, capacity and capabilities. Importantly, we expect this fund-raising to take Abzena to profitability, which will be a significant milestone for the company. We have increased our valuation to £132m (vs £105m), primarily due to the increase in forecast service revenues, improved gross margin and cash position.

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