KTG Energie
Written by
KTG Energie |
Keeps going and growing |
Trading statement |
Alternative energy |
16 February 2016 |
Share price performance
Business description
Next events
Analysts
KTG Energie is a research client of Edison Investment Research Limited |
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KTG Energie (KTG) has released a solid trading statement for FY15, giving an encouraging outlook that underpins our expectation of 31% EPS CAGR for 2015-18. We expect the company to continue to take advantage of both organic and external growth opportunities as it cements its position in the biogas sector. KTG stands out as one of very few profitable biogas developers and, according to management, is well set up for the highly leveraged balance sheet. We will update our forecasts and valuation (currently €18) after the release of full financial statements later this month.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
10/13 |
54.3 |
2.7 |
0.27 |
0.40 |
37.1 |
3.9 |
10/14 |
73.3 |
4.0 |
0.43 |
0.45 |
23.3 |
4.4 |
10/15e |
87.0 |
6.8 |
0.57 |
0.50 |
17.6 |
5.0 |
10/16e |
100.4 |
9.3 |
0.75 |
0.55 |
13.3 |
5.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Solid FY15 results
KTG has reported a solid FY15 trading statement that confirms our expectation of the company’s growth trajectory. Revenues were €92.7m vs our forecast of €87m. EBITDA came in at €25m (Edison €26.2m), EBIT at €13.3m (€15.6m) and net income at €2.05m (€3.9m). These preliminary numbers do not yet fully include the 7.5MW Brandenburg acquisition announced in June 2015 (due to a dispute with the administrator), although we have included the acquisition in our forecasts. The underlying like-for-like (l-f-l) EBITDA margin of 33% was above our expectation. It shows the company’s strength in executing on its business strategy to drive margin expansion by continuous operating performance improvement.
Positive FY16 growth outlook
For 2016, management guides for revenues of at least €90m and EBITDA of €28m on the basis of its existing asset base. Our forecast of €100m revenues and €31m of EBITDA for FY16 reflect c 5MW of plant growth. Our EBITDA margin assumption of 31% is in line with the company’s guidance. We think there will be opportunities for organic growth and attractive acquisitions as the biogas sector continues to consolidate, exemplified by the last acquisition, which was at very favourable terms. The proceeds from the 2015 capital raise are likely to have been used for these initiatives. We expect the company to continue to build on its stable growth, according to plan. We note an improvement in the equity/total assets ratio from 10% to 13% year-on-year (y-o-y), although the balance sheet remains highly geared.
Valuation: Unchanged at €18/share
We value KTG using a three-stage DCF methodology based on long-term normalised assumptions (risk-free rate 4.0%, equity risk premium 4.5%, 35% equity ratio). We will revisit our valuation (unchanged at €18 per share) after the release of full FY15 results.
FY15 trading statement
KTG reports solid trading for FY15. At €92.7m, revenues were above our expectations due to higher than-expected trade revenues. EBITDA came in at €25m (Edison €26.2m), EBIT at €13.3m (€15.6m) and net income at €2.05m (€3.9m). However, the company quotes underlying plant revenues of €75m. This implies an EBITDA margin for the core biogas plants of 33%, which is better than expected. In addition, the 7.5MW Brandenburg acquisition (announced in June 2015) was not included in the results, whereas we have included the acquisition in our forecasts. We understand that due to a dispute with the administrator from which KTG made the acquisition, the assets have not been fully consolidated and are thus not yet included. Full consolidation would have lifted reported EBITDA and EBIT level with our forecasts. Management has confirmed that KTG has an installed plant base of more than 63MW including the acquisition (or 60MW l-f-l), which is in line with our 64MW estimate for FY15. We will reassess our assumptions surrounding the acquisition after the release of full financial statements later this month.
Management has reiterated that it will not require additional cash to service debt as it can use proceeds from refinancing through KfW loans, as per its declared business strategy. We continue to see the balance sheet and cash flow situation as unchanged. The strong operational cash flow will be absorbed by growth capex, leaving a highly leveraged balance sheet with a debt/total assets ratio of 63% (FY15). The financial structure reflects KTG’s project financing approach, yet we point out our unchanged view that it may entail risk relating to interest rates and refinancing at corporate level. We acknowledge a y-o-y improvement in the equity/total assets ratio from 10% to 13%, even though that might deteriorate again if and when the company uses funds for growth and acquisition initiatives.
Exhibit 1: FY15 results and FY16 outlook
€m |
FY15A |
FY15 Edison forecast |
FY16 guidance (l-f-l) |
FY16e Edison forecast |
Revenues |
92.7 |
87.0 |
>90 |
100,392 |
% chge |
26.4% |
18.7% |
15.3% |
|
EBITDA |
25.05 |
26.24 |
28 |
31,468 |
% chge |
14.0% |
19.4% |
19.9% |
|
EBITDA margin |
27.0% |
30.1% |
31.1% |
31.3% |
EBIT |
13.3 |
15.6 |
||
EBIT margin |
14.3% |
17.9% |
||
% chge |
10.9% |
30.2% |
||
Earnings |
2.05 |
3.90 |
||
% chge |
10.4% |
110.1% |
Source: KTG Energie and Edison Investment Research
For FY16, management guides for revenues in excess of €90m and EBITDA up to €28m on an l-f-l basis. This implies a 31% EBITDA margin, which is in line with our expectations. Our forecast is above the l-f-l guidance, at €100m revenues and €31m EBITDA, as we include additional growth over and above the current asset base. We expect 5MW of incremental capacity growth for FY16e. As the company continues to optimise plant performance, we expect continuous margin expansion towards a long-term level, around 33%. We will revisit our forecasts and valuation after the release of the full accounts.
Exhibit 2: Financial summary
€000s |
2013 |
2014 |
2015e |
2016e |
2017e |
2018e |
||
Oct |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
54,308 |
73,325 |
87,044 |
100,392 |
108,563 |
116,011 |
Cost of Sales |
(27,433) |
(32,218) |
(38,212) |
(44,173) |
(47,768) |
(51,045) |
||
Gross Profit |
26,875 |
41,106 |
48,832 |
56,220 |
60,795 |
64,966 |
||
EBITDA |
|
|
13,218 |
21,968 |
26,236 |
31,468 |
34,272 |
38,215 |
Operating Profit (before amort. and except.) |
7,985 |
11,994 |
15,619 |
19,083 |
21,865 |
25,893 |
||
Intangible Amortisation |
0 |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
(264) |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
7,720 |
11,994 |
15,619 |
19,083 |
21,865 |
25,893 |
||
Net Interest |
(5,320) |
(7,931) |
(8,841) |
(9,780) |
(10,222) |
(9,775) |
||
Other financial items |
(1) |
(71) |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
2,665 |
3,992 |
6,778 |
9,303 |
11,644 |
16,118 |
Profit Before Tax (FRS 3) |
|
|
2,400 |
3,992 |
6,778 |
9,303 |
11,644 |
16,118 |
Tax |
(1,077) |
(1,369) |
(2,876) |
(3,948) |
(4,941) |
(6,840) |
||
Profit After Tax (norm) |
1,587 |
2,623 |
3,901 |
5,355 |
6,702 |
9,279 |
||
Profit After Tax (FRS 3) |
1,323 |
2,623 |
3,901 |
5,355 |
6,702 |
9,278 |
||
Average Number of Shares Outstanding (m) |
6.000 |
6.125 |
6.825 |
7.150 |
7.150 |
7.150 |
||
EPS - normalised (c) |
|
|
26.46 |
42.8 |
57.2 |
74.9 |
93.7 |
129.8 |
EPS - normalised fully diluted (c) |
|
|
26.5 |
42.8 |
57.2 |
74.9 |
93.7 |
129.8 |
EPS - (IFRS) (c) |
|
|
22.0 |
42.8 |
57.2 |
74.9 |
93.7 |
129.8 |
Dividend per share (c) |
40.0 |
45.0 |
50.0 |
55.0 |
65.0 |
80.0 |
||
Gross Margin (%) |
49.5 |
56.1 |
56.1 |
56.0 |
56.0 |
56.0 |
||
EBITDA Margin (%) |
24.3 |
30.0 |
30.1 |
31.3 |
31.6 |
32.9 |
||
Operating Margin (before GW and except.) (%) |
14.7 |
16.4 |
17.9 |
19.0 |
20.1 |
22.3 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
158,048 |
177,787 |
197,670 |
202,785 |
205,378 |
193,056 |
Intangible Assets |
862 |
783 |
783 |
783 |
783 |
783 |
||
Tangible Assets |
157,184 |
177,002 |
196,885 |
202,000 |
204,593 |
192,270 |
||
Investments |
2 |
2 |
2 |
2 |
2 |
2 |
||
Current Assets |
|
|
50,260 |
60,475 |
68,631 |
80,541 |
82,936 |
100,917 |
Stocks |
11,474 |
17,430 |
20,673 |
17,911 |
18,976 |
20,278 |
||
Debtors |
28,657 |
33,677 |
34,756 |
49,428 |
50,758 |
53,580 |
||
Cash |
8,971 |
8,302 |
12,137 |
12,137 |
12,137 |
25,993 |
||
Other |
1,157 |
1,065 |
1,065 |
1,065 |
1,065 |
1,065 |
||
Current Liabilities |
|
|
(5,678) |
(10,036) |
(6,673) |
(8,107) |
(8,396) |
(8,892) |
Creditors |
(5,678) |
(10,036) |
(6,673) |
(8,107) |
(8,396) |
(8,892) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(182,720) |
(203,125) |
(225,712) |
(239,361) |
(241,291) |
(241,823) |
Long term borrowings |
(134,190) |
(145,509) |
(167,697) |
(180,886) |
(182,319) |
(182,319) |
||
Other long term liabilities |
(48,529) |
(57,616) |
(58,015) |
(58,475) |
(58,972) |
(59,504) |
||
Net Assets |
|
|
19,910 |
25,100 |
33,915 |
35,858 |
38,627 |
43,258 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
5,852 |
14,317 |
16,074 |
17,504 |
27,721 |
28,279 |
Net Interest |
(5,320) |
(7,931) |
(8,841) |
(9,780) |
(10,222) |
(9,775) |
||
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(23,273) |
(31,512) |
(30,500) |
(17,500) |
(15,000) |
0 |
||
Acquisitions/disposals |
(6,558) |
0 |
0 |
0 |
0 |
0 |
||
Financing |
0 |
15,538 |
7,670 |
0 |
0 |
0 |
||
Dividends |
0 |
(2,400) |
(2,756) |
(3,413) |
(3,933) |
(4,648) |
||
Net Cash Flow |
(29,299) |
(11,988) |
(18,354) |
(13,188) |
(1,433) |
13,856 |
||
Opening net debt/(cash) |
|
|
75,309 |
125,219 |
137,207 |
155,560 |
168,748 |
170,181 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
(0) |
0 |
0 |
0 |
|||
Closing net debt/(cash) |
|
|
125,219 |
137,207 |
155,560 |
168,748 |
170,181 |
156,325 |
Source: KTG Energie and Edison Investment Research. Note: Under German GAAP, assets are valued at acquisition costs. IFRS would mark assets to market and thereby lead to higher net assets.
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