Currency in AUD
Last close As at 03/02/2023
AUD0.07
▲ 0.02 (40.00%)
Market capitalisation
AUD36m
Research: Industrials
The memorandum of understanding (MOU) signed with energy heavyweight Total Eren gives real credibility to Provaris Energy’s compressed green hydrogen transportation solution and may also lead to funding options that make it a reality. The timing of the MOU is perfect as it comes at a time when the EU is introducing initiatives and investment to accelerate the introduction of green hydrogen into the energy mix, to improve energy reliability and push its zero-carbon agenda. Approval for construction of vessels could be the next key announcement that makes Provaris the genuine first mover in the space.
Provaris Energy |
MOU with Total Eren is pivotal endorsement |
Project announcements |
Industrial support services |
20 September 2022 |
Share price performance
Business description
Next events
Analyst
Provaris Energy is a research client of Edison Investment Research Limited |
The memorandum of understanding (MOU) signed with energy heavyweight Total Eren gives real credibility to Provaris Energy’s compressed green hydrogen transportation solution and may also lead to funding options that make it a reality. The timing of the MOU is perfect as it comes at a time when the EU is introducing initiatives and investment to accelerate the introduction of green hydrogen into the energy mix, to improve energy reliability and push its zero-carbon agenda. Approval for construction of vessels could be the next key announcement that makes Provaris the genuine first mover in the space.
Year end |
Revenue (A$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/21 |
0.2 |
(3.1) |
(0.7) |
0.0 |
N/A |
N/A |
06/22 |
0.4 |
(6.8) |
(1.3) |
0.0 |
N/A |
N/A |
06/23e |
0.3 |
(9.7) |
(1.7) |
0.0 |
N/A |
N/A |
06/24e |
0.3 |
(10.2) |
(1.6) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Credibility of compression solution underpinned
On 15 September, Provaris Energy announced the signing of a new MOU with Total Eren, a France-based renewable energy independent power producer (IPP). The agreement will see the two parties co-operate on the development of solutions to transport green hydrogen (H2) to Asia and Europe utilising Provaris Energy’s compressed H2 and transport solution. Specifically, the agreement will identify and assess opportunities for the importation of green H2 into Europe and Asia utilising Provaris’s GH2 Carriers. The two entities have already identified project opportunities, and terms and participation will be agreed in future. This is likely to include funding arrangements.
EU is building the mechanism to drive H2 adoption
Provaris’s initial H2 projects are in Australia, but this MOU brings the possibility that H2 projects being developed to supply Europe will become a reality sooner rather than later. The war in the Ukraine has pushed the EU to reduce reliance on Russian gas via its REPowerEU plan and the announcement of the creation of a European Hydrogen Bank, with access to a €3bn budget to guarantee the purchase of H2, will help underpin proposed clean H2 projects, such as Total Eren’s project in Morocco, that can then feed clean H2 via major import hubs like Rotterdam, and into the European Hydrogen Backbone network. Further assistance in the development of a clean H2 market came when the EU voted to loosen the ‘additionality’ rules and passed binding targets for renewable H2.
Valuation: MOU confirms credibility
This MOU confirms credibility and lends support to our modelling, which produced internal rates of return (IRR) of 9.7–18.7% from a range of scenarios and vessel sizes. Our assumptions remain relevant and are unchanged. Successful offtake discussions would be an opportunity to revisit our IRR assumptions, and are likely given the exponential growth in demand for green hydrogen forecast by the IEA.
Next milestone likely to be vessel class approvals
The increased credibility attached to Provaris’s H2 transport solution by this MOU is clearly very important. The next important step is likely to be a Class Approval from the American Bureau of Shipping (ABS), in the shape of an Approval for Construction for the novel H2Neo vessel. It is hoped that this authority will be forthcoming before the end of 2022, which would allow Provaris to engage in detailed discussions with shipyards that will initially focus on constructability and price with a view to first voyages in early 2027. These are likely to coincide with the first green H2 volumes from the numerous clean energy plants being planned. Some of these projects and trade routes are highlighted in the chart below.
Exhibit 1: Summary of Provaris Energy’s existing projects and areas of potential expansion |
Source: Provaris Energy |
We have updated our estimates following the release of FY22 results. The company ended the year with a comfortable net cash position of A$11.6m.
Exhibit 2: Financial summary
A$m |
2020 |
2021 |
2022 |
2023e |
2024e |
||
June year end |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
1.5 |
0.2 |
0.4 |
0.3 |
0.3 |
Profit Before Tax (norm) |
|
|
(2.9) |
(3.1) |
(6.8) |
(9.7) |
(10.2) |
Profit Before Tax (reported) |
|
|
(2.9) |
(3.1) |
(6.8) |
(9.7) |
(10.2) |
Reported tax |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit After Tax (norm) |
(2.9) |
(3.1) |
(6.8) |
(9.7) |
(10.2) |
||
Profit After Tax (reported) |
(2.9) |
(3.1) |
(6.8) |
(9.7) |
(10.2) |
||
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
(2.9) |
(3.1) |
(6.8) |
(9.7) |
(10.2) |
||
Net income (reported) |
(2.9) |
(3.1) |
(6.8) |
(9.7) |
(10.2) |
||
Basic average number of shares outstanding (m) |
393.5 |
417.3 |
512.9 |
579.5 |
648 |
||
EPS - normalised (c) |
|
|
(0.7) |
(0.7) |
(1.3) |
(1.7) |
(1.57) |
Revenue growth (%) |
34.9 |
(84.0) |
53.4 |
(29.2) |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
6.3 |
5.8 |
5.4 |
5.0 |
4.6 |
Intangible Assets |
6.2 |
5.8 |
5.4 |
5.0 |
4.6 |
||
Tangible Assets |
0.1 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Investments & other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Assets |
|
|
3.2 |
6.7 |
12.0 |
8.1 |
5.6 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
0.1 |
0.1 |
0.3 |
0.3 |
0.3 |
||
Cash & cash equivalents |
3.1 |
6.6 |
11.6 |
7.7 |
5.3 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
(0.3) |
(0.2) |
(0.8) |
(0.8) |
(0.8) |
Creditors |
(0.2) |
(0.2) |
(0.8) |
(0.8) |
(0.8) |
||
Other |
(0.1) |
(0.0) |
(0.1) |
(0.1) |
(0.1) |
||
Long Term Liabilities |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Long term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net Assets |
|
|
9.2 |
12.3 |
16.5 |
12.2 |
9.4 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
9.2 |
12.3 |
16.5 |
12.2 |
9.4 |
CASH FLOW |
|||||||
Op Cash Flow before WC and tax |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Receipts from the ATO (Covid-19 cash boost) |
0.1 |
0.1 |
0.0 |
0.0 |
0.0 |
||
Payments to suppliers and employees |
(2.9) |
(2.3) |
(3.1) |
(3.5) |
(3.8) |
||
Research and development |
(0.1) |
(0.0) |
0.0 |
(3.0) |
(3.0) |
||
Project development |
(1.0) |
(0.5) |
(1.9) |
(2.5) |
(2.8) |
||
Interest received |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Interest paid for lease liabilities |
(0.0) |
(0.0) |
0.0 |
(0.0) |
1.0 |
||
Research and development tax concession rebate |
1.4 |
0.2 |
0.0 |
0.0 |
0.0 |
||
WA Renewable Hydrogen Fund grant |
0.0 |
0.0 |
0.1 |
0.3 |
0.3 |
||
Working capital |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Tax |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net operating cash flow |
|
|
(2.5) |
(2.6) |
(4.8) |
(8.8) |
(8.3) |
Capex |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Acquisitions/disposals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Equity financing |
3.5 |
6.3 |
10.5 |
5.0 |
6.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(0.3) |
(0.3) |
(0.7) |
(0.2) |
(0.2) |
||
Net Cash Flow |
0.7 |
3.4 |
5.1 |
(3.9) |
(2.4) |
||
Opening net debt/(cash) |
|
|
(2.4) |
(3.1) |
(6.6) |
(11.6) |
(7.7) |
FX |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(3.1) |
(6.6) |
(11.6) |
(7.7) |
(5.3) |
Source: Company accounts, Edison Investment Research
|
|
Research: TMT
Esker reported a robust H122 performance, with 19% revenue growth year-on-year, 41% operating profit growth and 19% growth in the annual recurring value of new contracts signed. Reflecting the potential for slowing demand due to current macroeconomic uncertainty, the company slightly reduced its revenue guidance for FY22 but expects to be at the upper end of its operating margin target range. We reduce our cost forecasts for FY22/23 and revenue forecast by 1% in FY23, driving a 16% EPS upgrade in FY22 and a 9% downgrade in FY23.
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