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Global Bioenergies — Synergistic acquisition for new markets

Global Bioenergies — Synergistic acquisition for new markets

Global Bioenergies’ (GBE) acquisition of Syngip in an all-share deal further strengthens the company’s third-generation processes and as such is very synergistic. Our valuation range is now €34-51 per share (from €37-56) due to the higher share count.

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Written by

Global Bioenergies

Synergistic acquisition for new markets

Trading update

Alternative energy

8 March 2017

Price

€22.32

Market cap

€77m

Net debt (€m) at 30 June 2016

0.7

Shares in issue

3.4m

Free float

40%

Code

ALGBE

Primary exchange

Alternext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(6.3)

(3.0)

12.6

Rel (local)

(9.9)

(8.5)

0.5

52-week high/low

€29.9

€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. The process will be out-licensed to partners once it is proven in an industrial pilot

Next events

FY16 results

April 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’ (GBE) acquisition of Syngip in an all-share deal further strengthens the company’s third-generation processes and as such is very synergistic. Our valuation range is now €34-51 per share (from €37-56) due to the higher share count.

Year
end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/14

3.2

(9.2)

(2.9)

0.0

N/A

N/A

12/15

2.2

(12.2)

(4.0)

0.0

N/A

N/A

12/16e

2.2

(12.1)

(3.4)

0.0

N/A

N/A

12/17e

4.4

(10.9)

(2.7)

0.0

N/A

N/A

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

Synergistic acquisition of international start-up

GBE has acquired Syngip, a Dutch start-up that is developing a process based on microorganisms to produce light olefins. The company uses industrial waste emissions in order to convert carbon monoxide (CO) and carbon dioxide (CO2) through metabolisation. GBE will incorporate metabolic pathways in order to produce isobutene as a first output product, thus the process is in direct synergy with GBE’s product. In terms of both the product and the expansion of technology, Syngip fits very well into GBE’s strategy to expand into third-generation processes. We understand that Syngip will continue to focus on further developing third-generation processes. This is important to broaden feedstock sources, and because they enable GBE to reduce its cost base and its dependency on the commodity spread between oil and sugar prices. Syngip’s process is expected to be competitive with the conventional olefins production process at an oil price of US$45/bbl. Taking into account renewable fuel incentives, the break-even oil price will be still lower. It is also noteworthy that the Syngip process contributes to GHG emission savings, which positions GBE as a solution for industrial companies looking to comply with increasingly tight emissions regulations. We also note that this acquisition further widens the international reach of the company.

Share-based deal with incentives

GBE will acquire Syngip in an all-share deal and issue 37,240 new shares and 61,191 warrants. Exercise of the warrants is subject to Syngip achieving technology development milestones by February 2019. With that, management estimates c 1.1% dilution for existing shareholders, which could increase to a maximum of 3.1% after exercise of all warrants. In this way, the company conserves cash, which it will require for organic growth, and also ensures there is incentive for technology success. The deal values Syngip at €875k. There is a lockup period on the new shares until the milestone is reached or until February 2019.

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. Our valuation range reduces from €37-56/share to €34-51 on a higher share count. Further progress on new feedstock development, reinforced by Syngip’s acquisition, might reduce GBE’s dependence on commodities prices.

Widened market reach

GBE is developing a process based on three generations of feedstocks for isobutene production. Besides fuel production, each generation targets particular markets for the company. Each of those provides benefits of sectoral and geographic diversification, enhanced commercial development potential and reduction of dependence on commodities.

■

The first-generation technology is based on sugar beets. It targets the agricultural economy. The sugar industry and other agricultural sectors are initial potential commercial licensees. Europe and the US, but also tropical regions and particularly Brazil are key regions.

■

Second-generation feedstocks are mostly wood and forestry based. Forestry and paper industries in Northern Europe are key markets. The technology also reduces feedstock costs.

■

The third-generation technology uses the combination of CO and CO2. Steel manufacturers are the most immediate target market as they produce large quantities of unabated emissions in the CO/CO2 combination. The development of the third generation therefore opens the technology to additional industries and also new geographies: Germany, Eastern Europe and China are very important region for the steel sector.

The Syngip deal therefore provides additional diversification and opens new markets, while the company will continue to target its first- and second-generation based industries and regions. This is particularly relevant as the company needs to develop markets where it can be commercially successful in a low oil price environment.

Exhibit 1: Financial summary

€m

2013

2014

2015

2016e

2017e

Year end 31 December

FGAAP

FGAAP

FGAAP

FGAAP

FGAAP

PROFIT & LOSS

Grants

0.03

1.36

0.86

1.20

0.90

Other revenue

2.43

1.81

1.37

1.00

3.50

Revenue

 

 

2.46

3.17

2.23

2.20

4.40

Operating Expenses

(6.36)

(7.85)

(6.97)

(7.49)

(7.82)

Gross Profit

(3.90)

(4.69)

(4.75)

(5.29)

(3.42)

EBITDA

(6.55)

(8.99)

(11.04)

(10.60)

(8.82)

Operating Profit (before amort. and except.)

 

(6.66)

(9.50)

(12.01)

(11.67)

(10.42)

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)

(11.67)

(10.42)

Net Interest

0.13

0.29

(0.26)

(0.45)

(0.50)

Profit Before Tax (norm)

 

 

(6.54)

(9.21)

(12.16)

(12.12)

(10.92)

Tax

1.41

1.59

1.99

1.60

1.65

Minority interests

0.00

0.00

0.00

0.00

0.00

Net income (Adj NP)

(5.12)

(7.62)

(10.29)

(10.53)

(9.27)

Net income (Reported)

(5.12)

(7.62)

(10.18)

(10.53)

(9.27)

Average Number of Shares Outstanding (m)

2.5

2.6

2.6

3.1

3.4

EPS - normalised fully diluted (c)

 

 

(204.82)

(293.11)

(395.61)

(334.68)

(272.67)

EPS - (Reported) (c)

 

 

(2.05)

(2.93)

(3.91)

(3.35)

(2.73)

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

11.68

12.52

Intangible Assets

0.09

0.14

0.11

0.11

0.11

Tangible Assets

1.58

3.72

7.18

11.43

12.27

Investments

0.09

0.11

0.14

0.14

0.14

Current Assets

 

 

25.72

20.65

14.78

9.78

9.39

Stocks

2.02

0.29

0.30

0.21

0.21

Debtors

0.00

0.00

0.34

0.52

0.94

Cash

23.70

15.66

10.42

5.33

4.50

Other

0.00

4.71

3.73

3.73

3.73

Current Liabilities

 

 

(0.72)

(2.40)

(3.18)

(1.21)

(1.93)

Creditors

(0.72)

(2.40)

(3.18)

(1.21)

(1.93)

Short term borrowings

0.00

0.00

0.00

0.00

0.00

Long Term Liabilities

 

 

(3.74)

(5.64)

(11.10)

(11.13)

(11.13)

Long term borrowings

(2.46)

(4.16)

(10.44)

(10.44)

(10.44)

Other long term liabilities

(1.28)

(1.48)

(0.66)

(0.69)

(0.69)

Net Assets

 

 

23.02

16.58

7.93

9.12

8.85

CASH FLOW

Operating Cash Flow

 

 

(4.33)

(8.01)

(8.84)

(11.51)

(7.38)

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)

(5.33)

(2.44)

Acquisitions/disposals

0.00

0.00

0.00

0.00

0.00

Financing

21.73

1.07

1.81

11.75

9.00

Dividends

0.00

0.00

0.00

0.00

0.00

Net Cash Flow

16.62

(9.74)

(11.52)

(5.09)

(0.82)

Opening net debt/(cash)

 

 

(4.62)

(21.24)

(11.50)

0.02

5.11

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

5.11

5.94

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

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