EQTEC - Valuation Update
EQTEC – Valuation Update
Further commercial progress and financial strengthening prompts forecasts update
EQTEC provides engineering and design services and sells its EQTEC Advanced Gasification Technology to waste-to-energy operators and enterprise partners. The company works together with multiple parties involved in W2E projects including the developers, waste owners, building contractors and funders with a view to ultimately providing its advanced gasification technology, associated engineering & design services and O&M services.
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Further significant commercial progress in H1 2020
Since our last update on the company at the end of March, EQTEC has announced further operational and commercial progress on a range of projects across the UK, US and Europe. In addition, 10 new commercial enquiries were received by EQTEC in Q1/early Q2 2020 and full detailed commercial offers, with an aggregate potential sales value of c.€120 million, were made during the period.
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Financial position strengthened via debt re-profiling, warrant exercise & placing
On 1st June, EQTEC announced the re-profiling of its debt facilities with lenders Altair and Riverfort. Existing loans plus interest totalling €2.7 million had their maturity extended from 31st July 2020 to 30th June 2021, with interest rates reduced from 12.5% to 10%. Also in June, a total of £964,750 was received by the company via the exercise of certain warrants. Further, in July, EQTEC raised £10 million via a placing and subscription.
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Further progress prompts forecasts review
Given the commercial progress being made and increased pipeline of opportunities we have revisited our forecasts for the years 2020 to 2022. At the top line we expect revenues to grow markedly over the forecast period as EQTEC delivers on its project pipeline. Net profits are forecast at €5.3 million in 2021, rising to €8.6 million in 2022. We consider a multiple of 15 times earnings to be a justifiable figure to use for our valuation, which applied to our 2022 forecasts and discounted back to end June 2020 at a rate of 12% derives a price per share of 1.39p.
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Peer analysis supports valuation
Applying the average London listed alternative energy sector peer group enterprise value to EQTEC implies a market cap of £88.08 million, or 1.282p per share. We thus update coverage of EQTEC with an increased target price of 1.39p based on our earnings valuation and retain our stance of Conviction Buy.
EQTEC is a clean energy project developer and operator. Co. identifies, develops, builds, owns and operates power plants in the UK and Ireland using clean energy technologies. Co. focuses on both large and small scale projects, providing flexibility to maximize existing land positions while diversifying development and technology risks. Co. seeks to take projects from "Greenfield" stage to "Shovel Ready" stage. Co. develops and builds projects using wood and waste wood as the sustainable fuel source. Co.'s core focus is on converting biomass or wood into clean electricity and heat. Co. has one operating segment: power generation.
Align Research is a commissioned research company founded in November 2015 in order to provide the under-served smaller company space with high quality analysis. We have an initial focus on the natural resources sector, in which we see significant opportunities given the current once in a generation bear market, however all undervalued small caps (sub £100m) are considered by our team. Align was founded by industry professionals with decades of experience in the stock markets, headed up by highly qualified individuals from both fund management and analytical backgrounds.
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