Model adjustments for full integration of power generation units (Europlasma)
Model adjustments for full integration of power generation unitsEPS CHANGE
CHANGE IN TARGET PRICE€ 0.38 vs 0.37 +1.42%
Europlasma's business model change, whereby it garners full control of its green power generation units, is an essential strategic move with positive implications in terms of visbility. It tends to weigh on near-term valuations though as the surge in its fixed asset base bites into the FCF. It is primarily the DCF and NAV valuations that help recognise the future value of the business in its new guise. It is important for would-be investors to keep in mind that the technology issues are essentially sorted, that the debt funding of project number 2 is also sorted but that the equity funding of future units will depend on the good execution of the first units. So that our modelling may have to be rejigged.
CHANGE IN EPS2017 : € -0.11 vs -0.11
2018 : € 0.00 vs 0.01 -97.3%
Changes to 2018 earnings are not relevant and a consequence of the change in the business model.
CHANGE IN NAV€ 0.43 vs 0.38 +13.2%
The update in our NAV recognises the value of the power generation assets as per the value agreed upon in an asset swap with a minority partner (see relevant research papers).
CHANGE IN DCF€ 0.73 vs 0.57 +27.6%
Sales and cash flow will be "power"-driven in the future, whereas they were EPC-based in the previous set-up. Our DCF has been rebuilt to allow for the surge in EBITDA and capex in the next 4-5 years with a slowdown thereafter. This DCF also has to allow for dividend payments to minorities in power SPVs.
Europlasma SA. Europlasma SA is a France-based company that offers a range of solutions for hazardous waste treatment. The Company's technology allows converting toxic waste into reusable materials. The Company is composed of four entities, such as Europlasma Torch & Process, which provides engineering consulting for hazardous waste treatment, and sells and licenses its plasma torches and technology; Inertam SAS, which specializes in destruction and valorization of asbestos waste and operates ash melting units; CHO Power SAS, which supplies technological solutions for the efficient transformation of biomass and waste into electric energy and Europe Environnement, which offers ventilation and air cleaning systems for industrial applications.
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