Omnia | Spread thin
Omnia is stretched across multiple fronts, which is exacerbated by ZAR 4.6bn of debt that has accumulated given two large acquisitions (ZAR 2.1bn) and the development of its nitro phosphate plant (ZAR 0.7bn). While we expect its Agricultural business to rebound, we see specific risk in its Mining and Chemicals' businesses. We have little confidence in the Mining business rebounding after the profit margins halved from 16.8% to 7.9% over the past five years and the Chemicals business is undergoing a much-needed restructuring (c.3% ROA). Consequently, we estimate that net debt to adjusted EBITDA will peak at 5.2x in FY '19a, which may require a rights issue of up to ZAR 1.5bn in our view.We estimate that the counter is trading at a 5.8x rolled forward PE (0.48x PE relative). Our EV/EBITDA valuation methodology delivers a one-year target price of ZAR 57.55ps, implying a total return of 12.3%. This is 1.5% greater than our estimated market return of 10.8%. Accordingly, we downgrade to a MARKET PERFORM rating.
Omnia Holdings engaged in the business of services and solutions for the agricultural, mining and chemicals industries. Co.'s segments include: Agriculture, which comprises Omnia Fertilizer and Omnia Specialties, produces and trades in granular, liquid and specialty fertilizers for a range customer base of farmers, co-operatives and wholesalers; Mining, which comprises BME, a manufacturer and supplier in southern and West Africa of explosives, related accessories and blasting services to the mining, quarrying and construction industries; and Chemicals which comprises Protea Chemicals, a manufacturer and distributor of specialty, functional and effect chemicals and polymers.
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