Famur: Market leader, high dividends (stays BUY)
We reiterate our BUY rating on Famur, with a new 12M price target (PT) of PLN 5.14/share (53% upside), down from PLN 6.33/share. As a cost competitive market leader (c.70% market shares in both Poland and Russia), Famur should be able to tackle the market slowdown relatively better than its competitors, in our view. Moreover, we see the weaker market as a chance for the company to gain even greater market shares (we expect a 2018-21E export CAGR of 6%). On top of this, between 1H18 and 9M19, the high-margin aftermarket services share in Famur’s revenues doubled, which we expect to cushion the impact of the challenging environment on its profits. We also note that Famur’s strong FCF generation capacity (a 2019-21E FCF yield of 10-17%), should allow generous dividend payments (2019-21E yields at 9-11%), while keeping low leverage (2019-21E ND/EBITDA at 0.4x or below). Finally, we see Famur as attractively valued (consensus 2020E EV/EBITDA at 3.8x vs. its 6.4x long-term average). We highlight the deteriorating market outlook, and the significant charges reported in the surface segment in 3Q19, as the major reasons for the cut in our PT and the stock price weakness.FAMUR SA is a Poland-based manufacturer of mining equipment and machinery. The main area of the Company's operations is manufacture of automated longwall systems enabling the exploitation of coal. The Company also specializes in design and production of equipment for underground mines and open pits, as well as bulk material handling equipment and machines for coal preparation plants. The Company's products portfolio includes electric and hydraulic shearers, roof support, hydraulic control system, conveyors and crushers. FAMUR SA is also engaged in the development of information technology solutions and management system for coal industry. The Company operates through subsidiaries, based in Poland, Germany and the Russian Federation. The Company's major shareholder was TDJ SA, with a stake 71.28%. On November 27, 2014 the Company acquired 76,69% of stake in FAMAK SA.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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