Mytilineos Group Well placed, well diversified €4.82

Initiation of Coverage
Mytilineos Group
€4.82
Basic Materials
Well placed, well diversified
23 June, 2004
•
Mytilineos Holdings owns a well-diversified portfolio of
companies, active in the metals, defence, construction and
energy sectors. Diversified activities secure the group’s
uninterrupted earnings flow, even during periods of adverse
business conditions.
•
Mytilineos group is also well placed to benefit from: a) The
upturn cycle in the commodities market, b) The opportunities
arising from the Greek energy market’s deregulation and c)
Increasing co-production share of Greek producers in public
defence projects.
•
Under Greek GAAP, we forecast group revenues to rise by
13% on the back of improved business conditions. Reported
EPS is reckoned 10% lower while adjusted for goodwill
amortization EPS is reckoned 46% higher.
•
Our group valuation combines the results of the peer group
valuation comparison deployed for the parent company and
the DCF derived fair values of METKA and ELVO.
•
We set an Outperform rating for Mytilineos Holdings and
METKA with respective target prices of €6.50 and €5.40 per
share.
Stella Dimaraki
+30 210 8173 387
[email protected]
OPINION
Initiate as
Outperform
TARGET PRICE
€6.50
Key Data
Reuters Code
MYTr.AT
Bloomberg Code
MYTIL GA
Market Cap (€ m)
195.31
Shares outstanding
40,520,340
Free Float
57%
ASE General Index
(€)
2,343.55
High
Low
6.8
3.6
52 weeks
price range
(1m)
(3m)
(12m)
Daily Avg
Volume
Stock Price
Relative Performance
June ’03 – June ‘04
June ’03 – June ‘04
1,000,000
61,172
73,211
109,778
-1.6%
18.1%
30.3%
8.0
8.0
50.0%
40.0%
Absolute
30.0%
perf. (%)
500,000
Rel. perf.
4.0
4.0
20.0%
10.0%
to GI (%)
-1.7%
15.2%
7.3%
0.0%
0
17/06/2003
10/09/2003
04/12/2003
04/03/2004
0.0
17/06/2003
0.0
02/06/2004
10/09/2003
04/12/2003
Price (€)
EAT
(€m)
EPS
(€)
EPS
chg
DPS
(€)
Relative
Sales (€m)
EBITDA
(€m)
EBITDA
margin
EBT
(€m)
2002
259.6
30.2
11.6%
17.6
5.1
0.13
-64.4%
0.05
1.0%
38.3
8.8
2003
278.0
36.9
13.3%
27.8
14.4
0.35
181.3%
0.10
2.1%
13.6
7.2
2004e
314.6
41.1
13.1%
31.8
13.0
0.32
-9.7%
0.12
2.4%
15.1
6.4
0.8
1.1
2005f
370.6
49.6
13.4%
37.3
15.5
0.38
19.6%
0.12
2.6%
12.6
5.3
0.7
1.0
2006f
366.1
48.3
13.2%
34.9
14.1
0.35
-8.7%
0.13
2.8%
13.8
5.5
0.7
1.0
6.8
0.4
7.5%
2007f
367.1
47.8
13.0%
34.9
14.4
0.36
1.9%
0.16
3.3%
13.6
5.5
0.7
1.0
6.7
0.3
7.5%
2008f
375.7
48.9
13.0%
36.5
15.5
0.38
7.6%
0.16
3.4%
12.6
5.4
0.7
1.0
6.4
0.2
7.8%
P/E
EV/
Sales
-10.0%
02/06/2004
Year
DY
EV/
EBITDA
04/03/2004
Net Debt
/Equity
P/BV
P/CF
ROE
1.0
1.9
16.7
0.8
4.8%
1.0
3.4
9.8
1.0
18.1%
7.3
0.4
10.8%
6.6
0.4
8.4%
Mytilineos Group
23 June, 2004
Table of contents
Table of contents................................................................................2
Investment Summary .........................................................................3
Group profile.......................................................................................4
Core metal business...........................................................................7
METKA: Great opportunities ahead..................................................11
ELVO................................................................................................16
Group financials ...............................................................................18
Group valuation ................................................................................21
2
MARFIN ANALYSIS
23 June, 2004
Mytilineos Group
Investment Summary
Mytilineos Holdings owns a well-diversified portfolio of companies, active in the
metals, defence, construction and energy sectors. Diversified activities secure the
group’s uninterrupted earnings flow, even during periods of adverse business
conditions prevailing in specific sectors. Mytilineos group is also well placed to
benefit from: a) The upturn cycle in the commodities market, b) The opportunities
arising from the Greek energy market’s deregulation and c) Increasing coproduction share of Greek producers in public defence projects. In addition, the
business outlook looks more favourable should one consider the intragroup
synergies. We set an Outperform rating for Mytilineos Holdings and METKA
subsidiary with respective target prices of €6.50 and €5.40 per share.
Core metal business
The core metal business, mostly represented by the Mytilineos parent company, is
considered the group’s less predictable segment due to the cyclical nature and the
volatility of the commodities market. Peer group comparison in terms of profitability,
efficiency and leverage ratios do not favour the company and consequently require
the assignment of a hefty discount on any valuation exercise. Nevertheless, at
least in the short-term, the group is well placed to benefit from rising metal prices,
mainly driven by strong demand and tight supply. In the long-term however, the
group will need to address the low efficiency levels of this segment and on the
other hand bear the possible consequences in the advent of a slowdown in China which was the primary recovery trigger in the sector - or rising interest rates. We
derive a total value of €60.5m for Mytilineos parent company (core metal business
only), based on a peer group valuation comparison (DJ Stoxx Basic Materials index
used as benchmark).
Metka’s promising outlook
Metka is due to exploit great opportunities in the defence and energy sector. We
are positive given the significant existing backlog, healthy balance sheet, high
earnings visibility and attractive valuation. Main prospects arise from increased
investment activity expected in the energy sector as a result of replacements of
generation capacity in order to meet future environmental requirements and the
entry of IPPs. We derive a €280.5m DCF fair value for METKA or €5.40 per share
and assign an Outperform rating.
ELVO also adds value
The company’s backlog amounted to €293m as of the end of 2003 while holds the
potential to secure a similar amount of contracts flow every year. Note that only the
finalization of the Armoured Infantry Fighting Vehicles project agreement could add
€400m in the company’s backlog. Note that Civil projects worth €127m are
included in its backlog, providing further sales visibility. The government’s defence
budget is considered the major growth determinant for the company and
consequently high dependence on state decisions is considered the major risk
factor. We have derived a DCF fair value of €129m for ELVO.
Further opportunities not factored in yet
Last, further opportunities could arise in the case of a successful outcome of the
imminent availability capacity tenders of HTSO for a total amount of 900MW. The
group will aim to secure availability agreements with HTSO for its planned 400MW
CCGT unit in Volos, which however is not included in our forecasts. Among the
companies competing are Hellenic Petroleum, Gek-Terna and HED-Sidenor.
MARFIN ANALYSIS
3
Mytilineos Group
23 June, 2004
Group profile
Mytilineos Holdings is a holding company operating in the metals, mining, energy,
defence, vehicle manufacturing and construction sectors. The group is active
internationally, as the local market represents slightly higher than 50% of group
revenues and has created strategic alliances throughout the greater Southeast
European region.
The group gained exposure in the energy, defence, infrastructure and specialised
industrial metal construction sectors in 1999 through the acquisition of METKA, in
which it currently holds a 65.78% stake.
Further exposure in the defence and manufacturing areas was gained in 2000,
through the acquisition of ELVO (the state-owned Hellenic Vehicle Industry). The
state owns a 51% stake, Mytilineos SA. 22.53%, METKA 12.94% while General
Industry of Defence Materials owns a 7.53% stake.
In a grip to further diversify its activities towards the most promising energy field,
the group set up two subsidiaries in 2000: Mytilineos Power Generation and
Supplies and Mytilineos Hellenic Wind Power.
Table 1: Mytilineos Holdings: Main subsidiaries
Company
Mytilineos Finance
Stake
100.0%
ELEMKA
70.0%
Geniki Sidirometalliki
50.0%
METKA
65.8%
SOMETRA
88.0%
ELVO
22.5%
Defence Industry joint venture
52.4%
Mytilineos Hellenic Wind Power
56.0%
Mytilineos Power Generation and Supplies
67.0%
BEAT
35.0%
EBETAM
Hellenic Copper Mines
8.6%
39.2%
Source: The Company
Table 2: METKA: Main subsidiaries
Company
Stake
Servisteel
100.0%
ELVO
12.9%
T.C.B.
100.0%
EKME
40.0%
3KP
Rodax
40.0%
100.0%
Mytilineos Power Generation and Supplies
33.0%
Mytilineos Hellenic Wind Power
24.0%
Source: The Company
4
MARFIN ANALYSIS
23 June, 2004
Mytilineos Group
Figure 1: Mytilineos Group
Mytilineos Group of
Companies
Metals and international
trading
Energy
Defence
Sometra smelter,
Romania
METKA & Subsidiaries
ELVO
Hellenic Copper Mines,
Cyprus
Mytilineos Power
Generation and Supplies
METKA
Mytilineos Hellenic Wind
Power
Source: The Company
Figure 2: Mytilineos Holdings shareholders structure
Institutional
investors
19%
Mytilineos
family
43%
Retail
investors
38%
Source: The Company
Figure 3: METKA shareholders structure
Institutional
investors
10%
Mytilineos
SA.
67%
Retail
investors
23%
Source: The Company
MARFIN ANALYSIS
5
Mytilineos Group
23 June, 2004
Figure 4: ELVO shareholders structure
General
Industry of
Defence Lainopoulos
6%
Materials
8%
METKA
13%
Greek State
50%
Mytilineos SA.
23%
Source: The Company
6
MARFIN ANALYSIS
23 June, 2004
Mytilineos Group
Core metal business
The group is one of Greece’s largest metal traders, while following partnership
agreements and takeovers the group has turned into a manager of some of
Europe’s most commercially important mineral deposits. Main trading activities
focus on:
1. Non-ferrous base metals: copper, lead, zinc, aluminium and their alloys.
Apart from aluminium and copper, which are sold mainly locally, the
remaining products are provided for international markets.
2. Ores and minerals: raw materials processed to obtain base metals. The
group supplies copper, lead and zinc to a series of plants in Greece.
3. Steel products: materials used in construction projects and metal
manufacturing industries.
4. Wires: raw materials in the manufacturing of wire ropes, wire netting and
construction grids.
Metal prices
Metal prices recovered in 2003 and continue their upward trend in 2004 as well,
driven mainly by rising demand (+6% in 2003) which outpaced the growth of global
economies, inventory declines, opportunistic buying in the second half of 2003 as
well as increasing expectations for overall production deficits in 2004.
Copper prices increased by 14% on average in 2003 on fundamental grounds as
worldwide demand rose by 2.3% on the back of China’s rapid growth, while supply
fell marginally which resulted to a balance deficit of 312,000 tonnes. Copper prices
continued to rise in Q1:04 (+65% y-o-y and +33% q-o-q).
Aluminium prices rose by 6% on average in 2003 driven mainly by the overall
market’s rise rather than the underlying metal’s fundamentals. Global demand rose
by c7% in 2003 driven by China while supply grew 7.4%. The rise continued in
Q1:04, although at a slower pace than the overall market.
Zinc prices also rose by 6% in 2003. Nevertheless, global final consumption grew
modestly by 2.3% while it declined by 6% in US and remained flat in Europe.
Speculative funds as well as inventory declines contributed to the sharp rise of lead
prices in the last quarter of 2003. Demand was again modest while supply cuts was
the main reason for the prices recovery.
Table 3: Metal Prices
US $/Tonne
2001
2002
y-o-y
2003
y-o-y
Q1:03
Q4:03
Q1:04
y-o-y
q-o-q
Aluminium
1,444
1,349
-7%
1,432
6%
1,396
1,512
1,649
18%
9%
Copper
1,578
1,558
-1%
1,780
14%
1,663
2,055
2,739
65%
33%
Lead
476
453
-5%
516
14%
459
633
845
84%
34%
Zinc
886
779
-12%
828
6%
786
929
1,071
36%
15%
Source: LME
MARFIN ANALYSIS
7
Mytilineos Group
23 June, 2004
Figure 5: Mytilineos parent sales breakdown (2003)
Lead
13%
Aluminium
3%
Other
10%
Steel products
13%
Zinc
48%
Copper
13%
Source: The Company
Prospects / risks
We expect underlying fundamentals in the commodities market to improve as a
result of limited production growth and steady demand growth, which suggests
further gains in commodity prices. Demand should be supported by the overall
improving global economic conditions and continuous strong growth stemming
from China. Chinese industrial production continues to rise with double-digit rates
(+19% in April and +18% over the Jan-April 2004 period) with other leading
economies showing improved industrial activity. In addition, the closure of several
production units combined with limited investments in new capacity point to
moderate production growth and inventory declines. The fact that there is clear
inverse correlation between metal prices and the strength of the US dollar
(witnessed also recently with the weakness in commodity prices during May and
April), suggests that US dollar’s downward trend against other currencies should
provide a further impetus to metal prices.
Mytilineos should benefit from rising metal prices as well as implemented
investments, which aim at increasing capacity as well as improving efficiency of
existing units. The company aims at increasing capacity in Romanian zinc and lead
smelter SOMETRA by 9.6% in 2004 and 6.3% in 2005 while Hellenic Copper
Mines plans 9.4% and 28.6% capacity increases in the respective years.
Main risk for Mytilineos is an environment of declining metal prices. Volatility in the
commodities market could arise in the advent of rising US interest rates, possible
slowdown of Chinese growth and upon speculative activity.
Forecasts
Our forecasts are derived assuming a 5% production CAGR over the 2003-2006
period. Metal prices are conservatively forecast lower than current prices as well as
at a 5% discount to the average y-t-d price levels. In addition, we have included
Mytilineos fee for the management of ELVO, which corresponds to 50% of the
annual rise in ELVO’s pre-tax earnings only in the case that earnings growth
exceeds 40%.
As a result of rising metal prices we forecast a rise in Mytilineos gross margin by
1.0ppts and 0.40ppts in 2004 and 2005 as well as a rise in SG&A expenses in
8
MARFIN ANALYSIS
23 June, 2004
Mytilineos Group
accordance with revenues growth.
Note that our forecasts for the parent company include our estimated dividends to
be distributed by METKA and ELVO subsidiaries, ie. investment income of €5.5 in
2004 stems from the company’s 65.8% stake in METKA’s distributed total dividend
of €8.3m for FY03.
Table 4: Mytilineos parent P&L estimates
Includes ELVO
management fee
of €3.2m in 2003
and €6.6m in 2004
Includes dividend
distributed by
METKA and
potentially ELVO.
FY04 investment
income includes
its share from
METKA’s FY03
distributed
dividends
Turnover
Cost of Goods Sold
Gross Profit
Gross margin
Operating Expenses
Other Income
EBITDA
EBITDA margin
Depreciation
EBIT
Net Investment Inc. (Exp.)
Net Interest Inc. (Exp.)
Exceptionals (Net)
EBT
Taxes
EAT
Dividends
2003
145.6
(129.0)
16.6
11.4%
(7.8)
0.1
8.8
6.0%
(1.7)
7.1
5.6
(4.3)
1.1
9.5
(1.9)
7.6
4.1
2004e
163.1
(142.9)
20.2
12.4%
(9.0)
0.1
11.3
6.9%
(1.8)
9.5
5.5
(4.3)
2.6
13.3
(2.7)
10.5
4.7
12%
22%
15%
29%
10%
33%
-2%
-1%
40%
39%
17%
2005f
172.6 6%
(150.5)
9%
22.1
12.8%
(9.5) 6%
0.1
12.7 12%
7.3%
(2.0) 8%
10.7 13%
7.1 29%
(4.5) 4%
0.0
0%
13.3
(2.2)
5%
11.1
5.0
5%
2006f
181.3 5%
(158.7)
3%
22.7
12.5%
(10.0) 5%
0.1
1%
12.8
7.0%
(2.1) 7%
0%
10.6
11.4 61%
(4.4) -2%
0.0
17.7 33%
(2.2)
15.5 39%
5.4
8%
Source: MARFIN ANALYSIS, The Company
Valuation
We use a peer group comparison to value the core metal business of Mytilineos
parent company using as benchmark the European DJ Stoxx Basic Materials
index. Our valuation exercise excludes any possible value stemming from METKA
or ELVO as we contact separate valuation exercises, presented in following
sections. We use the weighted average multiples of our selective peer group for
2004 which leads to a fair value of €60.5m for Mytilineos metal division. Note, that
we have applied a hefty 50% discount to the weighted average sector multiples
given the fact that Mytilineos ROE stands considerable lower that the sector
average, EBITDA margins are also below average while net debt/EBITDA far
exceeds the sector average.
Table 5: Valuation of the core metal division of Mytilineos parent company
Weighted average
Method
Year multiple of peer group Applied discount Mytilineos value (€ m) Applied weight Final value (€ m)
P/E
2004
15.4
-50%
39.2
50%
19.6
P/BV
2004
1.7
-50%
182.0
10%
18.2
P/CF
2004
7.1
-50%
24.4
20%
4.9
Mcap/Sales
2004
1.1
-50%
89.1
20%
17.8
Total value of the metals division
60.5
Source: MARFIN ANALYSIS, JCF
MARFIN ANALYSIS
9
Mytilineos Group
23 June, 2004
Table 6: Peer group comparison (2004e)
ROE
EBITDA margin
Net debt/EBITDA
Sector weighted average
13.5%
25.7%
1.3
Mytilineos SA
4.9%
6.9%
8.8
Source: MARFIN ANALYSIS, JCF
Table 7: DJ Stoxx Basic Materials valuation
Anglo American Plc
Rio Tinto
Bhp Billiton Group
Upm Kymmene
Norsk Hydro
Arcelor (Ex Usinor)
Stora Enso
ThyssenKrupp AG
Xstrata Plc
Corus Group
Lonmin
Acerinox
Norske Skogindustrier
Umicore
Holmen Ab
Antofagasta
Kinnevik
Outokumpu
Voestalpine AG
Ssab Svenskt Stal
Average
Median
Weighted average
P/E 04
11.5
14.8
11.4
29.8
10.5
7.7
32.5
10.6
9.6
45.4
14.0
14.4
42.9
8.4
14.9
8.9
30.8
9.8
13.3
8.8
17.3
13.3
15.4
P/E 05
11.0
12.0
11.3
14.8
11.1
7.4
16.0
9.0
8.8
21.1
12.2
10.8
11.7
10.6
11.9
10.1
21.7
8.0
8.3
9.0
11.8
11.1
11.6
Price/Book
04
1.3
2.9
3.2
1.2
1.3
0.9
1.1
0.8
1.0
0.6
2.6
1.7
0.8
1.0
1.3
2.4
1.2
1.1
0.8
1.2
1.4
1.2
1.7
Price/Book
05
1.2
2.6
2.6
1.1
1.2
0.8
1.1
0.8
1.0
0.5
2.5
1.5
0.8
1.0
1.3
2.0
1.2
0.9
0.7
1.1
1.3
1.1
1.5
Price/Cash
Flow 04
8.3
10.1
8.4
6.6
4.5
3.5
6.3
3.1
6.1
4.4
10.2
8.8
4.1
4.3
7.5
6.1
11.4
5.0
3.5
4.9
6.4
6.1
7.1
Price/Cash Mcap/Sales Mcap/Sales
Flow 05
04
05
7.5
1.3
1.2
8.1
2.0
1.8
8.1
0.8
0.8
5.3
0.8
0.7
4.5
0.8
0.8
3.4
0.3
0.2
5.6
0.8
0.8
2.9
0.2
0.2
5.1
1.4
1.3
3.2
0.2
0.2
8.9
2.6
2.5
7.4
0.8
0.8
3.4
0.6
0.6
4.7
0.2
0.2
6.7
1.2
1.1
6.7
2.1
2.4
14.9
3.0
3.0
4.4
0.3
0.3
2.9
0.3
0.3
5.5
0.6
0.6
6.0
1.0
1.0
5.5
0.8
0.8
6.3
1.1
1.0
Source: JCF
10
MARFIN ANALYSIS
23 June, 2004
Mytilineos Group
METKA: Great opportunities ahead
Metka holds great potential for delivering sustainable profitable growth, as a result
of the opportunities arising in all three-market segments operating, ie. the
traditional metal constructions, the energy market and the defence sector. We
forecast 3-y sales and EPS CAGR of 12% and 14%, which is comfortably
supported by its significant backlog of €450m and also its ability to sustain a similar
contracts flow in the future given its leading position and know-how. Main
opportunities stem from the Greek government’s armament program and its
potential to capture a share of the investments stemming from the energy market’s
deregulation. We assign a target price of €5.4 for METKA shares and an
Outperform rating.
Prospects / risks
Metka acts as the major supplier/subcontractor for the procurement projects of the
Greek army, PPC, Public Gas Corporation, port authorities and oil refineries. The
company has secured strong relationships with leading international
electronics/defence companies such as GE, Alstom, ABB, Siemens, Raytheon,
Lockheed Martin and HDW through partnerships in major projects.
The company undertakes the manufacturing of heavy/compound steel
constructions and integrated electromechanical equipment as well as large-scale
construction electromechanical, industrial, energy and defence projects, including
assembly, erection and commissioning. The company owns two industrial sites in
Volos and one in Thessaloniki.
Table 8: METKA revenues breakdown
€m
2000
2001
2002
2003
Energy
50.0
66.6
70.7
96.0
Other metal construction
22.7
25.3
12.8
26.9
Refinery
-
-
-
0.6
Shipbuilding
-
-
2.4
8.1
Metals trading
-
20.6
5.8
5.2
Defence
-
8.2
14.7
-
Gas turbines
0.3
-
-
-
Mining
0.4
0.0
-
-
-
-
-
5.9
73.4
120.8
106.3
142.8
Vehicle related construction
Total
Source: The Company
METKA’s main growth drivers are considered the government’s defence spending
as well as the liberalization of the energy market.
In the defence front, Mytilineos Group aims at capturing a share of the
government’s 10-y procurement programme of €11bn. The group estimates that an
amount of €8bn falls into ELVO and METKA’s field of activities, which includes
army-related projects of €5.5bn, navy-related projects of €2bn and air force-related
projects of €0.5bn. Mytilineos group participation in the aforementioned projects
could range between 20% to 40%. METKA could potentially secure contracts worth
€450m stemming from the procurement programme. The fact that the company
has gained significant know-how through the implementation of defence projects in
the past as well as synergies stemming from the cooperation with ELVO could
MARFIN ANALYSIS
11
Mytilineos Group
23 June, 2004
further promote its position in the defence sector.
In the energy sector, key drivers are considered Greece’s healthy growth in
electricity demand, which supports generation capacity additions and need to
replace generation capacity in order to meet environmental requirements.
Electricity demand is expected to continue growing faster than the eurozone
average while convergence trends are expect in consumption per capita (which
stands 40% below the EU average). The Regulatory Authority for Energy projects
that electricity consumption growth would exceed 4% in the next 10 years and
stresses the need for capacity additions in the system to avoid running an
electricity deficit.
According to the amended liberalization law, which came into effect on August 29,
2003, the HTSO (Hellenic Transmission System Operator) is entitled to enter into
capacity-availability agreements following the launch of tender procedures. During
the first implementation phase, the HTSO may enter into agreements for up to 900
MW of new generation capacity that must be commissioned by July 1, 2007.
Additional tenders for up to 400MW capacity may be conducted during that time
period. PPC may participate in up to 200 MW in the case that this additional tender
takes place. In addition, the new law grants PPC an electricity generation license to
build new capacity or refurbish existing capacity of up to 1,600 MW, provided that
the old capacity of an equivalent amount is put in cold reserve. We consider that
METKA is well positioned to benefit from increased investments in the sector given
its expertise as well as its long-standing relationship with PPC.
The group has established two subsidiaries in order to fully exploit opportunities in
the energy sector. Mytilineos Power Generation and Supplies was established with
a primary objective being the production and trading of energy. The primary project
assigned is the construction of a natural gas-fired power plant in Volos of 400MW.
The company has obtained the necessary licenses and is in anticipation of further
regulatory clarifications. Mytilineos Hellenic Wind Power was established with the
objective of construction and operation of wind parks and has obtained generation
licenses for 7 wind parks of total capacity of 84.15MW.
Table 9: Energy investments
Total investment
€m
Volos
Sidirokastro
Platanos
Evia/Andros
245
20
5
65
30%
30%
30%
30%
0%
30%
30%
30%
70%
40%
40%
40%
Financed by:
Equity
Subsidy
Borrowing
Source: The Company
Main risks could stem from a possible cut in the government’s defence budget or
reduced co-production share for Greek companies. On the other hand, although
the Greek energy sector holds great potential, delays in the enforcement of a clear
regulatory framework hinder growth and increase the sector’s risk profile.
12
MARFIN ANALYSIS
23 June, 2004
Mytilineos Group
Forecasts
Metka’s current backlog covers 73% and 74% of our next two year’s parent
revenues estimates. Main project is considered the construction of PPC’s CCGT
plant in Lavrio budgeted for €194m which should provide a boost in FY05
revenues. Current backlog amounts to €450m and spreads over a 6-year period.
The backlog breaks down as follows: 61.3% energy, 5.3% metal construction and
33.4% defence. From 2006 onwards, defence projects, further investments by
energy players - primarily PPC - as well as the construction of the group’s wind
parks should support revenues.
Table 10: Metka revenues estimates (€ m)
Revenues secured by backlog
Client
Frame agreement, after sales, florina lignite power station, filters,
Kardias project, wind power unit Chania, other
PPC, Alstom, Other
Lavrio CCGT unit
PPC
Submarine parts
HDV
Bridge joint
Rio-Antirio
venture/Cleveland
Train equipment
OSE
Olympic Projects, Calatrava
Aktor/Attiko metro
Leopard
KMW/RHEINMETALL
Real estate Volos
Materials supply
Subtotal 1
% total revenues
Revenues based on new contract estimates
Leopard
KMW/RHEINMETALL
Neptune submarine
HDV
Lavrio unit maintenance
PPC
Kentavros
ELVO - SSF
Patriot
Raytheon - Lockheed
Bridges
Eurobridge
Energy provision
G.E.
Mechanical works
Various
Subtotal 2
% total revenues
Revenues based on further contract estimates by market
segment
PPC additional capacity and maintenance
PPC
Energy other
Other
Defence
Greek state
Metal construction
Other
Wind Parks
Group
Subtotal 3
% total revenues
Total (Subtotal 1+2+3)
2004
2005
2006
39.6
29.7
6.9
1.7
120.0
2.2
44.3
2.2
2.1
6.0
17.7
0.6
2.0
4.5
109.0
73%
21.4
0.6
0.9
146.7
74%
21.4
0.6
0.9
69.3
38%
0.7
7.8
1.1
9.6
6%
1.5
1.3
5.0
1.9
2.8
3.2
15.7
8%
1.5
5.0
1.9
0.7
0
9.1
5%
2.1
10.5
3.0
14.3
29.9
20%
148.5
4.9
2.5
10.5
3.0
16.2
37.1
19%
199.5
7.7
10.0
37.5
15.0
32.3
102.5
57%
181.0
Source: MARFIN ANALYSIS, The Company
MARFIN ANALYSIS
13
Mytilineos Group
23 June, 2004
Figure 6: 2004 revenues estimates (€ m)
200.0
160.0
120.0
19.6
Parent sales
secured by
backlog
Subsidiaries
contribution
29.9
9.6
New contracts MA assumption
New contracts management
assumption
80.0
109.0
40.0
0.0
Source: MARFIN ANALYSIS, The Company
Table 11: METKA group revenues forecasts
€m
2003
2004e
Ch%
2005f
Ch%
2006f
Ch%
Consolidated sales
142.8
168.1
18%
213.4
27%
200.0
-6%
Parent sales
121.4
148.5
22%
199.5
34%
181.0
-9%
Servisteel
EKME
3KP
Rodax
TCB
Subsidiaries total
1.9
2.0
5%
2.1
5%
2.2
5%
13.4
14.8
10%
16.0
8%
17.1
7%
5.3
5.6
5%
5.8
5%
6.1
5%
18.1
19.0
5%
19.8
4%
20.4
3%
9.6
10.1
5%
10.6
5%
11.1
5%
48.4
51.5
6%
54.3
5%
57.0
5%
Source: MARFIN ANALYSIS, The Company
Table 12: METKA P&L estimates
€m
Turnover
Cost of Goods Sold
Gross Profit
Operating Expenses
Other Income
EBITDA
Depreciation
EBIT
Net Investment Inc. (Exp.)
Net Interest Inc. (Exp.)
Exceptionals (Net)
EBT
Taxes
Net Profit After Tax
Minorities
EAT
2003
2004e
142.8
(109.1)
33.7
(8.5)
0.4
25.5
(2.5)
23.0
1.2
0.1
(3.9)
20.4
(6.8)
13.7
(0.1)
13.5
168.1
(129.4)
38.7
(10.4)
0.4
28.7
(2.6)
26.1
0.2
0.7
0.0
26.9
(9.4)
17.5
(0.2)
17.4
2005f
18%
15%
22%
12%
2%
13%
32%
28%
28%
213.4
(165.6)
47.8
(13.4)
0.5
34.9
(2.8)
32.1
0.2
0.6
0.0
33.0
(11.5)
21.4
(0.2)
21.3
2006f
27%
24%
29%
22%
8%
23%
22%
22%
22%
200.0
(155.0)
45.0
(12.6)
0.5
32.9
(2.9)
30.0
0.2
0.7
0.0
30.9
(10.8)
20.1
(0.2)
19.9
-6%
-6%
-6%
-6%
3%
-6%
-6%
-6%
-6%
Source: MARFIN ANALYSIS, The Company
14
MARFIN ANALYSIS
23 June, 2004
Mytilineos Group
Valuation and rating
We use a DCF exercise to value METKA, using the following key assumptions. Our
DCF exercise returns a fair value of €5.4 per share for METKA shares, including
also its 12.94% stake in ELVO which is valued on a DCF basis as well.
Table 13: Basic DCF assumptions
2003-2013
Terminal
Revenues CAGR
4.8%
0.5%
EBIT CAGR
4.1%
0.5%
EBIT margin (average)
15.0%
15.0%
Capex/sales (average)
2.6%
2.5%
40.4%
40.0%
WC/sales (average)
WACC
Implied EBITDA multiple at
terminal value
8.7%
3.05
Source: MARFIN ANALYSIS
Table 14: DCF exercise
€m
2004f
2005f
2006f
2007f
2008f
2009f
2010f
2011f
2012f
2013f
Sales
EBIT
EBIT margin
Depreciation
Other
Gross cashflow
Change in working capital
Net operating cashflow
Income tax
Investments
FCFF
Discounted FCFF
Sum of PV
Terminal value
Net debt
ELVO stake
Shareholder value
Value per share
168.1
26.1
15.5%
2.6
2.7
31.3
(11.3)
20.0
(5.4)
(5.0)
9.5
8.8
99.2
116.7
47.9
16.7
280.5
5.4
213.4
32.1
15.0%
2.8
6.0
40.9
(19.1)
21.9
(9.4)
(6.0)
6.4
5.4
200.0
30.0
15.0%
2.9
(1.8)
31.1
5.5
36.6
(11.5)
(5.0)
20.1
15.6
195.1
29.1
14.9%
3.0
(0.7)
31.4
2.0
33.5
(10.8)
(5.0)
17.6
12.6
199.0
29.6
14.9%
3.1
0.5
33.2
(1.6)
31.7
(10.5)
(5.0)
16.1
10.6
207.9
31.2
15.0%
3.3
0.5
35.0
(2.9)
32.1
(10.9)
(5.2)
16.0
9.7
215.2
32.3
15.0%
3.5
0.5
36.2
(1.9)
34.4
(11.3)
(5.4)
17.7
9.9
221.6
33.2
15.0%
3.6
0.5
37.4
(2.6)
34.8
(11.6)
(5.5)
17.6
9.0
227.2
34.1
15.0%
3.8
0.5
38.4
(2.2)
36.2
(11.9)
(5.7)
18.6
8.8
228.3
34.2
15.0%
4.0
0.5
38.8
(0.5)
38.3
(12.0)
(5.7)
20.6
8.9
Source: MARFIN ANALYSIS
Implied upside indicated by our fair valued combined with its significant backlog,
healthy balance sheet, high earnings visibility and great opportunities stemming
from the deregulation of the energy sector point to our Outperform rating for the
stock.
MARFIN ANALYSIS
15
Mytilineos Group
23 June, 2004
ELVO
Mytilineos Group acquired a 43% stake in ELVO in August 2000 for €19m,
assuming also the company’s management. The parent company holds a 22.5%
stake, METKA owns a 12.94% stake and General Industry of Defence Materials
holds a 7.5% stake. The Greek state remains the majority shareholder, controlling
a 51% stake. Mytilineos holds an option to increase its stake in ELVO by 17% while
it reserves the first refusal right for any share disposal by the Greek state.
Forecasts / Prospects
The company has the industrial infrastructure to produce all types of heavy
vehicles for military and civil use such as light military cross-country jeeps, civil and
military trucks of various types, armoured personnel carriers, busses and trucks for
various uses, armoured infantry fighting vehicle, fire fighting trucks and spare parts.
ELVO has the capacity to contact final assembly and system integration while
synergies through its cooperation with METKA reinforce the overall technical knowhow of the group.
Table 15: ELVO P&L estimates
Turnover
Cost of Goods Sold
Gross Profit
Gross margin
Operating Expenses
Other Income
2003
2004e
175.4
194.7
(128.1)
(142.5)
(148.4)
(141.2)
47.4
52.2
54.1
51.2
27%
27%
27%
(22.9)
(21.5)
0.0
30.2
EBITDA margin
16%
16%
Depreciation
(5.3)
(5.6)
EBIT
22.2
24.6
0.0
10%
31.2
15%
25.3
29.6
(6.2)
3%
23.4
0.2
0.2
0.2
0.2
(2.2)
(2.0)
(1.5)
1.3
0.0
21.9
22.6
Taxes
(4.0)
(4.5)
EAT
17.9
18.1
0.0
0.0
0.0
3%
23.5
17.6
3.5
-7%
0.0
4%
(5.9)
1%
-5%
15%
(5.9)
11%
-5%
0.0
3%
(1.7)
EBT
Dividends
192.4
(22.0)
0.0
Exceptionals (Net)
2006f
4%
27%
27.5
Net Interest Inc. (Exp.)
202.5
(19.9)
EBITDA
Net Investment Inc. (Exp.)
2005f
11%
22.2
-6%
(6.6)
-3%
15.5
-12%
3.9
10%
Source: MARFIN ANALYSIS, The Company
We reckon sales at €194.7m in 2004 up 11% vs. 2003. Revenues are seen broadly
flat in the next three years. The company’s backlog amounted to €293m as of the
end 2003, though the finalization of the Kentavros project agreement which
involves the delivery of Armoured Infantry Fighting Vehicles could potentially add
€400m in the company’s backlog. Other important projects include the agreement
signed between the Ministry of Defence and KMW for the delivery of 170 Leopard
A2 Main Battle Tanks. ELVO was selected to carry out the final assembly of the
tanks. The company’s backlog also includes civil projects worth €127m, which
involve mainly the supply of busses, trolleys and fire vehicles, providing further
sales visibility.
In addition, ELVO is currently networking with potential suppliers in order to secure
16
MARFIN ANALYSIS
23 June, 2004
Mytilineos Group
co-production projects of the Hellenic Armed Forces' procurement programme, like
new amphibious armoured vehicles, mobile hospitals, bridges and other vehicles.
Note that the company continues to cater the majority of needs of the Hellenic
Forces concerning supply materials. Any risks could arise through the potential cut
in the government’s defence spending budget, with direct implication to the
company’s operations.
Valuation
We use a DCF exercise to value ELVO, setting below our key assumptions. Our
DCF exercise returns a fair value of €129m which accounts for 16% of our sum-ofthe-parts target price for Mytilineos Holdings.
Table 16: Basic DCF assumptions
2003-2013
Terminal
0.8%
0.0%
Revenues CAGR
EBIT CAGR
-0.1%
0.0%
EBIT margin (average)
11.9%
11.6%
Capex/sales (average)
2.5%
2.5%
49.0%
50.0%
WC/sales (average)
WACC
Implied EBITDA multiple at
terminal value
9.0%
2.88
Source: MARFIN ANALYSIS
Table 17: DCF exercise
€m
2004f
2005f
2006f
2007f
2008f
2009f
2010f
2011f
2012f
2013f
Sales
EBIT
EBIT margin
Depreciation
Other
Gross cashflow
Change in working capital
Net operating cashflow
Income tax
Investments
FCFF
Discounted FCFF
Sum of PV
Terminal value
Net debt
Shareholder value
194.7
24.6
12.6%
5.6
(0.1)
30.1
(9.3)
20.8
(16.8)
(5.0)
(1.0)
(0.9)
93.3
84.0
(48.4)
128.9
202.5
25.3
12.5%
5.9
(0.1)
31.1
(8.2)
22.9
(4.5)
(5.0)
13.4
11.3
192.4
23.4
12.2%
6.2
0.1
29.7
0.2
29.9
(5.9)
(5.0)
19.1
14.7
190.5
22.8
12.0%
6.6
0.0
29.4
(0.9)
28.4
(6.6)
(5.0)
16.8
11.9
189.9
22.5
11.9%
6.9
0.0
29.5
0.3
29.7
(6.6)
(5.0)
18.2
11.8
189.9
22.0
11.6%
7.1
0.0
29.1
(0.1)
29.0
(6.6)
(4.7)
17.6
10.5
189.9
22.0
11.6%
6.3
0.0
28.4
0.0
28.4
(6.6)
(4.7)
17.0
9.3
189.9
22.0
11.6%
7.2
0.0
29.2
0.0
29.2
(6.6)
(4.7)
17.9
9.0
189.9
22.0
11.6%
6.9
0.0
28.9
0.0
28.9
(6.6)
(4.7)
17.6
8.1
189.9
22.0
11.6%
7.2
0.0
29.2
0.0
29.2
(6.6)
(4.7)
17.9
7.6
Source: MARFIN ANALYSIS
MARFIN ANALYSIS
17
Mytilineos Group
23 June, 2004
Group financials
Q1:04 results
Group sales increased by 9% to €80.1m mainly on the back of a very good sales
performance by METKA subsidiary as Mytilineos parent sales were off 5%. Group
EBIT rose by 10% on improved gross margins (+0.34ppts) as a result of the metal
prices recovery and a 13% increase in SG&As. EBT jumped 59% due to increased
net extraordinary gains of €1.9m vs. net losses of €0.5m in Q1:03. Note that the
group recorded extraordinary gains of €3m stemming from FX hedging. In other
issues, in an effort to converge with IAS accounting requirements, the group
booked consolidation differences as goodwill in intangible assets account while
amortization charges amounted to €2m.
Table 18: Mytilineos Group Q1:04 results
€m
Q1:03
Q1:04
ch%
73.4
80.1
9%
Sales
COGS
(59.9)
(65.1)
9%
Gross profit
13.5
15.0
11%
Gross margin
18%
19%
Other income
0.1
0.1
48%
Administrative expenses
(4.5)
(5.2)
15%
Selling and distribution expenses
(2.8)
(3.0)
8%
SG&A
(7.3)
(8.2)
13%
EBIT
6.3
7.0
10%
Net financial income / (Expenses)
(0.5)
(0.3)
-32%
Exceptionals (net)
(0.5)
1.9
5.3
8.5
59%
(1.5)
(2.2)
50%
3.9
6.3
63%
Q1:03
Q1:04
ch%
40.5
38.4
-5%
(36.7)
(34.2)
-7%
10%
EBT
Minorities
EBT after minorities
Source: The Company
Table 19: Mytilineos parent Q1:04 results
Mytilineos parent
Sales
COGS
Gross profit
3.8
4.2
Gross margin
9%
11%
Other income
0.0
0.0
-10%
Administrative expenses
(0.7)
(0.8)
6%
Selling and distribution expenses
(1.2)
(1.2)
5%
SG&A
(1.9)
(2.0)
6%
1.9
2.2
15%
EBIT
Net financial income / (Expenses)
(0.1)
(0.7)
508%
Exceptionals (net)
0.4
2.6
562%
EBT
2.2
4.1
87%
Source: The Company
18
MARFIN ANALYSIS
23 June, 2004
Mytilineos Group
Table 20: METKA (Cons) Q1:04 results
METKA cons
Q1:03
Q1:04
ch%
33.8
40.1
19%
(26.8)
(32.0)
19%
16%
Sales
COGS
Gross profit
7.0
8.2
Gross margin
21%
20%
Other income
0.1
0.1
54%
Administrative expenses
(1.7)
(1.9)
10%
Selling and distribution expenses
(0.4)
(0.4)
21%
SG&A
(2.1)
(2.3)
12%
5.1
6.0
18%
0.1
0.3
196%
(0.9)
(0.5)
-40%
34%
EBIT
Net financial income / (Expenses)
Exceptionals (net)
EBT
4.2
5.7
Minorities
0.1
(0.2)
EBT after minorities
4.3
5.5
26%
Source: The Company
Forecasts
Our group estimates are based on the Greek GAAP, according to which Mytilineos
and METKA’s combined stake in ELVO (35.5%) is accounted under the equity
method. The group has also published FY03 headline results under IAS, according
to which ELVO is fully consolidated (group stake of 43%).
Under Greek GAAP we forecast group revenues to rise by 13% driven by the
improved outlook expected for both the parent company and METKA subsidiary.
Net earnings are seen 10% lower in FY04, despite solid organic growth due to the
amortization of goodwill (full year forecast of €8m). The group would probably
restate its FY03 results as was the case with Q1:03 results. Excluding amortization
charges, net earnings are forecast 46% higher.
Table 21: Group Forecasts
2003
2004e
278.0
314.6
(219.3)
(247.5)
58.7
67.1
(22.2)
0.4
EBITDA
36.9
Depreciation
(5.6)
EBIT
31.4
Turnover
Cost of Goods Sold
Gross Profit
Operating Expenses
Other Income
Net Investment Inc. (Exp.)
2005f
13%
370.6
2006f
18%
(290.2)
366.1
-1%
(287.6)
14%
80.4
20%
78.5
-2%
(26.3)
19%
(31.1)
18%
(30.6)
-2%
0.3
-24%
0.4
18%
0.4
-1%
41.1
11%
49.6
21%
48.3
-3%
(13.9) 150%
(14.3)
2%
(14.5)
2%
35.4
30%
33.7
-5%
27.2
-13%
9.4
8.4
-11%
8.2
-2%
7.5
-9%
Net Interest Inc. (Exp.)
(6.2)
(5.8)
-7%
(6.4)
10%
(6.4)
0%
Exceptionals (Net)
(6.8)
1.9
EBT
27.8
31.8
14%
37.3
17%
34.9
-6%
Taxes
(8.9)
(12.6)
41%
(14.1)
12%
(13.4)
-5%
0.0
0.0
Net Profit After Tax
18.9
19.2
2%
23.2
21%
21.5
-7%
Minorities
(4.5)
(6.2)
38%
(7.7)
23%
(7.3)
-5%
EAT
14.4
13.0
-10%
15.5
20%
14.1
-9%
Source: MARFIN ANALYSIS, The Company
MARFIN ANALYSIS
19
Mytilineos Group
23 June, 2004
Below we present our headline group estimates under IAS, including the full
consolidation of ELVO, in a grip to compare our forecasts with management’s
guidance.
Table 22: Our estimates vs. management guidance
2003
2004 Ch%
2004MA
Marfin vs. Management
460.1
502.2
9%
516.9
3%
47.1
48.5
3%
52.1
7%
142.8
150.5
5%
168.1
12%
20.4
21.2
4%
26.9
27%
175.4
193.5
10%
194.7
1%
21.9
22.5
3%
22.6
0%
Mytilineos Group (IAS)
Revenues
EBT
METKA (Cons.)
Revenues
EBT
ELVO
Revenues
EBT
Source: MARFIN ANALYSIS, The Company
20
MARFIN ANALYSIS
23 June, 2004
Mytilineos Group
Group valuation
Our sum of the parts valuation methodology returns a fair value of €6.50 for
Mytilineos Group, implying a 35% upside to current share price. Our group sum-ofthe-parts valuation combines the results of the peer group valuation comparison
deployed for the parent company, the DCF derived fair values of METKA and
ELVO and a value assigned to other participations of Mytilineos Group valued on
the basis of a P/BV multiples. In addition, we have applied a 10% holding company
discount.
Table 23: Group sum-of-the-parts valuation
€m
Total value
Stake
Mytilineos parent (core)
Final Value
% total
60.5
100.0%
60.5
21%
Metka (core)
263.8
65.8%
173.5
59%
ELVO
128.9
35.5%
45.7
16%
Other
13.5
5%
Total
293.2
100%
No shares
40.5
Fair value per share
7.24
Holding company discount
-10%
Target price per share
6.51
Current price
4.82
Upside
35%
Source: MARFIN ANALYSIS
Should we value METKA at current market price, though assume that the market
assigns our fair value for its stake in ELVO, our group valuation drops to €5.9 per
share. Other things equal, should we value Mytilineos Group’s 35.5% stake in
ELVO at book values (ie. 15.9m), our fair value drops to €5.8 per share. Should we
combine both (ie. METKA valued at current price levels and ELVO at book values)
then our fair value drops to €5.4 per share.
Table 24: Different sum-of-the-parts valuation scenarios
€m
Mytilineos parent (core)
Metka at market
Final Value
price
ELVO at book
values
Metka at market
price & ELVO at
book values
60.5
60.5
60.5
60.5
173.5
147.6
173.5
154.8
ELVO
45.7
45.7
15.9
15.9
Other
13.5
13.5
13.5
13.5
Total
293.2
267.3
263.4
244.7
40.5
40.5
40.5
40.5
Metka (core)
No shares
Fair value per share
Holding company discount
Target price per share
7.24
6.60
6.50
6.04
-10%
-10%
-10%
-10%
6.51
5.94
5.85
5.43
Current price
4.82
4.82
4.82
4.82
Upside
35%
23%
21%
13%
Source: MARFIN ANALYSIS
MARFIN ANALYSIS
21
Mytilineos Group
23 June, 2004
We assign an Outperform rating on Mytilineos shares, as we consider that the
group is well placed to benefit from opportunities arising in all of the sectors
operating while its companies’ portfolio provide necessary synergies to maximize
those benefits. Moreover, the group’s diversified operations provide a shelter in
periods of adverse business conditions, especially given the highly volatile metals
division.
22
MARFIN ANALYSIS
23 June, 2004
Mytilineos Group
Summary Financial Data— METKA consolidated (Under Greek GAAP)
Profit & Loss (in € m)
2002
2003
2004e
2005f
2006f
2007f
2008f
Balance Sheet (in € m)
2002
2003
2004e
2005f
2006f
2007f
2008f
Turnover
106.3
142.8
168.1
213.4
200.0
195.1
199.0
Net Fixed Assets
33.7
Cost of Goods Sold
(77.2) (109.1) (129.4) (165.6) (155.0) (151.2) (154.2)
Gross Profit
29.1
33.7
38.7
47.8
45.0
43.9
44.8
Operating Expenses
8.5
8.5
10.4
13.4
12.6
12.3
12.5
Other Income
0.4
0.4
0.4
0.5
0.5
0.5
0.5
21.0
25.5
28.7
34.9
32.9
32.1
32.7
EBITDA
Depreciation
EBIT
Net Investment Inc. (Exp.)
Net Interest Inc. (Exp.)
25.7
22.0
24.4
27.6
29.7
31.8
Investments
6.5
6.5
6.5
6.5
6.6
6.6
6.6
Other LT Assets & Accruals
0.1
0.2
0.2
0.2
0.2
0.2
0.2
Total Fixed Assets
32.3
28.6
31.1
34.4
36.5
38.6
40.5
Inventories
22.9
26.2
31.9
40.8
38.2
37.3
38.0
Debtors
41.3
47.2
55.7
71.3
66.9
65.2
66.5
3.0
2.5
2.6
2.8
2.9
3.0
3.1
18.0
23.0
26.1
32.1
30.0
29.1
29.6
0.5
1.2
0.2
0.2
0.2
0.2
0.2
Cash & Equivalents
10.0
10.0
10.0
10.0
10.0
10.0
10.0
0.2
0.1
0.7
0.6
0.7
0.8
0.9
Marketable Securities
18.2
36.4
37.9
37.9
41.6
46.7
50.2
Exceptionals (Net)
(2.2)
(3.9)
0.0
0.0
0.0
0.0
0.0
Other Current Assets
0.9
0.8
1.0
1.2
1.2
1.1
1.2
EBT
16.4
20.4
26.9
33.0
30.9
30.1
30.7
Total Current Assets
93.3
120.7
136.6
161.3
157.8
160.3
165.9
125.6
149.4
167.7
195.7
194.3
198.8
206.4
Creditors
9.5
16.6
19.5
25.0
23.4
22.8
23.2
Short Term Debt
0.0
0.0
0.0
3.5
0.0
0.0
0.0
CP of Long Term Debt
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Other
25.4
35.0
43.7
55.2
52.3
51.4
52.8
Total Current Liabilities
35.0
51.7
63.2
83.7
75.7
74.2
76.0
Taxes
(6.2)
(6.8)
(9.4)
(11.5)
(10.8)
(10.5)
(10.7)
Net Profit After Tax
10.2
13.7
17.5
21.4
20.1
19.6
19.9
Minorities
(1.2)
(0.1)
(0.2)
(0.2)
(0.2)
(0.2)
(0.2)
EAT
9.0
13.5
17.4
21.3
19.9
19.4
19.7
Dividends
8.3
8.3
10.8
13.8
13.5
13.6
14.2
Per Share Data (in €)
EPS
0.17
0.26
0.33
0.41
0.38
0.37
0.38
CEPS
0.23
0.31
0.38
0.46
0.44
0.43
0.44
DPS
0.16
0.16
0.21
0.27
0.26
0.26
0.27
BVPS
Total Assets
1.50
1.65
1.77
1.92
2.04
2.15
2.26
No Of Shares (Yr-end, m)
51.95
51.95
51.95
51.95
51.95
51.95
51.95
Minorities
Adj. No Of Shares (m)
51.95
51.95
51.95
51.95
51.95
51.95
51.95
Other LT Liabil. & Prov.
P/E (x)
25.3
16.9
13.2
10.8
11.5
11.8
11.6
P/CF (x)
19.0
14.2
11.5
9.5
10.0
10.2
10.0
P/BV (x)
2.9
2.7
2.5
2.3
2.2
2.0
1.9
Div. Yield (%)
3.6%
3.6%
4.7%
6.0%
5.9%
5.9%
6.2%
EV / Sales (x)
1.7
1.3
1.1
0.8
0.9
0.9
0.9
EV / EBITDA (x)
8.6
7.1
6.3
5.2
5.5
5.6
5.5
Valuation Data
Long Term Debt
0.0
0.0
0.0
0.0
0.0
0.0
0.0
12.2
11.7
11.9
12.1
12.2
12.4
12.7
0.5
0.4
0.4
0.4
0.4
0.4
0.4
Total Liabilities
47.7
63.8
75.5
96.2
88.4
87.1
89.1
Total Equity
77.9
85.5
92.1
99.5
105.9
111.7
117.3
21.0
25.5
28.7
34.9
32.9
32.1
32.7
7.9
8.5
5.4
9.4
11.5
10.8
10.5
47.8%
37.3%
35.9%
34.4%
Cash Flow Statement (in € m)
Growth Rates
Turnover
(11.9%) 34.2%
17.8%
26.9%
(6.3%)
(2.5%)
2.0%
EBITDA
EBITDA
(6.4%) 21.6%
12.3%
21.7%
(5.7%)
(2.5%)
2.0%
Taxes Paid
EBIT
(8.0%) 27.9%
13.5%
23.1%
(6.5%)
(3.0%)
1.6%
Cash Tax rate (%)
41.6%
20.1%
28.6%
EBT
(17.6%) 24.3%
31.9%
22.3%
(6.2%)
(2.4%)
1.8%
Trade Wkg Capital needs
(14.0)
2.2
11.3
19.1
(5.5)
(2.0)
1.6
EAT
(22.6%) 50.0%
28.3%
22.4%
(6.4%)
(2.6%)
1.7%
Capex and Participations
1.9
(1.1)
5.0
6.0
5.0
5.0
5.0
EPS
(22.6%) 50.0%
28.3%
22.4%
(6.4%)
(2.6%)
1.7%
Other non-opg Items
(9.7)
7.8
2.7
6.0
(1.8)
(0.7)
0.5
Free Cash Flow bef. Finc.
15.5
23.8
9.5
6.4
20.1
17.6
16.1
Ratios
Gross Margin
27.4%
23.6%
23.0%
22.4%
22.5%
22.5%
22.5%
EBITDA Margin
19.7%
17.9%
17.1%
16.4%
16.5%
16.5%
16.5%
Dividends Paid
4.6
8.6
8.9
10.8
13.8
13.5
13.6
EBT Margin
15.5%
14.3%
16.0%
15.4%
15.4%
15.5%
15.4%
Net Interest Payments
(0.2)
(0.1)
(0.7)
(0.6)
(0.7)
(0.8)
(0.9)
Net Margin
8.5%
9.5%
10.3%
10.0%
9.9%
9.9%
9.9%
Change in Debt
(4.0)
0.0
(0.0)
3.5
(3.5)
0.0
0.0
Source: MARFIN ANALYSIS, Company
MARFIN ANALYSIS
23
Summary Financial Data— Mytilineos Holdings consolidated (Under Greek GAAP)
Profit & Loss (in € m)
Turnover
Cost of Goods Sold
Gross Profit
Operating Expenses
Other Income
EBITDA
Depreciation
EBIT
Net Investment Inc. (Exp.)
Net Interest Inc. (Exp.)
Exceptionals (Net)
EBT
Taxes
Net Profit After Tax
Minorities
EAT
Dividends
2002
2003
2004e
2005f
2006f
2007f
2008f
259.6
(204.7)
54.8
25.0
0.4
30.2
6.6
23.6
0.8
(5.5)
(1.3)
17.6
(7.4)
10.2
(5.1)
5.1
2.0
278.0
(219.3)
58.7
22.2
0.4
36.9
5.6
31.4
9.4
(6.2)
(6.8)
27.8
(8.9)
18.9
(4.5)
14.4
4.1
314.6 370.6 366.1 367.1 375.7
(247.5) (290.2) (287.6) (289.0) (295.9)
67.1
80.4
78.5
78.1
79.8
26.3
31.1
30.6
30.6
31.3
0.3
0.4
0.4
0.4
0.4
41.1
49.6
48.3
47.8
48.9
13.9
14.3
14.5
14.8
15.0
27.2
35.4
33.7
33.0
33.8
8.4
8.2
7.5
7.4
7.4
(5.8)
(6.4)
(6.4)
(5.6)
(4.8)
1.9
0.0
0.0
0.0
0.0
31.8
37.3
34.9
34.9
36.5
(12.6) (14.1) (13.4) (13.3) (13.7)
19.2
23.2
21.5
21.5
22.8
(6.2)
(7.7)
(7.3)
(7.1)
(7.2)
13.0
15.5
14.1
14.4
15.5
4.7
5.0
5.4
6.4
6.7
EPS
CEPS
DPS
BVPS
No Of Shares (Yr-end, m)
Adj. No Of Shares (m)
0.13
0.29
0.05
2.50
40.52
40.52
0.35
0.49
0.10
1.41
40.52
40.52
0.32
0.66
0.12
4.54
40.52
40.52
0.38
0.73
0.12
4.59
40.52
40.52
0.35
0.71
0.13
4.71
40.52
40.52
0.36
0.72
0.16
4.82
40.52
40.52
0.38
0.75
0.16
4.97
40.52
40.52
Valuation Data
P/E (x)
P/CF (x)
P/BV (x)
Div. Yield (%)
EV / Sales (x)
EV / EBITDA (x)
38.3
16.7
1.9
1.0%
1.0
8.8
13.6
9.8
3.4
2.1%
1.0
7.2
15.1
7.3
1.1
2.4%
0.8
6.4
12.6
6.6
1.0
2.6%
0.7
5.3
13.8
6.8
1.0
2.8%
0.7
5.5
13.6
6.7
1.0
3.3%
0.7
5.5
12.6
6.4
1.0
3.4%
0.7
5.4
Per Share Data (in €)
Balance Sheet (in € m)
2002
2003
2004e
2005f
2006f
2007f
2008f
Net Fixed Assets
Investments
Other LT Assets & Accruals
66.9
25.3
0.9
59.6
25.9
0.2
182.1
26.4
0.6
178.4
26.9
0.7
173.3
27.4
0.7
168.1
27.9
0.7
162.5
28.4
0.8
Total Fixed Assets
93.1
85.7
209.2
206.0
201.5
196.7
191.7
Inventories
Debtors
Cash & Equivalents
Marketable Securities
Other Current Assets
60.8
154.5
10.0
42.7
1.0
68.4
130.5
10.0
56.6
1.4
78.0
151.7
10.0
56.6
1.6
91.4
182.8
10.0
56.6
1.9
90.6
185.6
10.0
56.6
1.8
91.1
186.1
10.0
56.6
1.8
93.2
190.4
10.0
56.6
1.9
Total Current Assets
269.1
266.9
297.9
342.6
344.6
345.6
352.2
Total Assets
362.2
352.6
507.0
548.7
546.1
542.3
543.8
43.5
81.4
0.0
24.3
59.7
49.1
0.0
37.8
64.4
59.4
0.0
44.1
75.5
73.4
0.0
50.6
74.9
62.0
0.0
48.1
75.2
60.2
0.0
49.1
77.0
60.4
0.0
50.4
149.3
146.5
167.9
199.6
185.0
184.5
187.8
52.4
48.1
10.9
76.8
52.0
20.3
76.8
58.3
20.3
76.8
65.9
20.3
76.8
73.2
20.3
61.8
80.4
20.3
46.8
87.6
20.3
Total Liabilities
260.7
295.6
323.2
362.6
355.3
347.0
342.5
Total Equity
101.4
57.0
183.8
186.1
190.8
195.3
201.3
30.2
36.9
41.1
10.8
9.9
8.7
61.4% 35.7% 27.4%
(23.2) (32.6)
26.0
7.9
(1.2)
10.0
(7.4)
5.9
3.8
49.6
12.6
33.7%
33.4
11.0
4.4
48.3
47.8
14.1
13.4
40.5% 38.5%
2.7
0.6
10.0
10.0
(2.2)
0.1
48.9
13.3
36.6%
4.8
10.0
0.6
Creditors
Short Term Debt
CP of Long Term Debt
Other
Total Current Liabilities
Long Term Debt
Minorities
Other LT Liabil. & Prov.
Cash Flow Statement (in € m)
Growth Rates
Turnover
EBITDA
EBIT
EBT
EAT
EPS
Ratios
Gross Margin
EBITDA Margin
EBT Margin
Net Margin
Tax Rate
ROE (avg)
Net Debt / Equity
Interest Coverage
(32.3%)
7.1%
(15.9%) 22.3%
(19.3%) 32.9%
(40.7%) 58.1%
(64.4%) 181.3%
(64.4%) 181.3%
13.2%
11.4%
(13.2%)
14.2%
(9.7%)
(9.7%)
17.8%
20.7%
30.0%
17.4%
19.6%
19.6%
(1.2%)
(2.8%)
(4.7%)
(6.5%)
(8.7%)
(8.7%)
0.3%
(0.9%)
(2.1%)
0.0%
1.9%
1.9%
2.4%
2.2%
2.4%
4.5%
7.6%
7.6%
21.3%
13.1%
10.1%
4.1%
39.6%
10.8%
0.4
4.7
21.7%
13.4%
10.1%
4.2%
37.9%
8.4%
0.4
5.6
21.4%
13.2%
9.5%
3.9%
38.5%
7.5%
0.4
5.3
21.3%
13.0%
9.5%
3.9%
38.2%
7.5%
0.3
5.9
21.2%
13.0%
9.7%
4.1%
37.6%
7.8%
0.2
7.1
EBITDA
Taxes Paid
Cash Tax rate (%)
Trade Wkg Capital needs
Capex and Participations
Other non-opg Items
27.3
66.6
0.3
(2.9)
19.3
23.9
21.4
Dividends Paid
Net Interest Payments
Change in Debt
Capital Gains
New Equity
2.4
5.5
(28.5)
0.8
0.0
2.0
6.2
(8.0)
9.4
(37.2)
4.8
5.8
10.3
0.0
0.0
4.7
6.4
14.0
0.0
0.0
5.0
6.4
(11.5)
3.5
0.0
5.4
5.6
(16.8)
3.9
0.0
6.4
4.8
(14.9)
4.6
0.0
Change in Mkt Securities
(21.9)
13.9
(0.0)
(0.0)
0.0
0.0
0.0
Free Cash Flow bef. Finc.
21.1%
11.6%
6.8%
2.0%
42.1%
4.8%
0.8
4.3
21.1%
13.3%
10.0%
5.2%
32.1%
18.1%
1.0
5.1
Source: MARFIN ANALYSIS, Company
MARFIN ANALYSIS, 32 Aegialias str., 151 25, Maroussi, Greece, Tel: +30-210-
Research
Sales
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Vassilis Kararizos
Iraklis Kounadis
This report is for informative purposes only. Under no circumstances is it to be used or
Stamatis Diavatidis
Constantinos Maratos
considered as an offer to sell, or a solicitation of any offer to buy, any security. While the
Stella Dimaraki
Elias Calfoglou
information contained herein has been obtained from sources believed to be reliable, we do not
Spyros Karamassis
Thodoris Edipidis
Panos Panagiotou
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George Kounadis
represent that it is accurate or complete and it should not be relied upon as such. The firm or
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OF GREECE, 2004. All rights reserved.
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