Quirin Bank research news as of April 10, 2015
Transcription
Quirin Bank research news as of April 10, 2015
Capital Stage AG quirin bank Equity Research 9 April 2015 CAPITAL STAGE AG Rating Share price (EUR) Target price (EUR) Bloomberg Sec tor Buy 6.34 7.40 CAP GR Renewables S ha re da ta Shares out (m) Daily volume shs (m) Free float (%) Market c ap (EUR m) EV (EURm) Dividend/share (EUR) Dividend yield (%) Payout ratio 73.8 0.06 56.7 468 894 0.1 1.6 0.4 P e rforma nc e ytd (%) 12 months (%) 12 months (%) rel Index 31.8 67.7 48.0 SDAX S ha re pric e pe rforma nc e 2015 guidance points to further strong growth for Capital Stage Capital Stage has issued guidance for 2015, slightly below consensus but the former is based on the existing portfolio whereas the latter reflects the likely contribution from future acquisitions. In our view the track record is well proven. With fresh investment capital now available from the Gothaer JV, the parameters are in place to at least double the size of operations on a two year basis. Buy rating maintained. Good spread of renewable energy assets across Germany, Italy, France and UK Over the past five years, Capital Stage has evolved from a venture capital business to an SDAX-quoted company engaging in solar and wind farm ownership and management with EUR 468m market capitalization. Rather than develop projects itself, management has been delivering to a well-publicized plan of growth by acquisition of turnkey facilities. Including this week’s bolt-on acquisition in the UK, the current portfolio comprises 62 photovoltaic parks with 390 MWp capacity plus six wind farms with 60 MWp. Significant increase to generating capacity to double the business inside 3 years The recent acquisition of three major PV portfolios using EUR 65m mezzanine capital provided by Gothaer (27 MWp in Italy, 51 MWp in France and 58 MWp in the UK) adds 67% to generating capacity and we understand similar investments are in the pipeline for the months ahead. Stemming from this, our model assumes close to 50% revenue growth in 2015, followed by 30%, then 20% in 2017- the group will double in size! Beyond that, the growth potential remains huge. 6.5 We confirm our Buy rating on Capital Stage with EUR 7.4 target (+17% upside) In a market environment when investors in other sectors need to show concern with respect to forward sales & profit budgets, we remain convinced that our existing Capital Stage forecasts are relatively sound. Given the reliability of the income stream from existing assets, typically underpinned by FIT (in Germany, Italy and France) and Renewable Obligation Certificates (in the UK), we have a DCF price target of EUR 7.4 up from EUR 6.2 previously. With the TP some 17% above last night’s closing price, we maintained our Buy rating. 6.0 5.5 5.0 4.5 4.0 3.5 3.0 04.14 06.14 08.14 10.14 12.14 02.15 04.15 Ke y figure s 2 0 11 2 0 13 2 0 14 2 0 15 e 2 0 16 e 2 0 17 e Sales EUR m 57 78 114 152 182 Operating EBITDA EUR m 36 54 83 114 138 Ne xt trigge rs Q1- 15 results on 5 May 2015 Operating EBIT EUR m 22 34 52 72 87 FFO EUR m 23 36 45 63 78 Ana lysts Ma rk Jose fson T + 4 9 (0 ) 6 9 2 4 7 5 0 4 9 - 2 6 ma rk. jose fson@ quirinba nk. de FFO/share EUR 0.41 0.50 0.61 0.86 1.05 EPS EUR 0.24 0.35 0.40 0.46 0.52 Sales growth % 26 37 46 34 20 EBITDA growth % 101 52 53 38 20 FFO growth % 53 55 26 40 23 EBITDA margin % 88.4 109.6 79.5 77.8 77.3 FFO margin % 40.5 45.9 39.7 41.5 42.7 Net margin % 23.5 32.8 25.9 22.4 21.3 EV/Sales ratio 8.9 11.1 10.7 8.9 7.7 EV/adj. EBITDA ratio 14.2 15.8 14.6 11.8 10.2 EV/adj. EBIT ratio 23.4 25.6 23.2 18.7 16.1 P/E ratio 15.7 13.8 15.9 13.7 12.1 P/FFO ratio 9.1 7.6 8.0 7.4 6.0 Div. Yield % 2.7 3.1 2.8 3.3 3.8 Sourc e: Bloomberg Harald Eggeling T +49 (0) 69 2 47 50 49- 28 [email protected] Felix Lutz T +49 (0) 69 2 47 50 49- 29 [email protected] Klaus Soer T +49 (0) 69 2 47 50 49- 27 [email protected] Please see final page for important disc laimers and disc losures Source: Bloomberg, company data, quirin bank estimates Capital Stage AG quirin bank AG Investment case, TP calculation and valuation DCF is a solid basis for valuation We continue to view a DCF approach as providing a reliable basis for valuation given the 20 year feed-in tariff (FIT) period guaranteeing the income for the majority of the group’s assets. We apply our detailed model through 2018 and currently presume a stable capital investment programme thereafter. The latter assumption is probably conservative and (given the proven track record of finding suitable wind farms or solar parks to manage, adding value for shareholders) would thus result in a much higher valuation were we to incorporate the potential pipeline of generating capacity in our model. And points to at least 17% upside We later review the game-changing nature of the financing deal with Gothaer and resulting upgrade to forecasts which triggers our EUR 7.4 DCF (up from EUR 6.2), a 17% increase over the EUR 6.34 closing price on 8 March. We rate the shares a Buy and see them as particularly attractive for investors reviewing opportunities in the renewable energy sector. DCF Model DCF mode l (EUR m) Sales yoy change (%) EBIT EBIT margin (%) Depreciation Net working capital Tax Tax rate (%) 2 0 14 2 0 15 e 2 0 16 e 2 0 17 e 2 0 18 e 2 0 19 e 78 114 152 182 209 230 2020e 251 2 0 2 1e 2022e 2023e 2024e 290 308 314 37% 46% 34% 20% 15% 10% 9% 8% 7% 6% 2% 16 46 68 84 100 109 117 125 133 139 102 20% 41% 45% 46% 48% 47% 47% 46% 46% 45% 33% 39 37 46 53 60 63 66 68 71 73 74 1 -2 -2 -2 -2 -2 -2 -2 -2 -2 -1 271 2 -5 - 10 - 14 - 19 - 23 - 26 - 29 - 32 - 34 - 26 - 14% 11% 14% 17% 19% 21% 22% 23% 24% 25% 25% CF operating activities 58 76 103 122 140 147 156 163 170 175 150 CF investing activities - 85 - 296 - 212 - 134 - 81 - 77 - 73 - 71 - 68 - 66 - 74 Free cash flow TV - 27 - 220 - 109 - 12 59 70 82 93 102 109 76 1,740 5.4% 5.4% 5.4% 5.4% 5.4% 5.4% 5.4% 5.4% 5.4% 5.4% 5.4% 5.4% 0 - 211 - 100 - 10 48 55 61 65 68 69 46 978 Contribution to EV 0.0% - 19.8% - 9.3% - 1.0% 4.5% 5.1% 5.7% 6.1% 6.4% 6.5% 4.3% 91.5% Disc ounte d EV 1, 0 6 9 WACC (%) Discounted FCF Net cash(+)/ debt(- ) per Dec 14 Minorities (- ) per Dec 2014 S ha re holde r va lue Fa ir va lue pe r sha re - 503 - 20 547 7.4 WACC c a lc ula tion TV growth rate 1.0% Risk free interest rate 0.5% Risk premium 7.0% Beta Company interest rate Company tax rate Shareholders' equity 1.00 5.5% S e nsitivity a na lysis 21.0% 243 Net debt 503 Total capital 746 WACC 4.4% 4.9% 5.4% 5.9% 6.4% 0.326327 0.3% 10.1 7.5 5.5 3.8 2.4 0.673673 0.5% 11.1 8.3 6.0 4.2 2.7 Te rmina l 0.8% 12.2 9.1 6.7 4.7 3.1 growth ra te 1. 0 % 13.6 10.1 7.4 5.3 3.6 Cost of equity 7.5% Cost of debt 4.3% 1. 3 % 15.1 11.2 8.2 5.9 4.0 5.4% 1. 5 % 16.9 12.4 9.1 6.6 4.6 WACC So urce: quirin bank estimates Strong 2015 guidance 2 Capital Stage AG quirin bank AG Background to the DCF parameters The basis is our detailed model through 2018. We regard the revenue and operating EBIT basis for 2015 and 2016 as underpinned by the recent acquisitions and the pipeline outlined by management: we assume that all of the GIS mezzanine finance is utilized in this period and our forecasts may prove conservative if the deals are closed more quickly than this (see background to quirin bank model, page 11). For EBIT, we take operating EBITDA (i.e. stripping.-out other income – the non-cash PPA revaluation effects) less all depreciation and amortization of FIT contracts. Note that the 2014 D&A figure include EUR 12.5m impairment charges – adding these back would have yielded a 36% EBIT margin compared to just 20% reported. For 2017, our model incorporates the momentum of planned deals (annualisation effects); thereafter we currently assume a return to more modest investment, albeit that there may well be a Gothaer version 2.0 or some other alliance that provides additional funding for investment beyond this. Excluding the latter at this point, free cash flow should allow funding for rolling new investment in parks supporting mid-single digit sales growth even beyond the period covered by FIT for existing projects. For the ten year defined period in our DCF, we model slightly declining EBIT margin, again supported by guaranteed FIT payment process. Given declining FIT payments on new projects and the likelihood that future revenues will eventually reflect market prices without subsidies, we assume that margins drop from 45% to 33% beyond this first ten years. The depreciation of physical assets is modest (there may be some degradation of solar panels, more so with wind turbines and rotor blades) but the bulk of D&A actually reflects the amortization of the FIT contracts over (typically) 20 years. The current cost of financing is 4% on debt provided by German banks for the first ten years, with 6% applied for the second ten year period: our model assumes 5.5% pretax cost of debt, or 4.3% post-tax. The resulting WACC applied throughout is 5.4%. A much higher TP conceivable if one extends the asset lifespan We increase our target to EUR 7.4 (from 6.2) The DCF model reflects a significant upfront burden given the assumption of peak investment from the GIS funding in the current year and a 20 year recovery of financing, after which the plants are written-down to zero. We understand that management itself believes it conservative to evaluate projects on the basis of FIT remaining plus a further five years of operation whereby it applies the stock exchange forward energy price (currently 4cents per KWh). Those investors believing that prolongation of asset assumptions to be appropriate would probably target fair value above EUR 9, rather than the 17% upside to EUR 7.4 implied by our DCF model. Capital Stage divisional structure Five operating segments Germany’s largest independent solar park operator The core business of Capital Stage (CAP) involves the purchase and operation of solar or photovoltaic (PV) parks of which there were 48 at the last year end (but signed contracts has extended this to 61 subsequently) and wind farms (six at the moment) in Germany, Italy, France and soon in the UK. Thus, it is Germany’s largest independent solar park operator with a peak capacity of 445 MWp today (385 MWp solar; 60 MWp wind) and last year fed some 319,214,511 KWh energy into the relevant power grids. 445 MWp capacity now but potential pipeline for additional 200 MWp Rather than finance the building of new installations, the focus of strategy is to further expand its portfolio by acquiring completed turnkey projects. Management claim a pipeline today of 200 MWp across key OECD markets where feed-in tariff systems (FIT) are in place, guaranteeing the rate of remuneration per kilowatt hour over a period of 15 to 25 years. The group is also active in the technical operation and commercial management (O&M) of existing parks, both group-owned and for third-party landlords. Strong 2015 guidance 3 Capital Stage AG Minimum IRR 7.5% targeted in PV or >8% for onshore wind projects quirin bank AG Given this predictable revenue flow and relatively low risk, our understanding is that the internal rate of return (IRR) over the life of the project is the most important decisionmaking consideration. For example at least 7.5% IRR is required on photovoltaic parks in Germany and 8% for onshore wind farms. Given the country risk, 11.5% IRR after tax is required on PV installations in Italy and 9% return in France, with 10.5% indicated on the recent PV portfolio acquired in the UK. The operating return on equity (ROE) is reviewed to determine the financing of the investment in terms of equity versus debt. The greater the equity element, the stronger the cash flows attributable to shareholders. However, to take full opportunity of the potential pipeline, higher debt financing will be required going forward. Non-recourse debt often secured at below 4% on many German SPVs This is normally secured against the project in an individual SPV (special purpose vehicle) and thus the financing would typically be non-recourse debt as far as Capital Stage is concerned. However, the group’s track record and high standing, as well as the guaranteed revenue stream accruing during the remaining FIT period normally makes these projects attractive to financial institutions such as the KfW with financing terms (on German investments) fixed below 4% over a ten year loan period; closer to 4% in France and a little higher on Italian projects. The divisional organization comprises 61 subsidiaries in five operating segments: Administration comprises the group's parent company Capital Stage AG and central functions. It recorded just EUR 0.7m sales in 2014 but reported a loss of EUR 5.2m at the EBITDA level. PV Parks comprises all German, Italian, French and from this year UK photovoltaic parks, as well as holding companies of such parks. In 2014 it accounted for 82% of group sales and reported EUR 80m at the EBITDA level (94% of group total). PV Services includes Capital Stage Solar Service GmbH and Eneri PV Services (49% stake), involved in the technical and commercial management of existing parks, both group owned and for third-parties. In 2014 the division accounted for 4% of group sales and reported EUR 1.1m at the EBITDA level (1% of group total). Wind Farms comprises all wind farms in Germany and Italy plus the holding companies Capital Stage Wind IPP GmbH and Capital Stage Windpark Betriebs- und Verwaltungs GmbH. It accounted for 10% of 2014 sales and EUR 9m EBITDA (11%). Financial Investments comprises Helvetic Energy GmbH and Calmatopo Holding AG. Helvetic Energy is a leading supplier of roof-mounted solar thermal energy and PV systems in Switzerland. The segment accounted for 7% of 2014 sales and broke-even at the EBITDA level. Excellent track record and even better prospects 2014: a very strong PV performance especially with respect to expansion 2014 is seen as a very successful year for Capital Stage. Revenues rose by 37% to EUR 78m with the slight shortfall (vs. qb est. and guidance of EUR 80m) due to a disappointing year for wind power generally, plus a dip at Helvetica (the Swiss solar thermal business, the investment in which has now be written-down). 2014: a successful year particularly for the PV division Divisional P & L (EUR m) Administration PV Parks PV Services Wind Farms Financial investments Reconciliation Sum of divisions Sales 2013 0.0 39.4 2.2 7.7 9.7 -2.0 57.0 Sales 2014 0.7 64.1 2.9 7.6 5.7 -3.0 77.8 % ch yoy n.a. 63% 32% -1% -41% 56% 37% EBITDA 2013 -4.0 43.9 1.1 9.9 -0.6 0.0 50.4 EBITDA 2014 -5.2 80.4 1.1 8.9 0.0 0.0 85.3 % ch yoy 32% 83% 4% -10% -102% n.a. 69% So urce: Capital Stage; quirin bank estimates Strong 2015 guidance 4 Capital Stage AG quirin bank AG EBITDA jumped 69% to EUR 85m significantly above guidance (>67m) but this included EUR 32m of other income, predominantly IFRS valuation effects (PPA adjustments). The latter typically reflects a (non-cash) write-up between the price paid for new assets by CAP and the auditor’s idea of fair value. Excluding other income, adjusted EBITDA of EUR 54m (+52%) was a slight beat to qb forecast: as was EBIT at EUR 24m (guidance >23m). Diluted EPS rose by 46% to 35 cents and a dividend of 15 cents (+50%) will be proposed at the forthcoming AGM. There will again be the option for shareholders to accept shares as an alternative to a cash dividend (a facility accepted by 57% of shareholders in 2013). That means that for the three years between 2011 and 2014 CAP has recorded an impressive growth strategy that has included: Significant prospects in solar power, which is the group’s priority today 30% p.a. compound annual growth rate in sales. 51% p.a. CAGR in EBITDA. 57% p.a. CAGR with operating EBITDA 52% p.a. CAGR in EBIT. 66% p.a. CAGR in pretax. Diluted EPS have moved from 3 cent loss to 35 cent profit 8% p.a. CAGR in FFO per share. 49% p.a. CAGR in the balance sheet total. 39% p.a. CAGR in shareholders’ total equity As can be seen in the table above, last year was an excellent period for the Photovoltaic Park segment with revenues jumping 63% to EUR 64m. We understand that radiation levels were above plan in all three countries and by 3% in total for the group. However, the key determinant of the strong growth reflects the acquisition of new solar parks which is a subject that we shall address in more detail later in this review. Here it is worth noting that CAP currently operates less than 1% of the installed PV parks in Germany and there remains a huge opportunity for additional expansion. Reported EBITDA in PV jumped 83% to EUR 85m in 2014, way above guidance. Aside from the revenue expansion, divisional EBITDA included EUR 27m of other income, primarily IFRS PPA adjustments for initial consolidation of parks at fair value. Again we review this subject in more detail later. Excluding non-cash items, we estimate operating EBITDA for PV Parks segment grew by 59% to EUR 53m (a margin of 83%). Significant prospects in wind power, but not the group’s top priority today As can be seen in the table above, last year was a dull one for Wind Farms with revenues declining 1% despite higher capacity on board and EBITDA down 10%. We understand that the Italian facility is trading modestly above budget whereas the five wind farms in Germany missed targets by c.10%. Rather than any fundamental problem this reflects wind speeds dropping below the long term average and a significant improvement is likely in the current year. We see significant prospects for CAP in this sector going forward, although it is not seen as the number 1 priority today given a higher return-risk scenario currently in solar compared to wind energy. PV Services likely to be fastest growing division, from low basis The second fastest growing segment was PV Services, which provides for technical operation and management of photovoltaic parks, making for 40% CAGR p.a. since 2010, albeit from a modest base. We expect this division to be the fastest growing in future years, but it is currently viewed as a lucrative add-on to the main business of owning renewable energy assets. As per the last year end, PV Services oversaw 160 MWp volume of internally operated parks and 25 MWp externally operated. Strong 2015 guidance 5 Capital Stage AG quirin bank AG Some background on renewable energy Compelling arguments for expanding renewable energy At least since 1997 there have been targets set within the EU for the promotion of renewable energy. It is seen as “clean”; it utilizes natural assets without depleting them; it reduces the need for importing costly fossil fuels; it strengthens the economic situation of the EU vis-à-vis oil exporting nations; and since Fukushima has been emphasized as a safer alternative to nuclear. The initial 1997 goal set a target of providing 12% of the EU’s energy consumption from renewable sources by 2010. EU targets 20% of energy consumption being covered by 2020 Subsequently there were several attempts to incorporate a more global policy at promoting renewable energy (e.g. summits at Johannesburg or at Rio), but these have been subject to conflicting interests. At a European Conference for Renewable Energy in Berlin in 2004, the EU laid down ambitious goals extending to 2020. The key assumption was that the EU as a whole would strive towards a target of 20% of energy consumption being generated from renewable sources (from a 2004 base of 8.3%), with individual targets being set for each member state. Renewable sources now expanding in every member state In a Eurostat news release from 9 March 2015, it was claimed that 15% of final energy consumption in the (now) EU28 was generated from renewable sources in 2013. Since 2004, there had been an increase in renewable energy capacity in every member state, with the largest increase during the period being recorded in Sweden, Denmark, Austria and Italy. Estonia was the first member state to hit its 2020 target (achieving 25% in 2011) with Bulgaria (16%) and Sweden (49%) surpassing their respective 2020 targets in 2012. Share of energy provided from renewable sources: 2004-2013, plus 2020 targets Source: Eurostat news release 9 March 2015; quirin bank estimates Italy and Germany close to achieving the 2020 targets set For an overview of the EU targets by country see Appendix on page 13. Of the three countries in which Capital Stage currently operates, Italy is closest to achieving its goal (generating 16.7% from renewable supplies in 2013 vs. 17% 2020 target), with Germany at 12.4% (vs. 18% target). Furthermore, the German government has the following longterm targets calling for 30% by 2030 and 60% by 2050 of energy consumption supplied from renewable sources. France and the UK are a long way from achieving the 2020 targets set France is still a long way adrift from its 2020 target generating 14.2% in 2013 (vs. 23% goal) of its energy from renewable sources. In the UK, a market where CAP is about to enter, the figure was even more disappointing: at 5.1% in 2013, the renewable share is almost ten percentage points below the 2020 target. According to Bloomberg New Energy Finance (BNEF) total capital spend last year on renewable energies rose to more than EUR 255bn (+16% from EUR 221bn in 2013). Within Europe, growth amounted to just 1% at EUR 66bn, however, close to 60% of this was in the four countries where Capital Stage is targeting. Strong 2015 guidance 6 Capital Stage AG quirin bank AG Germany invested EUR 15.3bn (+3% yoy) in renewable energies UK invested EUR 15.2bn (+3% yoy) in renewable energies France invested EUR 7.0bn (+26% yoy) in renewable energies Italy invested EUR 2bn (down 60% yoy) in renewable energies In all of these countries there has been government financial support. Most widely established is the system of guaranteed payments by means of long-term feed-in tariffs (FIT) as currently prevails in Germany and France and used to be the case in Italy. Elsewhere there are bonus models, as applied in Denmark and the Netherlands, whereby a premium over the market price is provided. By contrast, the quota model adopted by the UK and Sweden obliges power companies to include a fixed proportion of electricity from renewable sources. The political scene in Germany 26% of German 2014 electricity produced from renewable sources up from 20% in 2011 When looking at renewables in the supply of electricity (as opposed to total energy consumption highlighted above) the share of electricity produced from renewable sources in Germany has increased from 6.3% of the national total in 2000 to 25.8% in 2014. Now with the planned phasing-out of nuclear power by 2022, the target range is for 40%-45% of electricity sales to be generated by renewable energies by 2025, rising to 55%-60% by 2035. EEG makes clear that no change to existing FIT payments will happen As elsewhere various measures of government support have been required in order encourage this investment in renewable energy. In Germany, the main political framework behind the development of renewable energy is the EEG (Erneuerbare Energien Gesetz, or Renewable Energy Sources Act) which was first established in 2000 and renewed in 2014. Importantly for the Capital Stage business model, in the latter has confirmed that there will be no retrospective cuts in existing subsidies. To begin with, the EEG guaranteed a fixed feed-in payment, but came in for criticism for lacking focus in terms of volume of investment. Having achieved targets set in recent years, an optional market premium (akin to the fixed payment) has been in place since 2012. Systematic volume management is also now integrated into the EEG for solar power by means of adjustments to subsidy rates depending on the pace of new installations. The FIT for fresh installed capacity is reducing, but once set is guaranteed for 20 years A flexible cap defines expansion corridors and over- or under-performance from that has a direct impact on subsidy rates. For solar energy, the annual corridor is 2,400 MW to 2,600 MW, although according to the German Federal Network Agency (Budesnetzagentur) the level of new PV installations in 2014 amounted to only 1,899 MW. Given ever increasing more efficient modules, the FIT payments for solar power goes down by 0.5% per month and by an additional amount if the expansion corridor is exceeded. However, once connected to the grid the FIT is guaranteed at that amount for 20 years. As noted above, Germany was the largest market for new wind energy with 4.75 GW newly installed capacity last year, a rise of 59% yoy. According to Capital Stage Accounts, the German Wind Energy Association attributes this to the zoning of new areas that can be used for onshore wind power. This development is likely to slow with the EEG now setting a range similar to solar of 2,400 MW to 2,600 MW. Again the FIT on newly installed wind power is reduced once the expansion corridor is exceeded. The political scene in Italy Italy has also been strongly supported by long-term feed-in tariff model known in recent years as the Conto Energia V. By June 2013 the EUR 6.76bn annual subsidy ceiling had been reached, so since 2014 electricity has to be sold at the free market price. Strong 2015 guidance 7 Capital Stage AG quirin bank AG More worryingly for investors in Capital stage, the Italian government also reduced the existing FIT for solar power retroactively with effect from 1 January 2015. Park operators were thus given a choice of three options: Extend the subsidy period from 20 to 24 years, but with a FIT reduction on the outstanding period (up to 20%) Retain the subsidy for 20 years, but with regular (and lower) FIT rates Keep the subsidy for 20 years and reduce the FIT by a fixed amount (6% to 8% depending on size of installation and duration remaining) Retrospective cut to Italian FIT hits 2015 revenue by >2% Our best understanding of the situation at Capital Stage is that the third choice was made resulting in close to 8% reduction in the level of feed-in tariff applicable. In our model, we have assumed that the Italian 2014 base goes down by this amount effective 1 January 2015, resulting in 2-3% revenue cut at the group level, before capacity expansion. (See business model, page 10). The FIT for fresh installed capacity is reducing, but once set is guaranteed for 20 years With the 2014 Accounts, there was a EUR 7.75m impairment charge against the lower FIT now expected from the existing CAP facilities in Italy. Rather than being discouraged by this situation, management at Capital Stage actually see increased movement in the secondary market for PV facilities and is actively seeking fresh investment opportunities. At the same time, it stresses that it will continue to insist that the higher country risk is reflected in higher anticipated IRR. The political scene in France FIT subsidy for French PV growth President Francois Hollande has endorsed a report calling for a reduction in the French dependence on nuclear from 75% now to 50% by 2025. This necessarily would require a significant boost to capacities generated from renewable sources. Like Germany and Italy, the subsidy system in France is characterized by fixed FIT structure guaranteed for 15 to 20 years. Since March 2014, the available FIT varies between 7 cent and 29 cent per kilowatt hour, but with the lowest level granted to the large ground-mounted installations that CAP typically operates. There may be additional support, for example for parks using components or modules manufactured in the EU including the wafer transformation process (amounting to 5% for residential buildings and 10% for larger ground-mounted parks) but this appears to contravene EU regulation and could soon end. No retrospective cutting of FIT likely Since the FIT is passed on to the end French consumer by means of a distribution mechanism, any subsequent change in the law would have no impact on the government’s budgets. Like Germany and unlike the case in Italy therefore, we do not view the risk of retrospective action impacting the CAP business model in France. The political scene in the UK Although there is FIT system in the UK similar to the schemes that have spurred the development of renewable energies in Germany, Italy and France, these are only available for very small facilities which would not be considered appropriate for the Capital stage business model Instead there is a quota system obliging power companies to include a minimum ratio of electricity from renewable sources. UK quota system can be difficult for outside investors to follow Strong 2015 guidance Thus revenue is more complicated to calculate than on the continent since UK users of electricity have to acquire renewable energy rights as part of their power obligation. Hence plant operators like CAP usually benefit from contractually guaranteed offtake of their electricity by industrial customers (in this first instance by Capital stage by BT and Total) as well as government subsidies in the form of Renewable Obligation and Levy Exemption certificates. 8 Capital Stage AG quirin bank AG Rapidly developing portfolio still with huge growth potential 349 MWp facilities fed 319k kilowatt hours into the grid Over the past five years, Capital Stage has evolved from a venture capital business to an SDAX-quoted company engaging in solar and wind farm ownership and management with EUR 468m market capitalization. As per December 2014 the portfolio consisted of 48 PV parks with 289 MWp capacity plus six wind farms with 60 MWp. Together these fed 319 MW hours into the electricity grids in 2014. Subsequently, the option on Wolgast PV park in Mecklenburg-West Pomerania (8 MWp) has not been taken-up since a final proof of the facility showed that it did meet Capital Stage’ requirements. However two large acquisitions and one small bolt-on deal have more than compensated. Signed in December but completed in January, the first deal saw CAP dramatically expand its position in France (to 141 MWp) after taking control of a portfolio of five PV parks in south-west France with 50.8 MWp generating capacity. This was closely followed by the group’s entry into the British renewable energy sector with the purchase of a portfolio of seven PV parks in the south-west with a total capacity of 53.4 MWp. This deal has just closed and will be consolidated into the group accounts from Q2-15. Then just this week Capital Stage announced that it has signed another deal to acquire a facility in south-east England that should provide 5 MWp. This deal will also close shortly. In addition CAP has secured an exclusive option on the purchase of two further British solar parks with an aggregate generation of 10 MWp. The latter, which are expected to connect to the grid in June, are part of a portfolio pipeline of 50 MWp being constructed by German park developer F&S and with both sides mentioning closer ties, one might speculate that CAP could end up acquiring the whole package. Current portfolio dominated by PV Thus excluding the latter the power balance is currently split 86% PV and 14% wind generation. Of the total solar capacity, 35% is based in Germany, 15% in Italy, 36% in France and now 14% in the UK. However, sunnier conditions in Italy mean that the assets there are more productive than PV parks in Germany (25% more effective is often suggested). Of the wind capacity, 90% is found in Germany and 10% in Italy with no wind farms in France not the UK as of today. Overview of the current PV Parks and Wind Farms of Capital Stage Group Portfolio Project Country Type MWp Solar Germany 18 PV 133.13 Wind Farms Germany 5 WF 54.00 Solar Italy 20 PV 57.70 Wind Farms Italy 1 WF 5.95 Solar France 14 PV 140.72 Wind Farms France 0WF 0.00 Solar UK 7 PV 53.40 Wind Farms UK 0WF 0.00 Solar Group 59 PV 384.95 Wind Farms Group 6 WF 59.95 Group generating capacity 444.90 Households 39,570 40,300 13,270 4,600 30,700 0 n.a. 0 83,540 44,900 128,440 Source: Capital Stage; quirin bank estimates per end March 2014 Management has flagged a pipeline of over 200 MWp currently being considered, with the likelihood of more than half of this being realized within the next 12 months. Given the possibility offered by the F&S UK portfolio highlighted above plus several projects indicated in Italy, it is not unreasonable to predict PV generating capacity above 100 MWp in both of these countries. Thus it could be the case that Capital Stage will soon have a portfolio with a fairly even spread of solar asset across the four countries of operation. Strong 2015 guidance 9 Capital Stage AG quirin bank AG Gothaer finance likely to be game-changer A constant requirement for fresh capital Must acquire new assets to grow So, a key feature of ownership of renewable energy sources still today is that future income streams are pretty much guaranteed by fixed feed-in tariffs received per kilowatthour of electricity generated by these assets. That also means that Capital Stage must acquire additional wind farms and solar parks in order to grow. Fortunately, there are a huge number of potential acquisitions in a highly fragmented market: CAP’s German PV base today represents less than 1% of the country’s solar capacity and yet it is the leading independent player there! PV parks are numerous, typically small, and found all over the country The domestic photovoltaic market is dominated by relative small solar parks with less than 20 MWp capacity spread through-out the country. Some of these parks were developed by small groups utilizing German tax breaks to encourage investment in renewable energy. Once these projects are complete, these developers look for purchasers like CAP to buy the turnkey operation on the secondary market. This is precisely the market that Capital Stage has historically tended to focus on with the Brandenburg solar park (51% owned) being the largest controlled in Germany. Favoured size for Capital Stage is often too small for insurance co.s and utilities to consider When bidding for new parks or wind farms CAP competes with insurance companies and utilities, as well as other private equity or venture capital firms. Prior to 2014, Capital Stage tended to be active in the 2 MWp to 12 MWp size categories; whereas insurance companies need a volume of 35 MWp whilst the utilities might begin to review projects once capacity is above 100 MWp. We draw the reader’s attention to the example of Allianz Capital which has a specialist fund (estimated above EUR 1bn) seeking investment opportunities in renewable energies. It has a team of six specialists reviewing acquisition projects which realistically means that it can only consider solar parks or wind farms above 50 MWp. Capital Stage probably the most nimble in terms of negotiating with sellers of small PV parks Capital Stage does not have the bidding field to itself, but we remind readers that it is the most important player in this niche (projects < 20 MWp) and is probably one of the more nimble in reacting when parks come on the market from distressed sellers. We point to the regular occurrence of other income often comprising exceptional profit attributable to the initial consolidation of badwill of assets purchased (the difference between price paid and the higher market value – see next Financials section) as evidence of CAP’s bargaining position. Long-term strategic partnership with Gothaer Insurance Group Last November, Capital Stage and Gothaer Insurance Group announced a strategic partnership whereby CAP will identify and manage solar parks, purchased via funds partially provided by GIS. During a conference call to explain the economic background, CAP management indicated that this partnership has the scope to double the scale of its existing operations within a relative short timeframe. Established in 1820 and now with over EUR 4bn of premium income and 3.5m insured members, Gothaer is one of Germany’s largest insurance groups. It offers a wide range of insurance classes and has been involved in renewable assets for many years. Back in July 2014 GIS outlined plans to invest a further EUR 200-300m in renewable energies, so this deal with Capital Stage is just one element of this strategy. Investment criteria of GIS identifies Capital Stage as a good fit in terms of security, return and horizon Strong 2015 guidance What is important for CAP is that Gothaer has good working knowledge of the planned business model investing in solar parks and has a time horizon that allows projects purchased to be seen through the feed-in-tariff period applicable. The strategic partnership involves paying-back the capital is full after 20 years. Important for GIS is predictable and stable returns over a prolonged period: it is a good match. 10 Capital Stage AG quirin bank AG The structure of the partnership involves a 50-50 JV into which all new PV parks in Germany, France, Italy and the UK will go. GIS provides participation rights capital of EUR 150m which the JV will draw-down as acquisitions are identified. This mezzanine capital has a fixed 4% coupon with an upside sharing agreement (maximum 6% in total) with a financial leverage at project level anticipated to be 25/75 equity to debt capital. Half gone in just three months Huge investment potential just within its existing field of operation Thus the EUR 150m available could be leveraged to a total investment sum of EUR 600m, sufficient to double the size of the business to over 600 MWp generating capacity. Within just three months, slightly less than half (EUR 63m of the 150m) had been utilized in just three purchases: The 51 MWp acquisition in France for a total investment volume of EUR 70m The 27 MWp acquisition in Italy for a total investment volume of EUR 30m The 53 MWp acquisition in the UK for a total investment volume of EUR 90m Management expects to have identified projects which could fully utilize the participation capital by the end of the current year! Beyond then, it might extend the current financing deal with GIS (another EUR 150m or probably more); it might enter a new agreement with a new financial partner; or it might seek alternative sources of capital for additional investments. Rather than speculate at this stage, we just alert investors to the fact that there is a huge investment potential in its existing areas of operation and even more significant opportunities should it consider expansion to new geographical areas. Consolidated Capital Stage forecasts When reviewing individual investment opportunities, management give priority to IRR and ROE anticipated from those projects and builds bottom-up planning on a project level. For investors, management provides annual guidance which is more easily monitored in terms of group revenues and EBITDA. Since the latter include significant valuation effects which are highly unpredictable (determined in the course of purchase price allocations when acquired facilities are first consolidated) management has refined guidance provided to investors. In future CAP will publish an earnings figure adjusted for these non-cash IFRS valuation effects. Cynics might say that following an exceptional contribution from “other income” in 2014 (accounting for EUR 29m of the EUR 85m reported EBITDA), this new guidance avoids a yoy downturn. However, we view as being more transparent for investors in a period ahead likely to be heavily influenced by the acquisition of additional capacity (resulting in a wider than normal range of analysts’ forecasts). In future, “operating EBITDA” will be highlighted as IFRS EBITDA less profit or loss on the disposal of investments, less other non-cash income (essentially badwill from PPA), less share-based remuneration. So for 2015 fresh guidance now include: quirin bank forecasts remain above 2015 guidance Strong 2015 guidance Total revenues to rise by at least 35% to an amount above EUR 105m Operating EBITDA likewise to rise one-third to an amount above EUR 73m Operating EBIT to rise at least 28% to an amount above EUR 43m Cash flow from operating activities up by 34% to an amount above EUR 75m FFO per share is predicted to grow by 10% to above EUR 0.55 Our detailed P&L forecasts are provide at the end of this report. Our bottom-up model is based on forecasts on a divisional basis, but at a consolidated level are a little ahead of the general guidance highlighted above. We believe that the key difference is that management forecasts reflect plans for the current portfolio whereas our model assumes fruition of acquisitions in utilizing the GIS mezzanine finance. 11 Capital Stage AG quirin bank AG The table below provides an overview of the divisional importance, both on a historical basis and our underlying forecasts for the next three years. Divisional P & L Sales Administration PV Parks PV Services Wind Farms Financial investments Reconciliation Sum of divisions EBITDA Administration PV Parks PV Services Wind Farms Financial investments Reconciliation Sum of divisions Adjustments Non cash IFRS items Operating EBITDA EBITDA margin (%) PV Parks PV Services Wind Farms Financial investments Sum of divisions EBITDA ex other inc. 2012 2013 2014 2015e 2016e 2017e 0.0 30.5 1.3 2.5 12.1 -1.3 45.1 0.0 39.4 2.2 7.7 9.7 -2.0 57.0 0.7 64.1 2.9 7.6 5.7 -3.0 77.8 0.5 97.8 4.0 9.7 5.2 -3.5 113.6 0.5 132.6 5.8 11.6 5.7 -4.0 152.3 0.5 159.2 7.3 13.7 6.1 -4.5 182.2 CAGR % 2012-17 n.a. 39% 41% 41% -13% 29% 32% -3.1 40.6 0.7 3.6 -8.0 0.0 33.7 -4.0 43.9 1.1 9.9 -0.6 0.0 50.4 -5.2 80.4 1.1 8.9 0.0 0.0 85.3 -5.5 87.0 1.5 7.0 0.3 0.0 90.3 -5.5 113.0 2.0 8.5 0.5 0.0 118.5 -5.5 133.0 2.5 10.0 0.7 0.0 140.7 12% 27% 29% 23% -161% n.a. 33% 15.9 17.8 14.6 35.8 30.8 54.5 7.1 83.2 4.1 114.4 3.1 137.6 n.a. 50% 133% 54% 146% -66% 75% 40% 111% 51% 129% -6% 88% 63% 125% 40% 118% 0% 110% 70% 89% 37% 72% 6% 79% 73% 85% 34% 73% 9% 78% 75% 84% 34% 73% 11% 77% 76% So urce: Capital Stage; quirin bank estimates 46% projected sales growth driven by new PV parks, including UK In total we forecast EUR 114 sales in 2015, some EUR 9m above guidance. The main driver is additional revenues from the PV parks acquired during 2014 (Italy, Germany and France) and earlier this year, most notably the move into UK. Wind Farms likewise benefit from the initial consolidation of Kirchheilingen which came on-stream right at the end of 2014. This total assumes close to 8% reduction in FIT revenues from existing PV parks in Italy. 53% increase in operating EBITDA Given that personnel expenses and other operating costs are relatively modest in comparison to sales, the biggest uncertainty with respect to profitability concerns the level of other income. We now assume EUR 7m heavily weighted to H1, compared to EUR 31m in 2014. Thus we forecast EUR 90m EBITDA (+6%). On an underlying basis before other income, we forecast a 53% jump in operating EBITDA to EUR 83m for an underlying margin of 70% (from 63%) reflecting a slightly more favourable weather pattern in 2015, particularly with respect to wind totals. 15% rise in net income, with EPS growth of 14% Following EUR 37m depreciation / amortization, we forecast EUR 53m reported EBIT (+15%) and EUR 52m operating EBIT (+56%). After EUR 23m financing costs we forecast EUR 35m pretax (+48%). Taxation is made complicated by the extent of tax free gains within other income, but we model a 18% tax rate on profit before other income, so forecasting EUR 29m attributable net income (+15%). Given the additional share base, diluted EPS are estimated at 40 cents (+14%). FFO projected at EUR 45m (+28%) and FFO / share at 61cents (+21%) As already announced CAP will take control of five PV parks in France, six in Italy and eight in the UK for an investment sum of EUR 200m. This was reflected in EUR 65m equity capex and EUR 135m debt assumed at time of acquisition and alone added 80% to the group’s solar capacity This will thus support growth in 2015 and 2016, as well as providing strong cash flows for future expansion. Our best guess at FFO this year is EUR 45m (+28%) although the heavy expansion programme will mean that net debt rises (qb est. EUR 747m +240m). However the cash flows generated from projects already belonging to Capital Stage will mean significant FFO streams from 2016. Strong 2015 guidance 12 Capital Stage AG quirin bank AG Appendix Share of energy from renewable sources in Europe Appendix: Share of energy from renewable sources in % of final energy consumption 2004 2007 2010 2012 2013 Austria 22.7 27.5 30.8 32.1 32.6 Belgium 1.9 3.4 5.7 7.4 7.9 Bulgaria 9.6 9.2 14.1 16.0 19.0 Croatia 13.2 12.1 14.3 16.8 18.0 Czech Rep. 5.9 7.4 9.5 11.4 12.4 Cyprus 3.1 4.0 6.0 6.8 8.1 Denmark 14.5 17.8 22.0 25.6 27.2 Estonia 18.4 17.2 24.6 25.8 25.6 Finland 29.2 29.8 32.5 34.5 36.8 France 9.4 10.3 12.8 13.6 14.2 Germany 5.8 9.0 10.4 12.1 12.4 Greece 7.2 8.5 9.8 13.4 15.0 Hungary 4.4 5.9 8.6 9.6 9.8 Ireland 2.4 3.6 5.6 7.3 7.8 Italy 5.6 6.4 10.5 15.4 16.7 Latvia 32.8 29.6 32.5 35.8 37.1 Lithuania 17.2 16.7 19.8 21.7 23.0 Luxembourg 0.9 2.7 2.9 3.1 3.6 Malta 0.3 0.4 1.0 2.7 3.8 Netherlands 1.9 3.1 3.7 4.5 4.5 Poland 7.0 7.0 9.2 10.9 11.3 Portugal 19.2 21.9 24.2 25.0 25.7 Romania 16.8 18.3 23.4 22.8 23.9 Slovakia 5.3 7.3 9.0 10.4 9.8 Slovenia 16.1 15.6 19.2 20.2 21.5 Spain 8.3 9.7 13.8 14.3 15.4 Sweden 38.7 44.1 47.2 51.0 52.1 UK 1.2 1.8 3.3 4.2 5.1 EU28 8.3 10.0 12.5 14.1 15.0 2020 34 13 16 20 13 13 30 25 38 23 18 18 13 16 17 40 23 11 10 14 15 31 24 14 25 20 48 15 20 So urce: Euro stat news release 9 M arch 2015 Strong 2015 guidance 13 Capital Stage AG quirin bank AG Company description Capital stage is Germany’s largest independent solar park operator: the core business is the purchase and operation of solar parks and wind farms. Per end March, Capital Stage operated 54 PV parks and six wind farms across Germany, Italy and France, with a contract signed for the purchase of seven solar parks in the UK. This portfolio has a capacity of 445 MWp and the indicated pipeline might extend this to over 600 MWp within the next 12 months. Altogether 319,214,511 kWh was fedinto the power grid in 2014. Due to their stable predictable revenue typicaly supported by pre-agreed feed-in tariffs, these parks offer a good risk-return ratio. In order to grow, management actively seeks new turnkey investments in additional solar parks or wind farms in the core countries of operation. A JV with Gothaer provides equity funding for the 2015 planned PV expansion. Revenues by segment 2014 MWp by product mix 2014 PV services 4% Invests 7% Equity investment by energy 2014 PV Fr 32% Wind farms 11% Wind Ger. 9% PV Fr 13% Wind Ger. 12% PV parks 78% PV Ger. 36% Wind Italy 1% PV UK 12% PV Italy 39% PV Ger. 30% PV Italy 13% Source: Company data Wind Italy 3% Source: Company data S e gme nt da ta (EUR m) ### Source: Company data 2 0 13 78.7 38% 2 0 15 e 113.6 2 0 16 e 2 0 17 e Re ve nue s (growth in % ) 45.1 27% 57.0 44% 152.3 34% 182.1 20% PV Parks PV Services Wind farms Invest./other 30.5 1.3 2.5 10.8 35% 84% - 6% 39.4 29% 2.2 69% 7.7 212% 7.8 - 28% 64.1 63% 2.9 32% 7.6 - 1% 4.2 - 46% 97.8 53% 4.0 40% 9.7 28% 2.2 - 47% 132.6 5.8 11.6 2.2 36% 45% 20% 0% 159.2 7.3 13.6 2.1 20% 25% 17% - 5% EBITDA (ma rgin in % ) PV Parks PV Services Wind farms Invest./other 33.7 40.6 0.7 3.6 - 11.1 75% 133% 54% 145% 50.4 88% 43.9 111% 1.1 51% 9.9 129% - 4.5 n.a 85.3 108% 80.4 125% 1.1 40% 8.9 118% - 5.2 n.a 90.3 87.0 1.5 7.0 - 5.2 118.5 113.0 2.0 8.5 - 5.0 78% 85% 34% 73% n.a 140.7 133.0 2.5 10.0 - 4.8 77% 84% 34% 73% n.a -102% 26% 2 0 14 79% 89% 37% 72% n.a Source: Company data, quirin bank estimates Shareholder structure AMCO Service 22.0% CEO 2.2% Other free float 54.3% Recommendation overview 0.60 0.50 17% 0.40 Albert Büll 6.1% in % Dr Liedkte 8.1% EPS: quirin bank vs. consensus 0.30 0.20 83% 0.10 Blue Elephant 7.3% 0.00 2015 2016 quirin bank Source: Company data 2017 00% 20% Sell Consensus Source: quirin bank Research, Bloomberg 40% 60% Hold 80% 100% Buy Source: Bloomberg Compa ny guida nc e 2 0 15 Group sales Operating EBITDA Operating EBIT operating cash flow Ta rge ts >EUR 105m >EUR 73m >EUR 43m >EUR 75m quirin ba nk EUR 115m EUR 83m EUR 54m EUR 78m Conse nsus EUR 122m n.a. n.a. n.a. Source: Company data, quirin bank estimates Strong 2015 guidance 14 Capital Stage AG quirin bank AG Profit & Loss Statement P rofit & Loss sta te me nt (EUR m) Sales 2 0 12 45.1 yoy 2 0 13 yoy 2 0 14 yoy 2 0 15 e yoy 2 0 16 e yoy 27% 57.0 26% 77.8 37% 113.6 46% 152.3 34% 2 0 17 e 182.1 Cost of goods - 6.9 - 6.5 - 3.8 - 3.6 - 4.1 - 4.5 Gross profit 38.2 50.5 74.0 110.0 148.2 177.7 Gross profit margin (%) 85% 89% 95% 97% 97% 98% Other operating earnings 15.9 15.0 32.2 7.1 4.1 3.1 Personnel expenses - 5.9 - 6.3 - 6.6 - 7.6 - 9.6 - 11.2 Other operating expenses - 14.5 - 8.8 - 14.3 - 19.2 - 24.2 - 28.9 EBITDA 33.7 36% 50.4 49% 85.3 69% 90.3 6% 118.5 31% 140.7 EBITDA margin (%) 75% 4.9 pp 88% 13.7 pp 110% 21.2 pp 79% - 30.1 pp 78% - 1.6 pp 77% Depreciation - 13.2 - 18.7 - 38.9 - 36.8 - 46.1 - 53.5 EBIT 20.5 31.7 46.4 53.5 72.4 87.2 EBIT margin (%) 46% 56% 60% 47% 48% 48% Net financial result - 11.1 - 15.8 - 22.5 - 18.1 - 27.7 - 33.1 Exceptional items 0.0 Pretax profit 9.5 82% 15.8 67% 23.9 51% 35.4 48% 44.7 26% 54.1 21.0% 6.4 pp 27.8% 6.7 pp 30.7% 2.9 pp 31.1% 0.5 pp 29.3% - 1.8 pp 29.7% Pretax margin (%) Taxes 0.0 - 0.4 0.0 0.0 0.0 0.0 - 1.8 2.2 - 5.3 - 9.8 - 14.1 Tax rate (%) 4% 11% - 9% 15% 22% 26% Earnings after taxes 9.1 14.0 26.1 30.1 34.9 40.0 - 0.6 - 0.7 - 0.5 - 0.7 - 0.8 Minorities Group attributable income 8.6 - 1052% 13.4 56% 25.5 15% - 1.3 16% 0.18 - 753% 0.24 30% 0.35 48% 0.40 13% 0.46 16% 0.52 Adjusted EBITDA 17.8 26% 35.8 101% 54.5 52% 83.2 53% 114.4 38% 137.6 Adj. EBITDA margin (%) 40% Adj. EBIT margin (%) 17% 42% 21.7 38% 70% 184% 33.7 43% 73.8 38.7 46.8 63% 73.8 34.1 Earnings per share (EUR) 7.6 72.1 29.4 No. of shares (m) Adjusted EBIT 55.9 91% 73% 55% 52.4 46% 73.8 75% 56% 72.3 48% 76% 38% 87.1 48% So urce: Co mpany data, quirin bank estimates Strong 2015 guidance 15 Capital Stage AG quirin bank AG Balance Sheet Ba la nc e she e t (EUR m) 2 0 12 yoy 2 0 13 yoy 2 0 14 yoy 2 0 15 e yoy 2 0 16 e yoy 2 0 17 e Asse ts Cash and cash equivalents 34.2 55.7 118.7 49.7 51.2 130.1 Accounts receivables 3.2 4.5 9.3 12.8 17.3 22.8 Inventories 2.5 2.1 1.9 1.9 1.9 1.9 Other current assets 1.4 3.1 10.0 10.0 10.0 10.0 Tax claims 12.7 Tota l c urre nt a sse ts 53.9 Fixed assets 317.1 408.1 675.9 933.9 1097.8 6.9 6.8 2.6 2.6 2.6 2.6 69.3 91.4 145.4 146.4 148.4 151.4 Financial assets 3.1 7.8 0.0 0.0 0.0 0.0 Deferred Taxes 2.8 5.6 13.5 13.5 13.5 13.5 Goodwill Other intangible assets Other fixed assets Tota l fixe d a sse ts Tota l a sse ts 3.6 25% 2.0 401.1 455.0 68.9 2.3 28% 4.5 142.3 - 0.3 106% 6.0 74.2 10.0 - 48% 6.0 90.4 26.4 22% 191.2 1148.3 6.0 6.0 56% 524.2 31% 843.5 61% 1102.4 31% 1268.4 15% 1321.9 52% 593.2 30% 985.8 66% 117 6 . 6 19 % 13 5 8 . 8 15 % 15 13 . 1 Equity & Lia bilitie s Subscribed capital 48.4 67.7 73.8 73.8 73.8 73.8 Reserves & other 73.7 131.3 161.8 175.7 214.8 240.2 S ha re holde rs' e quity 122.1 199.0 235.7 249.5 288.7 314.0 8.1 8.4 7.8 7.8 7.8 Minorities S ha re holde rs' e quity with minoritie s 130.3 42% 207.4 59% 243.5 17% 257.3 6% 296.5 7.8 15% 321.8 Long- te rm lia bilitie s Pension provisions Other Provisions Financial liabilities Tax liabilities Other liabilities Tota l long- te rm de bt 2.6 4.0 12.0 12.0 12.0 17.9 17.9 17.0 17.0 17.0 17.0 243.8 286.1 578.3 753.3 893.3 1018.3 32.0 42.2 60.8 60.8 60.8 60.8 1.7 4.5 8.3 8.3 8.3 298.0 57% 354.7 19% 676.3 91% 851.3 26% 991.3 12.0 8.3 16% 1116.3 S hort- te rm de bt Other provisions 0.9 0.9 1.0 1.0 1.0 1.0 Trade payables 2.1 2.1 13.3 15.3 18.3 22.3 Financial debt 17.4 22.0 43.1 43.1 43.1 43.1 Other liabilities 6.4 6.0 8.7 8.7 8.7 Tota l short- te rm de bt Tota l e quity & lia bilitie s 26.8 43% 455.0 52% 31.1 593.2 8.7 16% 66.0 112% 68.0 3% 71.0 4% 75.0 30% 985.8 66% 117 6 . 6 19 % 13 5 8 . 8 15 % 15 13 . 1 So urce: Co mpany data, quirin bank estimates Strong 2015 guidance 16 Capital Stage AG quirin bank AG Financial Key Ratios Ke y Ra tios 2 0 12 2 0 13 2 0 14 2 0 15 e 2 0 16 e 2 0 17 e EPS 0.18 0.24 0.35 0.40 0.46 0.52 Book value per share 2.67 3.06 3.30 3.48 4.01 4.36 P e r sha re Da ta Free cash flow per share - 0.57 - 0.19 - 0.41 - 2.95 - 1.51 - 0.22 FFO per share 0.32 0.41 0.50 0.61 0.86 1.05 Dividend per share 0.08 0.10 0.15 0.18 0.21 0.24 9.10 8.90 11.09 10.69 8.89 7.68 EV/EBITDA 23.04 14.19 15.84 14.60 11.83 10.17 EV/EBIT 53.74 23.39 25.65 23.17 18.71 16.06 Price Earnings Ratio (P/E) V a lua tion ra tios EV/Sales 20.53 15.74 13.79 15.92 13.75 12.09 Price/FFOpS 11.66 9.11 7.59 8.00 7.41 6.02 Dividend Yield 2.1% 2.7% 3.1% 2.8% 3.3% 3.8% Sales growth (%) 27% 26% 37% 46% 34% 20% EBITDA growth (%) 26% 101% 52% 53% 38% 20% EBIT growth (%) 26% 101% 52% 53% 38% 20% EPS growth (%) n.a. 53% 55% 26% 40% 23% EBITDA margin (%) 75% 88% 110% 79% 78% 77% EBIT margin (%) 33% 41% 46% 40% 41% 43% Net return on sales (%) 19% 23% 33% 26% 22% 21% 6% 7% 7% 6% 6% 7% 130 207 243 257 296 322 29% 35% 25% 22% 22% 21% 227 253 503 747 885 931 174% 122% 206% 290% 299% 289% - 1.9 - 2.0 - 2.1 - 2.9 - 2.6 - 2.6 6.7 5.0 5.9 8.3 7.5 6.6 44% 42% 42% 45% 46% 46% G rowth P rofita bility ra tios ROCE (%) Fina nc ia l ra tios Total Equity Equity ratio (%) Net financial debt Net debt / Equity Interest Cover Net debt / EBITDA Dividend pay out ratio (%) Working Capital Working Capital / Sales Capital employed 3 4 -2 -1 1 2 8% 8% - 3% 0% 1% 1% 405 529 841 1,102 1,269 1,324 So urce: Co mpany data, quirin bank estimates Strong 2015 guidance 17 Capital Stage AG quirin bank AG Legal Disclaimer This document has been prepared by quirin bank AG (hereinafter referred to as „the Bank“). 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The valuation underlying the rating of the company analysed in this report is based on generally accepted and widely used methods of fundamental valuation, such as the DCF model, Free Cash Flow Value Potential, peer group comparison and – where applicable – a sum-of-the-parts model. Strong 2015 guidance 18 Capital Stage AG quirin bank AG We do not commit ourselves in advance to whether and in which intervals an update is made. The document and the recommendation and the estimations contained therein are not linked – whether directly or indirectly – to the compensation of the analyst responsible for the document. All share prices given in this equity analysis are closing prices from the last trading day before the publication date stated, unless another point in time is explicitly stated. The rating in this report are based on the analyst´s expectation of the absolute change in stock price over a period of 6 to 12 months and reflect the analyst´s view of the potential for change in stock price as a percentage. The BUY and SELL ratings reflect the analyst´s expected high change in the value of the stock. The levels of change expressed in each rating categories are: BUY >= +10% HOLD > −10% and < - 10% SELL < = - 10%. Analyst certification Mark Josefson, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by the Bank or its affiliates. Price and Rating History (last 12 months) Date 08.05.2014 13.06.2014 16.10.2014 12.12.2014 10.03.2015 09.04.2015 Price target EUR EUR 5.0 EUR 5.0 EUR 5.0 EUR 6.2 EUR 6.2 EUR 7.4 Rating Buy Buy Buy Buy Buy Buy Initiation 09.05.2014 Bank distribution of ratings and in proportion to investment banking services can be found on the internet at the following address: http://investment-banking.quirinbank.de/ Competent supervisory authority Bundesanstalt für Finanzdienstleistungsaufsicht - BaFin – (Federal Financial Supervisory Authority), Marie-Curie-Straße 24-28, 60439 Frankfurt Contact quirin bank AG Frankfurt am Main Schillerhaus / Schillerstraße 20 / 60313 Frankfurt am Main Management Board: Karl Matthäus Schmidt · Johannes Eismann · Dr. Marcel Morschbach · Stefan Spannagl Contact Sales Team Tel,: +49 69 2 47 50 49 – 46 Fax.:+49 69 2 47 50 49 – 44 [email protected] Strong 2015 guidance 19 Capital Stage AG quirin bank AG Contact Details quirin bank AG Schillerhaus | Schillerstrasse 20 | 60313 Frankfurt am Main Tel.Nr.:+49 69 2 47 50 49-0 | Fax: +49 69 2 47 50 49-44 | [email protected] Institutional Research & Sales Equity Research Tel. Email Klaus Soer Harald Eggeling Mark Josefson Felix Lutz +49 (0) 69 2475049-27 +49 (0) 69 2475049-28 +49 (0) 69 2475049-26 +49 (0) 69 2475049-29 [email protected] [email protected] [email protected] [email protected] Equity Sales Tel. Email Felix Schulte Stefan Krewinkel Rainer Jell Klaus Messenzehl +49 (0) 69 2475049-65 +49 (0) 69 2475049-53 +49 (0) 69 2475049-45 +49 (0) 69 2475049-46 [email protected] [email protected] [email protected] [email protected] Debt Sales Tel. Email Jürgen Raabe Klaus Linnebach Benjamin Reul Stefan Zeissler +49 (0) 69 2475049-41 +49 (0) 69 2475049-47 +49 (0) 69 2475049-48 +49 (0) 69 2475049-42 [email protected] [email protected] [email protected] [email protected] Trading / Sales Trading Tel. Email Thomas Flügel Sebastian Schütt +49 (0) 69 2475049-99 +49 (0) 69 2475049-99 [email protected] [email protected] Business Support Tel. Email Research Info +49 (0) 69 2475049-0 [email protected] Strong 2015 guidance 20