NO. Brokerage activity at AlphaValue. NO. Client of AlphaValue Research .... our recommendation from a Call option recom
Gaussin Capital Goods / France Document generated on the 03/11/2017
Adjusted net result expected to be positive in FY18
KEY DATA
12/15A
12/16A
12/17E
12/18E
12/19E
Adjusted P/E (x)
Buy
Upside potential : 271%
Target Price (6 months)
0.48
Share Price
€ 0.13
Market Capitalisation €M Price Momentum Extremes 12Months Bloomberg ticker
13.5 NEGATIVE
0.13
0.40
ALGAU FP
-4.16
-1.58
27.2
3.36
2.55
Dividend yield (%)
0.00
0.00
0.00
0.00
0.00
EV/EBITDA(R) (x)
-4.94
-4.84
-23.2
5.21
3.27
Adjusted EPS (€)
-0.60
-0.55
0.00
0.04
0.05
Growth in EPS (%)
n/a
n/a
n/a
710
31.4
0.00
0.00
0.00
0.00
0.00
Sales (€M)
6.51
6.04
18.0
33.2
40.7
EBIT margin (%)
-181
ns
3.23
18.6
21.8
Attributable net profit (€M)
-10.4
-19.3
9.36
4.41
6.31
ROE (after tax) (%)
-94.4
-204
63.4
17.2
21.3
112
223
42.6
9.36
5.82
Dividend (€)
Gearing (%)
Last forecasts updated on the 16/08/2017 Benchmarks
Values (€)
Upside
Weight
0.74
468%
35%
DCF NAV/SOTP per share
0.67
413%
20%
EV/Ebitda
Peers
0.26
100%
20%
P/E
Peers
0.26
100%
10%
Dividend Yield
Peers
0.00
-100%
10%
P/Book
Peers
0.26
100%
5%
0.48
271%
100%
TARGET PRICE
Conflicts of interest Corporate broking
NO
Trading in corporate shares
NO
Analyst ownership
NO
Advising of corporate (strategy, marketing, debt, etc)
NO
Research paid for by corporate
YES
Provision of corporate access paid for by corporate
NO
Link between AlphaValue and a banking entity
NO
Analyst
Brokerage activity at AlphaValue
NO
Felix Brunotte
[email protected]
Client of AlphaValue Research
NO
@
corporate.alphavalue.com +33 (0) 1 70 61 10 50
[email protected]
Contract research, paid for by the above corporate entity. Equity research methods and procedures are as applied by AlphaValue. Target prices and opinions are thus exclusively determined by those methods and procedures.
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Contents Recent Updates....................................................................................................................
3
Body of research..................................................................................................................
6
Target Price & Opinion....................................................................................................
7
Businesses & Trends......................................................................................................
8
Money Making.................................................................................................................
13
Debt.................................................................................................................................
15
Valuation.........................................................................................................................
16
DCF.................................................................................................................................
18
NAV/SOTP......................................................................................................................
19
Worth Knowing................................................................................................................
20
Financials........................................................................................................................
21
Pension Risks..................................................................................................................
27
Governance & Management...........................................................................................
29
Graphics..........................................................................................................................
31
Methodology.........................................................................................................................
34
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 2
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Recent Updates
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 3
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Updates 16/08/2017 Financial freedom by 2019? Change in Target Price
€ 0.53 vs 0.61
-12.2%
Note that we changed our recommendation from a Call option recommendation (held for almost two years) to a Buy in June 2017. We believe that the debt restructuring and the strong guidance (namely €18m of revenue and a positive reported net profit for FY17) are positive elements. We believe that the company could become cash break-even from 2019 onwards, which would be a very positive element and a strong catalyst for the share price. Finally, in our view, Gaussin's dependence on capital increases is approaching an end (we forecast only a €5m capital increase in 2018). Gaussin's financial freedom will be significantly rewarded by the market. In anticipation of this, we have switched to a positive recommendation.
Change in EPS
2017 : € 0.00 vs 0.02 2018 : € 0.04 vs 0.05
-76.2% -22.9%
Following a Q2 that was disapointing relative to Q1, we have decided to lower our EPS forecasts. We now expect the company to be break-even in 2017 on an adjusted basis. We still expect Gaussin to deliver positive adjusted net income in FY 2018.
Change in NAV
€ 0.67 vs 0.71
-6.68%
Following the issuance of convertible bonds, we have adapted our assumptions about the future capital increase, namely the conversion of debt into shares. We now expect this to takes place at c.€0.25 per share vs €0.30 previously, explaining all the decrease in our NAV.
Change in DCF
€ 0.76 vs 0.83
-8.51%
Following the issuance convertible bonds, we have adapted our assumptions about the future capital increase, namely the conversion of debt into shares. We now expect this to takes place at c.€0.25 per share vs €0.30 previously, explaining all the decrease in our DCF.
09/08/2017 Disappointing H1 but guidance reiterated Earnings/sales releases
Fact Key information: • Revenue of €5.7m in H1. • Revenue up by 16%. • Order book of €81m. • ATT revenue is up by 44%. • MTO revenue down by 18%.
Analysis A rather poor set of H1 results; given the full year guidance, we had expected higher revenue for the first six months. No information was given about net income for H1, but it is most likely negative when restated for one -offs in view of the company’s high fixed costs and knowing that it should be at breakeven in FY with €18m of revenue, meaning that the breakeven level for a semester is near the €10m threshold. Despite this, the FY revenue guidance has been reiterated, namely c.€18m of revenue. Moreover the company now expects to report a positive net income for the full year, in view of the €9m positive effect on the bottom line from the debt restructuring. In our view, given the H1 performance, it will be difficult for Gaussin to reach the FY guidance, but we give November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 4
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Updates the management the benefit of the doubt.
Impact No change to our forecasts as the debt restructuring is a one-off and should be treated as such. We stick to our view that adjusted net income will be only slightly positive.
20/06/2017 Further dilution expected Change in Opinion Change in EPS
Buy vs Call Option 2017 : € 0.02 vs -0.01 2018 : € 0.05 vs 0.06
ns -13.4%
As the company has issued a guidance for the first time, we have decided to take it into account and trust management. As a consequence, we have now revised upwards our 2017 EPS into positive territory.
Change in NAV
€ 0.71 vs 0.90
-20.6%
As we expect further dilution following the AGM (114m shares by 2018 versus 78m shares previously), our NAV has been decreased. The main other change is the fact that we no longer account for the licence business in our NAV.
Change in DCF
€ 0.85 vs 1.10
-23.3%
As we expect further dilution following the AGM (114m shares by 2018 versus 78m shares previously), our DCF has been decreased. Our other changes are only minor.
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 5
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Body of research
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 6
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Target Price & Opinion
Stock Price and Target Price
Earnings Per Share & Opinion
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 7
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Businesses & Trends
Businesses & Trends A family-owned company dating back more than a century Gaussin is a family-owned company dating back more than a century. During its whole history, Gaussin has designed and delivered more than 50,000 vehicles worldwide to more than 1,500 customers in 50 countries to meet the global need of transportation of heavy, difficult or cumbersome goods. Backed by a client list including prestigious companies like Maersk and DP World (to mention only the port operators), Gaussin Manugistique enjoys international renown and a strong foothold in the port sector. Founded in 1880 by Eugène Gaussin, the company is currently headed by Christophe Gaussin. As of 1986, at the height of the containerisation boom, Gaussin Manugistique decided to refocus its business on terminal tractor trailers. As of 1994, on the impetus of Christophe Gaussin, the company began to develop a motorised range. With its “made-to-order” (construction of specialist vehicles to order) offering for large customers, Gaussin Manugistique benefits from the long tail in the heavy engineering sector. A shift towards a mid-volume series based business model As of 2006, the company invested massively in the creation of a port container handling/logistics system, resulting in the first prototype of the Automotive Terminal Trailer (ATT) in 2008/09. A demonstration vehicle fleet was only finished in 2011/12 after validation of the prototype in 2010, with the first ATT order taking place in September 2012. This long cycle and the disputes encountered along the way weakened the company and, between 2010 and 2016, Gaussin Manugistique racked up total losses of c.€60m due to heavy R&D spending/depreciation/provisions and weak sales volumes (concentration on the development of the ATT range) leading to numerous successive capital increases (number of shares rose from 2.4m in 2009 to c.11m in 2013). The return to profit in 2013 and the take-off in the order book (€29.7m at end 2012) seemed to signal a turning point for Gaussin Manugistique, but turned out to be a false dawn… A three-year delay in the launching of the electric power pack due to the CEA Due to the late delivery of the first electric ATT range by the CEA (Commissiriat de l’Energie Atomique), Gaussin suffered from a funding issue and had to issue convertible bonds which were fully exercised as of the end of April 2017. As a consequence, the number of shares increased from 11m in 2013 to 64m by the end of April 2017. Recognising its mistake, the CEA has waived its €4.3m receivables from Gaussin and transferred all the patents to the company for free, which is a positive for the future since it should result in higher margins (3% to 4% of higher margin) than expected as Gaussin Manugistique will not have to pay for the licence of this product. A shift towards services Gaussin Manugistique also offers various services like auditing, leasing, training and maintenance. The company is looking to flesh out its services offering by continuing to develop leasing, finance leasing and automation in the near future. Through its Event subsidiary, Gaussin Manugistique has a portfolio of more than 25 patents on the ATT range, filed in the company’s main markets. The patents giving the company a competitive advantage are as follows: ALL-IN-ONE (patent covering the architecture of the port vehicle) & POWER-PACK (patent covering the concept of concentrating the energy components in a removable pack). In partnership with the French Atomic Energy Commission (CEA), Batterie Mobile (49% owned by Gaussin Manugistique and 51% by Milestone Factory) has developed electric, hybrid and hydrogen-fuelled motorisation systems for Power-Packs together with the algorithm enabling the independent navigation for the AGV (Google car-type autonomous port vehicle). For its part, Gaussin Manugistique has developed diesel and natural gas-fuelled power systems. A growth company! Note that terminal trailers are the equipment most often found at a port terminal. Gaussin Manugistique’s aim is to offer a new paradigm in the horizontal transportation/ unloading of containers: efficiency and cost reduction are the new watch words of port operators and the ATT range meets these needs. For a long period, Gaussin Manugistique could have been classified as a semi-cyclical, short-run business due to the high proportion of made-to-order activity in its overall sales. With the strategic shift and the development of the ATT range, Gaussin Manugistique may now be deemed to have re-positioned itself as a growth company and a mid-volume manufacturer in a semi-cyclical sector. Given its significant export share, Gaussin does, however, remain sensitive to global growth, growth in commercial trading, forex fluctuations and economic cycles. Divisional structure and introduction of new products November 3 2017
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Page 8
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Businesses & Trends Gaussin Manugistique curently operates under two divisions: MTO (Made-To-Order) division: speciality products such as the ATM (Automotive Trailer Mover), ACT (Automoted Coils Transporter), HHT (Heavy Handling Transporter); and the port division: ATT (Automotive Terminal Trailer), AGV (Automotive Guided Vehicle), ACM (Automotive Container Mover), TT (Terminal Trailer) and Power-Packs range. • MTO consists of manufacturing trailers and specialised vehicles for the transport, energy, transformation industry and environmental sectors to order. The MTO activity has represented the historic business of Gaussin for many years. This involves the ability to support customers in order to build handling solutions adapted to their problems, in a spirit of co-development and exchanges. This know-how enables the company to enjoy an international reputation amongst customers. The ATM is a handling/logistics system for the semi-trailers of heavy goods vehicles which has a reduced size (can be housed in the space of the semi-trailer) and which offers greater manoeuverability relative to a tractor/truck. Additionally, the electric motor enables logistics companies to generate operating cost savings. This product won the innovation award at the SITL trade show (transport and logistics). The ACT is a fully automated electric AGV (automated guided vehicle) which can carry steel coils weighing up to 26 tonnes.
• For its part, the ATT is a port vehicle specifically dedicated to the transportation/unloading of containers: by offering an availability ratio of 99% (compared with 90% for traditional terminal trailers) thanks to the Power-ack (a removable pack containing the motor and the energy component), a reduction in operating costs estimated at 50% by Gaussin Manugistique client PTP and a number of movements per hour higher than the competition, this product is highly attractive to major port operators. Lastly, the AGV is a port vehicle similar to the ATT but auto-guided and currently in the launch phase (commercial launch expected at end of June 2017), with a titanate battery. Finally, the Power-Pack is a vehicle module developed originally for the Gaussin Port Vehicle range. It is a disruptive technology that decouples the energy source from the vehicle in order to swap energy while keeping the same vehicle or for preventive maintenance operations to ensure maximum availability. The Power-Pack is available in five energies to meet all customer needs, namely Diesel-Hydraulic, Gas-Hydraulic, Hybrid Diesel-Electric, Full Electric and Hydrogen.
November 3 2017
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Page 9
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Businesses & Trends
The Power-Pack has outstanding potential After more than 10 years of experience in this port technology, Gaussin now offers the Power-Pack as a power generation and storage module for customers wishing to develop their own mobile or stationary applications such as energy storage for the renewable sector. Another application of the Power-Pack could be for every sector involved in horizontal transportation, such as Airports, Logistics, Raw Materials and Manufacturing and so on. One day, the Power-Pack could even equip the truck sector in our opinion. As a consequence, it is very difficult to estimate the true market potential for the Power-Pack. In order to remain conservative, in our forecast, we take into account only the growth potential in the port industry, but we may be underestimating the long-term potential of this disruptive technology. Main risks Gaussin Manugistique’s main risks are those linked to the product portfolio, the manufacturing of ATTs, the supply chain and suppliers, the technology, the competitive environment and to intellectual property and replication. The growth that Gaussin Manugistique needs to deliver to justify its valuation is very high. It is thus important to highlight the existence of execution risks, namely the difficulty of managing too high a level of growth: difficulties in securing the supply chain (difficulties encountered by some suppliers in meeting their deadlines), operational difficulties linked to the expansion of the assembly factory and the logistics chain, difficulties for the management linked to the significant increase in the payroll, difficulties linked to the management of cash flows (control over Working Capital Requirement), etc. To limit these difficulties, the negotiation of partnerships with major industrial groups with strong operations and benefiting from substantial financial resources could allow Gaussin Manugistique to reduce the risks linked to the strong growth in its order book. A growing market In its Drewry Report 2011, Drewry Shipping estimated that global container traffic is likely to double in 10 years and exceed the billion TEU mark in 2020. The growth in the container fleets was respectively 5%, 8% and 7% in 2012, 2011 and 2010, according to the Container Census from Drewry. Furthermore, according to the Xerfi “Container Shipping Lines” survey of March 2011, 90% of the merchandise transported in the world should be carried by containers. Currently, some 5% annual growth in this sector mainly originates from the intensification of trading flows. The growth in commercial trading by container should logically accelerate the purchasing of container handling/transport/unloading tools by port operators. Additionally, the automation of port operations should stimulate the interest of port operators (due to productivity gains) and thus offer attractive growth opportunities for the sector. A concentrated market structure and no direct competitors Given that this is a growing niche market, the competition is relatively moderate, the port vehicles/tractors sector effectively being highly concentrated. Gaussin Manugistique’s competitors are the traditional terminal trailer manufacturers whose investment costs are lower but where the operating costs are higher. Since there are currently no terminal trailers with the November 3 2017
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Page 10
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Businesses & Trends ATT architecture (combined tractor and trailer), these are indirect competitors. The main manufacturers of traditional terminal trailers are the brands Kalmar by Cargotech (Finland), the leader of the terminal tractor trailer market, Capacity Texas (USA), Terberg (Netherlands), Mafi Transport Systems (Germany). CHNTC (China) with its Sinotruck brand is the main terminal tractor trailer manufacturer in Asia. This does not prevent Gaussin Manugistique from taking its share of this market given its technological differentiation. The ATT substitutes are ship-to-shore cranes, gantry cranes, container storage racks and fork-lift trucks. In addition to effecting vertical container movements, the latter may effectively also undertake horizontal operations. Their principal disadvantages are their high unit cost (with the exception of fork-lifts) and their limited range. The main manufacturers of ship-to-shore cranes are Cargotech, Terex Port Solutions and Konecranes. Terex also manufactures fork-lift trucks aimed at port operators. A sizeable market for terminal trailers Kalmar has produced more than 57,000 terminal trailers over a period of more than 50 years. The 32,000 most recent terminal trailers were manufactured over the last fifteen years: annual sales are estimated at around 2,000 terminal trailers. According to Kalmar, automation and services offer the most attractive growth opportunities. Port automation is slowly developing with fewer than 40 terminals in more than a thousand now automatised to a significant degree. Gottwald, of Terex Port Solutions, was the first to implement auto-guided port vehicles in the early 1990s. More than 650 Gottwald AGVs (Automated Guided Vehicle) have thus been sold in the past twenty years, a product which competes directly with the Gaussin Manugistique AGV. To a lesser extent, VDL Containersystemen is also a direct competitor for the auto-guided range although the relative advantages of the Gaussin Manugistique AGV model should enable it to gain a significant market share in this still-embryonic technology. Moreover, in a context where Corporate Social Responsibility is taking on an increasingly important dimension, the 200 to 300 annual fatal accidents in port terminals could be significantly reduced thanks to the adoption of auto-guided port vehicles. According to Gaussin Manugistique, the number of terminal trailers in service is estimated to be 32,500. Taking a lifespan of five years, the renewal market may thus be estimated at 6,000 units a year. For its part, the PEMA (6th annual mobile equipment survey) puts the sale of terminal trailers at 2,000 in 2012 excluding North America for the six main manufacturers. Taking into account North America and the other competitors (like the Asian Sinotruk which did not respond to the survey), a market situated at between 2,500 and 3,000 annual units remains conservative. Market leader Kalmar sells 2,000 terminal trailers on average per year. Estimating its share of the market at between 25% and 50%, the annual market is likely to be around 4,000 to 8,000 terminal trailers. With an average price of around €115k for traditional terminal trailer manufacturers, the market is liable to amount to between €290m and €900m. Taking the average price of an ATT with a Power-Pack (€300k) into account, the market would amount to between €750m and €2,400m. This difference remains conservative since the ATT range has the potential to become a partial substitute for heavy equipment like ship-to-shore cranes and other port vehicles like Reachstackers. Thus, a potential market of 5,000 ATTs per year would seem to be a reasonable estimate. With around 200 ATTs sold annually by the end of 2020, Gaussin Manugistique would have a market share of around 4% (in terms of the number of terminal trailers sold), which constitutes our central scenario. Furthermore, the marketing of the AGV range (and the services linked to the deployment of the auto-guidance system), Dockings Stations, MTO vehicles, ATMs Terminal Trailers and new options could also drive revenues higher. For instance, Gaussin has been awarded by PSA (Port Singapore Authority) the delivery of two AGVs. The company estimated that the market is sizeable as the need only for PSA could amount to 2,000 AGVs over the long term. Bear in mind that the price of an AGV is roughly €1m, so that the fact that Gaussin has been short-listed is a strong catalyst. Latest developments As mentioned previously, the launches of the ATM (2014) and the AGV (2017) are the latest main developments. These have been successful as there have been orders for both product ranges: - in H2 16, the award of an order for two AGVs and three Power-Pack Full Electric. - in May 2017, firm orders for a total of eight ATM Full Electric vehicles by its distributor BLYYD. The eight vehicles are intended for leading players in the distribution and logistics sectors. Deliveries will take place in the second half of 2017. The November 3 2017
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Page 11
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Businesses & Trends amount of the orders has not been divulged. Debt restructuring Moreover, the company announced, in June 2017, an agreement to repurchase debt of €11.3m resulting from the financing put into place in April 2014. The purpose of this operation was to improve the structure of the company’s balance sheet by significantly reducing its debt and increasing its equity. This financing carried interest due annually at the rate of 8%, i.e. €1m per year, up to 2020 and at the rate of 9% thereafter, i.e. €1.2m per year. Gaussin entered into an agreement with the creditors holding 86.93% of the amount of this debt, i.e. a face value of €11.3m, with a view to repayment of their debt securities for a balance amount for all accounts of €2.3m. Gaussin equally saves the interest expense in its income statement for the years ending 2017-21, i.e. a cumulative amount of €4.6m. In total, the transaction represents net cash savings of €13.6m if one considers what the company should have paid out over the balance of the loan term (principal and interest). Lastly, from an accounting standpoint, the transaction will result in a positive impact of €8.9m in the income statement and in shareholders’ equity. Thanks to this and the simplification of the legal structure, all patents are now detained by Gaussin. Recentred management and merger of entities The restructuring of Gaussin also took the form of a reduced management team to lower the fixed costs but also for efficiency reasons. Moreover, following the AGM in June 2017, the legal structure of the company has been simplified and all entities will be merged, in order to reduce costs and also to attract potential partners, as in the past the legal structure may have put off some of them.
Divisional Breakdown Of Revenues Change 17E/16 Sector
12/16A
12/17E
12/18E
12/19E €M
Terminal port equipements (A...
Engineering-Heavy Constr. Engineering-Heavy MTO Constr. Services / Licensing / Engineering-Heavy Others Constr. Other Total sales
of % total
Change 18E/17E €M
of % total
2.37
13.7
24.3
31.8
11
95%
11
70%
3.67
1.80
5.40
5.40
-2
-16%
4
24%
0.00
0.00
0.00
0.00
0
0%
0
0%
0.00
2.49
3.52
3.52
2
21%
1
7%
6.04
18.0
33.2
40.7
12
100%
15
100%
Key Exposures
Sales By Geography Revenues
Costs
Equity
Dollar
90.0%
5.0%
0.0%
France
10.0%
Emerging currencies
15.0%
0.0%
0.0%
Other
90.0%
0.0%
0.0%
0.0%
Long-term global warming
We address exposures (eg. how much of the turnover is exposed to the $ ) rather than sensitivities (say, how much a 5% move in the $ affects the bottom line). This is to make comparisons easier and provides useful tools when extracting relevant data. Actually, the subject is rather complex on the ground. The default position is one of an investor managing in €. An investor in £ will obviously not react to a £ based stock trading partly in € as would a € based investor. In addition, certain circumstances can prove difficult to unravel such as for eg. a € based investor confronted to a Swiss company reporting in $ but with a quote in CHF... Sales exposure is probably straightforward but one has to be careful with deep cyclicals. Costs exposure is a bit less easy to determine (we do not allow for hedges as they can only be postponing the day of reckoning). How much of the equity is exposed to a given subject is rarely straightforward but can be quite telling In addition, subjects are frequently intertwined. A $ exposure may encompass all revenues in $ pegged currencies and an emerging currency exposure is likely to include $ pegged currencies as well. Exposure to global warming issues is frequently indirect and may require to stretch a bit imagination.
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 12
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Money Making
Money Making Strong growth in the order book Gaussin Manugistique has enjoyed strong growth in its order book: from €3.2m in 2011 to €8.9m in 2012, €29.7m in 2013, €48.2m in 2014 and €122m in 2015. But it contracted in 2016 to €83m due to cancellations. ATT range, the key revenue driver in the short-to-medium term The ATT range is expected to represent more than 80% of revenues in 2017 versus only some 15% in 2012. The company is also simultaneously developing its exports with the breakdown in revenues by geography moving from 76% of sales generated in France in 2012 to 10% in France expected in 2017 (forecast). A blue ocean strategy Gaussin Manugistique has opted for differentiation rather than a price war. By betting on this sensible choice, Gaussin Manugistique has been able to create a “blue ocean” in a niche market thanks to significant investment in R&D. The ATT/AGV range has been protected by the filing of numerous patents. Business model This company has opted for a tried and tested loyalty strategy which has won its spurs and is comparable to that of the “printer cartridge” strategy, as applied to capital goods. Whereas the chassis has an estimated lifespan of between 20 and 30 years, the Power-Pack (removable module comprising the motor and the energy source) has a shorter lifespan of between three and five years. Over the full duration of the chassis use, the client must purchase between five and seven Power-Packs of which Gaussin Manugistique has exclusive ownership. The company will thus have a semi-recurrent revenue source which will come on stream gradually as its lead product, namely the ATT, and its new product, the AGV, are accepted by the market. The price of a Power-Pack is positioned at between 50% of the price of the chassis for the Diesel model and 100% of the chassis price for the Full-Electric model. If the Full-Electric Poer-Pack proves a hit with port operators, the Gaussin Manugistique business model could thus evolve to focus on the manufacturing and improvement of the Full-Electric Power-Packs in partnership with Batterie Mobile. Gaussin Manugistique has also moved up-market. By creating a unique product range catering to the specific needs of port operators and protecting it by the filing of numerous patents, Gaussin Manugistique has given itself room to increase the sale prices of its products depending on their success. Furthermore, by continuously improving its product technology and by offering new options, Gaussin Manugistique regularly proposes new products/options with more value added and at higher prices. The deployment of this strategy enables the company to discriminate its clients by prices. Similarly, this company has opted for a cost optimisation strategy. By moving from a made-to-order manufacturing model to a mid-volume series based model, Gaussin Manugistique has been able to reduce the manufacturing costs for its ATT range significantly thanks to both economies of scale and the learning curve. Additionally, the sub-contracting and procurement of standardised components enables manufacturing costs to be contained. In addition to the steady decline in manufacturing costs, Gaussin Manugistique is also counting on flexibility to limit its fixed costs and rapidly adapt to market conditions: sourcing of standardised components from suppliers, ability to redeploy rapidly to other suppliers, use of temporary staff for the final assembly, etc. The bulk of an ATT’s manufacturing costs are thus variable costs. Finally, when the company realises that the market’s needs are beyond its circle of competencies, it does not hesitate to seek a partnerhsip. The best example is the partnership between BA System and Gaussin for the development of the AGV. The Tesla copy-paste: towards a battery manufacturer? Gaussin could well develop in the future its business model towards only the manufacturing of batteries where it has a competitive advantage thanks to the numerous patents that it holds. This is the main development in the business model over the last few years. Towards a licensing business model ? Gaussin Manugistique is counting on both internal and external growth to drive its revenues. The internal growth is mainly November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 13
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Money Making based on the development of the ATT/AGV range together with the related services (leasing, finance leases, training, maintenance, etc.). However, Gaussin Manugistique does not rule out external growth as witnessed in its two abortive partnership attempts with Dubaï Investments Industries and EPD as well as Pelindo. Despite these setbacks, the licensing/partnership model remains a way for Gaussin Manugistique to respond rapidly to the success of the ATT/AGV range with port operators. The choice of strategic orientation towards the automobile concession model would also be a way for Gaussin Manugistique to increase its revenues while reducing the risk for its shareholders. Towards a low working capital intensity ? As sales grow and the solvability of the company increases, Gaussin Manugistique should be able to renegotiate its supplier payment conditions under better terms (currently when the order is placed) and obtain more favourable client advances. This should accentuate the transition to a model based on low, or potentially negative, working capital at a time of strong growth in orders. Gaussin Manugistique’s activity could ultimately prove to be significantly cash generative. Towards a dealer-based business model ? In addition to direct sales with large accounts, Gaussin Manugistique is currently developing its distribution network in two forms: distribution agreements without a vehicle order commitment and distribution agreements with a vehicle order commitment. The first distributor order was placed in June 2013. Sixteen letters of intent have been signed with a view to the implementation of exclusive distribution contracts with a minimum number of ATTs per year. In June 2014, two of these letters of intent were transformed into contracts by FSH (Hamburg, Germany) and Akan-sel (Turkey). This distribution strategy nonetheless highlights the willingness of Gaussin Manugistique to move towards a dealer-based model. Risk of bankruptcy? Not in our opinion, but a sharp dilution is still expected It is expected that to continue its development Gaussin will need to execute additional capital increases. Thanks to the quality of its products, the high expertise in R&D, new products development and the outstanding potential of the Power-Packs, on our side we do not expect Gaussin to become bankrupt, as we believe that investors are willing to invest in the company, at least over the next few years. The only unknown, in our opinion, is on the size of the capital increases and their dilutive effect for current shareholders. We currently expect Gaussin to be at break-even in the P&L in 2017 and in the cash flow statement in 2019 (meaning that capital increases ought to be expected in the near term due to the low liquidity of the company). After crossing its cash flow break-even, we do not expect the company to issue additional shares as the limitation is currently for 75m new shares and the currentr number of shares is 64m, and we expect the company to issue roughly 50m new shares over the next two years.
Divisional EBIT Change 18E/17E
Change 17E/16
12/16A
12/17E
12/18E
12/19E
Services / Licensing / Others
0.00
0.00
0.00
0.00
0
0%
0
0%
MTO Terminal port equipements (ATT/AIV/Powerpacks/Docking S... Other/cancellations
0.73
0.36
1.08
1.08
0
-3%
1
13%
-14.2
0.22
5.08
7.79
14
103%
5
87%
Total
-13.4
0.58
6.16
8.87
14
100%
6
100%
€M
of % total
€M
of % total
Divisional EBIT margin 12/16A
12/17E
12/18E
12/19E
MTO
20.0%
20.0%
20.0%
20.0%
Terminal port equipements (ATT/AIV/Powerpack...
-598%
1.61%
20.9%
24.5%
Total
-222%
3.23%
18.6%
21.8%
Services / Licensing / Others
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 14
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Debt
Debt Gaussin Manugistique has had numerous capital increases since 2009: roughly €60m of equity has been raised to finance the development of the ATT range. These fund-raisings were admittedly dilutive for the shareholders but they have enabled the development of a comprehensive range of port vehicles. Gaussin Manugistique raised €13m of debt in April 2014 with bullet redemption in 2021. The interest rate was 8% through to 2020 then 9% in the last year. Debt was guaranteed by the pledging of the Event shares and the patents on the ATT range. In mid 2017, debt was bought back for €2.3m.
Funding - Liquidity 12/16A
12/17E
12/18E
12/19E
EBITDA
€M
-12.1
-0.92
4.16
6.87
Funds from operations (FFO)
€M
-11.0
-1.14
2.41
4.31
Ordinary shareholders' equity
€M
6.75
22.8
28.4
30.9
Gross debt
€M
17.5
8.00
8.00
8.00
o/w Less than 1 year - Gross debt
€M
3.05
3.00
3.00
3.00
o/w 1 to 5 year - Gross debt
€M
14.0
5.00
5.00
5.00
o/w Beyond 5 years - Gross debt
€M
0.46
0.00
0.00
0.00
+ Gross Cash
€M
1.94
4.14
6.55
5.86
= Net debt / (cash)
€M
15.6
3.86
1.45
2.14
Bank borrowings
€M
3.00
3.00
3.00
Issued bonds
€M
17.5
Financial leases liabilities
€M
0.00
0.00
0.00
0.00
Mortgages
€M
0.00
0.00
0.00
0.00
Other financing
€M
0.01
5.00
5.00
5.00
Gearing (at book value)
%
223
42.6
9.36
5.82
Adj. Net debt/EBITDA(R)
x
-1.29
-4.20
0.35
0.31
Adjusted Gross Debt/EBITDA(R)
x
-1.76
-13.0
2.91
1.78
Adj. gross debt/(Adj. gross debt+Equity)
%
76.0
34.5
29.9
28.4
Ebit cover
x
-14.2
34.2
-21.6
-48.7
FFO/Gross Debt
%
-51.5
-9.54
19.9
35.2
FFO/Net debt
%
-70.7
-29.6
166
201
FCF/Adj. gross debt (%)
%
-81.6
-60.9
-21.4
-5.68
(Gross cash+ "cash" FCF+undrawn)/ST debt
x
-5.09
-1.05
1.32
1.72
"Cash" FCF/ST debt
x
-5.71
-2.43
-0.86
-0.23
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 15
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Valuation
Valuation Cautionary statement Valuing Gaussin Manugistique is an exceptionally tough exercise. In fact, the company currently burns a lot of cash and one or several significant capital increases are expected. We thus need to warn investors that our valuation is highly speculative because a small change in our hypothesis could change significantly the company’s valuation. Following the press release on 2014 and 2015 full-year results, we have decided to take into account a significant dilution during the next three years. The following assumptions have been used: three capital increases for an amount of c.€10m in 2017 and another for €5m in 2018, each at €0.25 per share. The number of shares thus increases from 64m at the beginning of 2017 to 124m at the end of 2018. Note that the number of shares in 2009 was c.2.5m. DCF valuation For the DCF, the central scenario is a strong growth in sales. Sales are expected to reach €18m in 2017, €33m in 2018 and €41m in 2019. This sales growth is driven by the growth in the ATT range. Overall, we forecast FCFF to move from negative territory to positive territory: we expect FCFF will increase from c.€-17m in 2016 to c.€13m in 2027 which, in our opinion, may be justified by an expansion of the EBITDA margin between 2016 and 2027 from -200% to c.22%. We believe that the company has no other choice than to clearly expand its EBITDA margin if it wants to stay in business over the long term and fund its growth. The assumptions for the 2019-27 period are as follows: sales growth of 13% and EBITDA growth of 17%, taxes growth of 10%, as well as working capital requirement and capex growth of 2% per year. The Drewry forecasts put the growth in the number of containers transported at an annual 5% through to 2020. We thus expect the high growth rate to stem from market share capture. The change in WCR deserves a comment. The scenario of a sharp increase of working capital requirement has been taken into account, because of a change in the business model. Indeed, the company has decided to rent its products, which will sharply increase WCR. In fact, we decided to apply a simple rule for 2017E onwards: each euro of incremental revenue to be generated, needs an investment of c.€0.30 to €0.50 in working capital. This seems to be conservative enough in our opinion. More comments are deserved on the capex side. We expect capex to converge towards depreciation expense, namely €2m. Capex as a proportion of sales would thus move from 84% in 2016 to 17% in 2017E, 6% in 2018E and to c.2-5% from 2019E onwards. The long-term growth used to calculate the terminal value is the ECB’s inflation target, namely 2%. The discounted terminal value represents 82% of the valuation by DCF. This means that our valuation is more speculative than usually since it depends more on the terminal value than on the next 10 years free cash flow. This can be explained by the fact that we expect FCFF to be strongly in negative territory in 2017E and 2018E (because of the high capex and sharp increase in WCR). SOTP valuation For the sum of the parts, Gaussin Manugistique has been divided into two parts. The port division (ATT/AGV) has been valued using an EV/order book multiple of 1x and a reference multiple of €83m (namely the order book at the end of 2016). The EV/sales multiples for the MTO division (given the lack of growth for this division has been estimated at 0.5x and a reference multiple of €3m has been used. Peers valuation Gaussin Manugistique has no real comparable. It is effectively a growth company in a niche market with a market capitalisation of below €20m. However, Wärtsilä (Finland, heavy engineering/maritime sector, the manufacturer of electric generators and boat engines), Metso (Finland, mining sector, manufacturer of automation solutions), GEA Group (Germany, November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 16
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Valuation mechanical engineering sector) and Hamburger Hafen & Logistik (Germany, transport/logistics sector) have been chosen as peers due to their degree of similarity with the Gaussin Manugistique business model. A 50% premium has been applied to the P/E, EV/EBITDA, P/B multiples and the yield due to Gaussin Manugistique’s growth profile (strong growth in the order book). Although its growth potential could justify a premium higher than 50%, this has not been envisaged due to Gaussin Manugistique’s riskier profile (SME, execution risk, etc.). The multiples are applied to forecasts 18 months out. This explains why the peers’ valuation is such a drag on overall valuation: 18m earnings are expected to be negative, Gaussin is not expected to pay a dividend over the next few years and the EBITDA will be negative in comparison to our expectation for 2018E onwards. We consider the NAV and DCF to give a better picture of our valuation for these reasons.
Valuation Summary Benchmarks
Values (€)
Upside
Weight
DCF
0.74
468%
35%
NAV/SOTP per share
0.67
413%
20%
EV/Ebitda
Peers
0.26
100%
20%
P/E
Peers
0.26
100%
10%
Dividend Yield
Peers
0.00
-100%
10%
P/Book
Peers
0.26
100%
5%
0.48
271%
Target Price
Comparison based valuation Computed on 18 month forecasts
P/E (x)
Ev/Ebitda (x)
P/Book (x)
Yield(%)
Peers ratios
22.3
12.1
3.19
2.55
Gaussin's ratios
3.71
6.51
0.57
0.00
50.0%
50.0%
50.0%
50.0%
Default comparison based valuation (€)
0.26
0.26
0.26
0.00
Wärtsilä
22.2
12.9
3.98
2.52
Gea Group
25.7
13.7
2.64
2.04
Metso
20.0
11.5
2.92
3.52
Hamburger Hafen & Logistik
18.6
8.78
2.92
2.36
Premium
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 17
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
DCF
DCF Valuation Per Share WACC
%
8.84
Avg net debt (cash) at book value
€M
2.66
PV of cashflow FY1-FY11
€M
17.8
Provisions
€M
3.98
FY11CF
€M
12.8
Unrecognised actuarial losses (gains)
€M
0.00
Normalised long-term growth"g"
%
2.00
Financial assets at market price
€M
0.00
Terminal value
€M
188
Minorities interests (fair value)
€M
0.00
PV terminal value
€M
80.4
Equity value
€M
91.5
PV terminal value in % of total value
%
81.9
Number of shares
Mio
124
Total PV
€M
98.2
Implied equity value per share
€
0.74
Assessing The Cost Of Capital Synthetic default risk free rate
%
3.50
Company debt spread
bp
450
Target equity risk premium
%
5.00
Marginal Company cost of debt
%
8.00
%
30.0
Company beta (leveraged)
x
1.20
Company gearing at market value
%
28.6
Company market gearing
%
22.2
Required return on geared equity
%
9.48
Cost of debt
%
5.60
Cost of ungeared equity
%
8.76
WACC
%
8.84
Tax advantage of debt finance (normalised) Average debt maturity
Year
5
Sector asset beta
x
1.05
Debt beta
x
0.90
Market capitalisation
€M
13.5
Net debt (cash) at book value
€M
3.86
Net debt (cash) at market value
€M
2.66
DCF Calculation 12/16A 12/17E 12/18E 12/19E Growth 12/20E 12/27E Sales
€M
6.04
18.0
33.2
40.7
13.0%
46.0
108
EBITDA
€M
-12.1
-0.92
4.16
6.87
17.0%
8.03
24.1
EBITDA Margin
%
-201
-5.11
12.5
16.9
17.5
22.3
Change in WCR
€M
-1.33
-3.15
-3.00
-3.00
2.00%
-3.06
-3.51
Total operating cash flows (pre tax)
€M
-7.13
-4.07
1.16
3.87
4.97
20.6
Corporate tax
€M
-4.08
-0.32
-1.85
-2.66
10.0%
-2.93
-5.70
Net tax shield
€M
-0.35
0.03
0.03
0.03
2.00%
0.03
0.04
Capital expenditure
€M
-5.06
-3.00
-2.00
-2.00
2.00%
-2.04
-2.34
Capex/Sales
%
-83.8
-16.7
-6.02
-4.91
-4.44
-2.17
Pre financing costs FCF (for DCF purposes)
€M
-16.6
-7.37
-2.66
-0.76
0.04
12.6
Various add backs (incl. R&D, etc.) for DCF purposes
€M
Free cash flow adjusted
€M
-16.6
-7.37
-2.66
-0.76
0.04
12.6
Discounted free cash flows
€M
-16.6
-7.37
-2.44
-0.65
0.03
5.39
Invested capital
€
25.9
30.4
33.7
37.0
37.7
43.3
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 18
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
NAV/SOTP (edit)
NAV/SOTP Calculation % owned
Port terminal equipm...
100%
MTO
100%
Valuation technique
Multiple used
Volume based valuation EV/Sales
Valuation at 100% (€M)
In currency per share (€)
Stake valuation (€M)
% of gross assets
1
83.0
83.0
0.67
98.2%
0.5
1.50
1.50
0.01
1.78%
(1)
Other Total gross assets
84.5
0.68
100%
Net cash/(debt) by year end
-1.45
-0.01
-1.72%
Commitments to pay
-4.38
-0.04
-5.18%
Commitments received
4.01
0.03
4.75%
NAV/SOTP
82.7
0.67
97.8%
Number of shares net of treasury shares - year end (Mio)
124
NAV/SOTP per share (€)
0.67
Current discount to NAV/SOTP (%)
80.5
November 3 2017
1. Deferred tax assets
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 19
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Worth Knowing
Worth Knowing Consolidation of management Following the completion of the ATT/AGV range development phase, Gaussin Manugistique has entered the commercialisation phase for these two products. The consolidation of the management/marketing team should enable Gaussin Manugistique to accelerate the commercialisation process. A cleaned up balance sheet The heavy provisions passed in 2012 (resolution of disputes with Dubaï Investments Industries and EPD) and 2016 (deferred tax assets) enabled the balance sheet to be cleaned up. A repatriation of the assembly line in France Following the dispute with EPD, Gaussin Manugistique repatriated the final assembly of the ATT/AGV range and the PowerPacks to Héricourt in France, enabling the company to be more responsive. Production capacity is estimated by the management at between 250 ATTs a year, based on the current organisation and 700 ATTs per year, in 3×8 (without significant additional investment). A bid offer cannot be excluded ! Due to the interest of port operators in port vehicles like the ATT/AGV, the promising potential of the ATT range, the approach of the end of the R&D cycle and the beginning of the commercialisation phase, Gaussin Manugistique could attract the interest of a company that understands the potential of this innovative range, meaning that the possibility of a bid cannot be ruled out.
Shareholders % owned
Of which % voting rights
Of which % free to float
Christophe Gaussin
8.90%
8.90%
0.00%
Volker Berl
2.52%
2.52%
0.00%
Name
Apparent free float
November 3 2017
88.6%
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 20
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Financials Valuation Key Data
12/16A
12/17E
12/18E
12/19E
Adjusted P/E
x
-1.58
27.2
3.36
2.55
Reported P/E
x
-2.03
1.44
3.65
2.55
EV/EBITDA(R)
x
-4.84
-23.2
5.21
3.27
P/Book
x
5.81
0.59
0.57
0.52
Dividend yield
%
0.00
0.00
0.00
0.00
Free cash flow yield
%
-44.5
-54.0
-16.1
-4.31
Average stock price
€
0.87
0.13
0.13
0.13
Consolidated P&L
12/16A
12/17E
12/18E
12/19E
€M
6.04
18.0
33.2
40.7
Sales growth
%
-7.19
198
84.7
22.6
Sales per employee
€th
92.9
315
474
479
Order book (mio currency)
m
83.0
100
120
140
Purchases and external costs (incl. IT)
€M
R&D costs as % of sales
%
0.00
0.00
0.00
0.00
Staff costs
€M
-5.99
-5.20
-6.00
-7.00
Operating lease payments
€M
Cost of sales/COGS (indicative)
€M
-12.2
-11.7
-20.7
-24.4
EBITDA
€M
-12.1
-0.92
4.16
6.87
EBITDA(R)
€M
-12.1
-0.92
4.16
6.87
EBITDA(R) margin
%
-201
-5.11
12.5
16.9
EBITDA(R) per employee
€th
-186
-16.1
59.4
80.8
Depreciation
€M
-2.09
-2.00
-2.00
-2.00
Depreciations/Sales
%
34.6
11.1
6.02
4.91
Amortisation
€M
Additions to provisions
€M
-2.52
-0.50
Underlying operating profit
€M
-16.7
-3.42
2.16
4.87
Underlying operating margin
%
-277
-19.0
6.51
12.0
Other income/expense (cash)
€M
3.51
4.00
4.00
4.00
Other inc./ exp. (non cash; incl. assets revaluation)
€M
Earnings from joint venture(s)
€M
Impairment charges/goodwill amortisation
€M
-0.20
Operating profit (EBIT)
€M
-13.4
0.58
6.16
8.87
Interest expenses
€M
-1.12
0.00
0.00
0.00
€M
-1.12
0.00
0.00
0.00
Financial income
€M
0.00
0.10
0.10
0.10
Other financial income (expense)
€M
-0.06
Net financial expenses
€M
-1.18
0.10
0.10
0.10
€M
0.00
0.00
0.00
0.00
Pre-tax profit before exceptional items
€M
-14.6
0.68
6.26
8.97
Exceptional items and other (before taxes)
€M
-0.96
9.00
0.00
0.00
of which cash (cost) from exceptionals
€M -4.08
-0.32
-1.85
-2.66
Sales
of which effectively paid cash interest expenses
of which related to pensions
Current tax
€M
Impact of tax loss carry forward
€M
Deferred tax
€M
0.00 (1)
0.00
0.00
0.00
Corporate tax
€M
-4.08
-0.32
-1.85
-2.66
Tax rate
%
-28.4
47.6
29.5
29.7
Net margin
%
-309
1.98
13.3
15.5
Equity associates
€M
0.47
Actual dividends received from equity holdings Minority interests Actual dividends paid out to minorities
€M €M
-0.17
€M
Income from discontinued operations
€M
Attributable net profit
€M
-19.3
9.36
4.41
6.31
Impairment charges/goodwill amortisation
€M
0.20
0.00
0.00
0.00
Other adjustments
€M
0.67
-9.00
0.00
0.00
November 3 2017
1. Research Tax Credit
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 21
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Financials Adjusted attributable net profit
€M
Interest expense savings
€M
Fully diluted adjusted attr. net profit
€M
NOPAT
€M
Cashflow Statement
-18.5
0.36
4.41
6.31
-18.5
0.36
4.41
6.31
-11.2
-2.39
1.51
3.41
12/16A
12/17E
12/18E
12/19E
EBITDA
€M
-12.1
-0.92
4.16
6.87
Change in WCR
€M
-1.33
-3.15
-3.00
-3.00
of which (increases)/decr. in receivables
€M
15.0
-5.13
-3.00
-3.00
of which (increases)/decr. in inventories
€M
-0.62
-3.83
0.00
0.00
of which increases/(decr.) in payables
€M
-1.31
3.01
0.00
0.00
of which increases/(decr.) in other curr. liab.
€M
-14.4
2.80
0.00
0.00
Actual dividends received from equity holdings
€M
0.00
0.00
0.00
0.00
Paid taxes
€M
0.00
-0.32
-1.85
-2.66
Exceptional items
€M
0.00
Other operating cash flows
€M
2.23
Total operating cash flows
€M
-11.2
-4.40
-0.69
1.21
Capital expenditure
€M
-5.06
-3.00
-2.00
-2.00
Capex as a % of depreciation & amort.
%
242
150
100
100
Net investments in shares
€M
0.00
Other investment flows
€M
2.85
Total investment flows
€M
-2.21
-3.00
-2.00
-2.00
Net interest expense
€M
-1.18
0.10
0.10
0.10
€M
-1.12
0.10
0.10
0.10
of which cash interest expense Dividends (parent company)
€M
Dividends to minorities interests
€M
0.00
0.00
0.00
0.00
New shareholders' equity
€M
13.4
10.0
5.00
0.00
€M
0.00 0.00
0.00
of which (acquisition) release of treasury shares (Increase)/decrease in net debt position
€M
0.35
-9.51
Other financial flows
€M
1.14 (1)
9.00
Total financial flows
€M
13.8
9.60
5.10
0.10
Change in scope of consolidation, exchange rates & other
€M
0.00
Change in cash position
€M
0.39
2.20
2.41
-0.69
Change in net debt position
€M
0.05
11.7
2.41
-0.69
Free cash flow (pre div.)
€M
-17.4
-7.30
-2.59
-0.69
Operating cash flow (clean)
€M
-11.2
-4.40
-0.69
1.21
Reinvestment rate (capex/tangible fixed assets)
%
30.1
15.1
9.17
8.40
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
1. Research Tax Credit
Page 22
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Financials Balance Sheet
12/16A
12/17E
12/18E
12/19E
Goodwill
€M
3.01
3.10
3.20
3.29
Contracts & Rights (incl. concession) intangible assets
€M
2.85
2.93
3.02
3.11
Total intangible
€M
5.86
6.04
6.22
6.41
Tangible fixed assets
€M
12.4
13.4
13.4
13.4
Financial fixed assets (part of group strategy)
€M
3.78
3.89
4.01
4.13
Other financial assets (investment purpose mainly)
€M
0.52
0.53
0.55
0.57
WCR
€M
3.85
7.00
10.0
13.0
of which trade & receivables (+)
€M
13.9
19.0
22.0
25.0
of which inventories (+)
€M
6.17
10.0
10.0
10.0
of which payables (+)
€M
3.99
7.00
7.00
7.00
of which other current liabilities (+)
€M
12.2
15.0
15.0
15.0
€M
0.00
0.00
0.00
0.00
€M
0.00
0.00
0.00
0.00
Total assets (net of short term liabilities)
€M
26.4
30.9
34.2
37.5
Ordinary shareholders' equity (group share)
€M
6.75
22.8
28.4
30.9
Minority interests
€M
0.26
0.27
0.28
0.29
Provisions for pensions
€M
0.00
0.00
0.00
Other provisions for risks and liabilities
€M
3.87
3.98
4.10
4.22
Deferred tax liabilities
€M
Other liabilities
€M
Net debt / (cash)
€M
15.6
3.86
1.45
2.14
Total liabilities and shareholders' equity
€M
26.4
30.9
34.2
37.5
Average net debt / (cash)
€M
15.1
9.71
2.66
1.80
Other current assets of which tax assets (+)
EV Calculations
12/16A
12/17E
12/18E
12/19E
EV/EBITDA(R)
x
-4.84
-23.2
5.21
3.27
EV/EBIT (underlying profit)
x
-3.51
-6.25
10.0
4.62
EV/Sales
x
9.72
1.19
0.65
0.55
EV/Invested capital
x
2.26
0.70
0.64
0.61
€M
39.2
13.5
16.1
16.1
+ Provisions (including pensions)
Market cap
€M
3.87
3.98
4.10
4.22
+ Unrecognised actuarial losses/(gains)
€M
0.00
0.00
0.00
0.00
+ Net debt at year end
€M
15.6
3.86
1.45
2.14
+ Leases debt equivalent
€M
0.00
0.00
0.00
0.00
- Financial fixed assets (fair value) & Others
€M
+ Minority interests (fair value)
€M
= Enterprise Value
€M
58.6
21.4
21.7
22.5
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 23
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Financials Per Share Data Adjusted EPS (bfr gwill amort. & dil.) Growth in EPS
€ %
12/16A
12/17E
12/18E
12/19E
-0.55
0.00
0.04
0.05
n/a
n/a
710
31.4 0.05
Reported EPS
€
-0.43
0.09
0.04
Net dividend per share
€
0.00
0.00
0.00
0.00
Free cash flow per share
€
-0.52
-0.10
-0.02
-0.01
Operating cash flow per share
€
-0.33
-0.06
-0.01
0.01
Book value per share
€
0.15
0.22
0.23
0.25
Number of ordinary shares
Mio
45.3
104
124
124
Number of equivalent ordinary shares (year end)
Mio
45.3
104
124
124
Number of shares market cap.
Mio
45.3
104
124
124
Treasury stock (year end)
Mio
0.02
0.02
0.02
0.02
Number of shares net of treasury stock (year end)
Mio
45.2
104
124
124
Number of common shares (average)
Mio
33.6
74.6
114
124
Conversion of debt instruments into equity
Mio
Settlement of cashable stock options
Mio
Probable settlement of non mature stock options
Mio
Other commitments to issue new shares
Mio
Increase in shares outstanding (average)
Mio
0.00
0.00
0.00
0.00
Number of diluted shares (average)
Mio
33.6
74.6
114
124
Goodwill per share (diluted)
€
0.01
0.00
0.00
0.00
EPS after goodwill amortisation (diluted)
€
-0.56
0.00
0.04
0.05
EPS before goodwill amortisation (non-diluted)
€
-0.58
0.13
0.04
0.05
Actual payment
€
Payout ratio
%
0.00
0.00
0.00
0.00
Capital payout ratio (div +share buy back/net income)
%
-0.02
0.00
0.00
Funding - Liquidity
12/16A
12/17E
12/18E
12/19E
EBITDA
€M
-12.1
-0.92
4.16
6.87
Funds from operations (FFO)
€M
-11.0
-1.14
2.41
4.31
Ordinary shareholders' equity
€M
6.75
22.8
28.4
30.9
Gross debt
€M
17.5
8.00
8.00
8.00
o/w Less than 1 year - Gross debt
€M
3.05
3.00
3.00
3.00
o/w 1 to 5 year - Gross debt
€M
14.0
5.00
5.00
5.00
o/w Beyond 5 years - Gross debt
€M
0.46
0.00
0.00
0.00
+ Gross Cash
€M
1.94
4.14
6.55
5.86
= Net debt / (cash)
€M
15.6
3.86
1.45
2.14
Bank borrowings
€M
3.00
3.00
3.00
Issued bonds
€M
17.5
Financial leases liabilities
€M
0.00
0.00
0.00
0.00
Mortgages
€M
0.00
0.00
0.00
0.00
Other financing
€M
0.01
5.00
5.00
5.00
Gearing (at book value)
%
223
42.6
9.36
5.82
Adj. Net debt/EBITDA(R)
x
-1.29
-4.20
0.35
0.31
Adjusted Gross Debt/EBITDA(R)
x
-1.76
-13.0
2.91
1.78
Adj. gross debt/(Adj. gross debt+Equity)
%
76.0
34.5
29.9
28.4
Ebit cover
x
-14.2
34.2
-21.6
-48.7
FFO/Gross Debt
%
-51.5
-9.54
19.9
35.2
FFO/Net debt
%
-70.7
-29.6
166
201
FCF/Adj. gross debt (%)
%
-81.6
-60.9
-21.4
-5.68
(Gross cash+ "cash" FCF+undrawn)/ST debt
x
-5.09
-1.05
1.32
1.72
"Cash" FCF/ST debt
x
-5.71
-2.43
-0.86
-0.23
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 24
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Financials ROE Analysis (Dupont's Breakdown)
12/16A
12/17E
12/18E
12/19E
Tax burden (Net income/pretax pre excp income)
x
1.32
13.7
0.70
0.70
EBIT margin (EBIT/sales)
%
-222
3.23
18.6
21.8
Assets rotation (Sales/Avg assets)
%
21.7
62.7
102
113
Financial leverage (Avg assets /Avg equity)
x
2.93
1.94
1.27
1.21
ROE
%
-204
63.4
17.2
21.3
ROA
%
-60.6
2.20
20.8
27.0
Shareholder's Equity Review (Group Share)
12/16A
12/17E
12/18E
12/19E
€M
12.2
6.75
22.8
28.4
+ Net profit of year
€M
-19.3
9.36
4.41
6.31
- Dividends (parent cy)
€M
0.00
0.00
0.00
0.00
+ Additions to equity
€M
13.4
10.0
5.00
0.00
€M
0.00
0.00
0.00
0.00
- Unrecognised actuarial gains/(losses)
€M
0.00
0.00
0.00
0.00
+ Comprehensive income recognition
€M
0.41
-3.32
-3.81
-3.81
= Year end shareholders' equity
€M
6.75
22.8
28.4
30.9
12/19E
Y-1 shareholders' equity
o/w reduction (addition) to treasury shares
Staffing Analytics
12/16A
12/17E
12/18E
Sales per staff
€th
92.9
315
474
479
Staff costs per employee
€th
-92.1
-91.2
-85.7
-82.4
Change in staff costs
%
23.1
-13.1
15.4
16.7
Change in unit cost of staff
%
13.6
-0.94
-6.04
-3.92
Staff costs/(EBITDA+Staff costs)
%
-97.7
121
59.1
50.5
Average workforce
unit
65.0
57.0
70.0
85.0
Europe
unit
65.0
57.0
70.0
85.0
North America
unit
0.00
0.00
0.00
0.00
South Americas
unit
0.00
0.00
0.00
0.00
Asia
unit
0.00
0.00
0.00
0.00
Other key countries
unit
0.00
0.00
0.00
0.00
Total staff costs
€M
-5.99
-5.20
-6.00
-7.00
Wages and salaries
€M
-5.99
-5.20
-6.00
-7.00
€M
-1.80
-1.56
-1.80
-2.10
0.00
0.00
0.00
of which social security contributions Equity linked payments
€M
Pension related costs
€M
Divisional Breakdown Of Revenues
12/16A
12/17E
12/18E
12/19E
Terminal port equipements (ATT/AIV/Powerpacks/Docking Statio... €M
2.37
13.7
24.3
31.8
MTO
€M
3.67
1.80
5.40
5.40
Services / Licensing / Others
€M
0.00
0.00
0.00
0.00
Other
€M
0.00
2.49
3.52
3.52
Total sales
€M
6.04
18.0
33.2
40.7
12/16A
12/17E
12/18E
12/19E
Divisional Breakdown Of Earnings EBIT Analysis Services / Licensing / Others
€M
0.00
0.00
0.00
0.00
MTO
€M
0.73
0.36
1.08
1.08
Terminal port equipements (ATT/AIV/Powerpacks/Docking Statio... €M
-14.2
0.22
5.08
7.79
-13.4
0.58
6.16
8.87
ns
3.23
18.6
21.8
Other/cancellations
€M
Total
€M
EBIT margin
%
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 25
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Financials Revenue Breakdown By Country
12/16A
12/17E
EMEA
%
0.00
0.00
Asia
%
0.00
0.00
Americas
%
0.00
0.00
Europe
%
0.00
0.00
France
%
32.9
10.0
Other
%
58.4
90.0
ROCE/CFROIC/Capital Invested
12/18E
12/19E
12/19E
12/16A
12/17E
12/18E
ROCE (NOPAT+lease exp.*(1-tax))/(net) cap employed adjusted
%
-43.4
-7.88
4.49
9.21
CFROIC
%
-67.3
-24.0
-7.69
-1.88
Goodwill
€M
3.01
3.10
3.20
3.29
€M
1.03
1.06
1.09
1.12
€M
2.85
2.93
3.02
3.11
€M
1.48
1.53
1.57
1.62
Financial hedges (LT derivatives)
€M
0.00
0.00
0.00
0.00
Capitalised R&D
€M
0.00
0.00
0.00
0.00
PV of non-capitalised lease obligations
€M
0.00
0.00
0.00
0.00
Other fixed assets
€M
12.4
13.4
13.4
13.4
€M
4.38
6.38
8.38
10.4
WCR
€M
3.85
7.00
10.0
13.0
Other assets
€M
3.78
3.89
4.01
4.13
Unrecognised actuarial losses/(gains)
€M
0.00
0.00
0.00
0.00
Capital employed after deprec. (Invested capital)
€M
25.9
30.4
33.7
37.0
Capital employed before depreciation
€M
32.8
39.3
44.7
50.1
Accumulated goodwill amortisation All intangible assets Accumulated intangible amortisation
Accumulated depreciation
Divisional Breakdown Of Capital
12/16A
12/17E
12/18E
12/19E
Services / Licensing / Others
€M
1.00
1.00
1.00
1.00
MTO
€M
2.00
2.00
2.00
2.00
Terminal port equipements (ATT/AIV/Powerpacks/Docking Statio... €M
22.9
27.4
30.7
34.0
Other
€M
0.00
0.00
0.00
0.00
Total capital employed
€M
25.9
30.4
33.7
37.0
November 3 2017
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 26
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Pension Risks
Pension matters Gaussin Manugistique uses a significant number of temporary and interim staff. This has the advantage of being able to respond to any short-term increases in the order intake while enabling the company to retain a degree of flexibility. As the business develops, some of these contracts will probably be transformed into permanent employment contracts: the duration of a temporary employment contract may not exceed 18 months (renewals included). Furthermore, the company has a payroll growth strategy: the group’s headcount thus increased from 58 employees, of whom 29 were temporary or interim staff, in June 2013 to around 110 employees, of whom 60 temps and interim staff, in June 2014 before decreasing again to 60 employees as of December 2015. In December 2016, Gaussin Manugistique comprised 65 employees. Gaussin Manugistique has a dynamic management strategy aimed at encouraging innovation: employees are effectively incentivised financially to file patents for new ideas and protect the brands/models. Additionally, the Chairman and CEO looks to create a virtuous circle by granting shares to all employees annually to encourage their efforts, secure their loyalty and align their interests with those of the other shareholders. This method of staff compensation can only have a positive impact on motivation levels.
Summary Of Pension Risks
12/16A
12/17E
12/18E
12/19E
Pension ratio
%
0.00
0.00
0.00
0.00
Ordinary shareholders' equity
€M
6.75
22.8
28.4
30.9
Total benefits provisions
€M
0.00
0.00
0.00
0.00
of which funded pensions
€M
0.00
0.00
0.00
0.00
of which unfunded pensions
€M
0.00
0.00
0.00
0.00
of which benefits / health care
€M
0.00
0.00
0.00
Unrecognised actuarial (gains)/losses
€M
0.00
0.00
0.00
0.00
Company discount rate
%
4.00
4.00
4.00
4.00
Normalised recomputed discount rate
%
Company future salary increase
%
3.00
3.00
Normalised recomputed future salary increase
%
Company expected rate of return on plan assets
%
5.00
5.00
Normalised recomputed expd rate of return on plan assets
%
0.00
Funded : Impact of actuarial assumptions
€M
0.00
Unfunded : Impact of actuarial assumptions
€M
0.00
Geographic Breakdown Of Pension Liabilities
2.50 3.00
3.00 2.00
5.00
5.00
12/16A
12/17E
12/18E
12/19E
%
100
100
100
100
%
100
100
100
100
12/16A
12/17E
12/18E
12/19E
US exposure
%
UK exposure
%
Euro exposure
%
Nordic countries
%
Switzerland
%
Other Total
Balance Sheet Implications Funded status surplus / (deficit)
€M
0.00
0.00
0.00
0.00
Unfunded status surplus / (deficit)
€M
0.00
0.00
0.00
0.00
Total surplus / (deficit)
€M
0.00
0.00
0.00
0.00
Total unrecognised actuarial (gains)/losses
€M
0.00
0.00
0.00
0.00
Provision (B/S) on funded pension
€M
0.00
0.00
0.00
0.00
Provision (B/S) on unfunded pension
€M
0.00
0.00
0.00
0.00
Other benefits (health care) provision
€M
0.00
0.00
0.00
Total benefit provisions
€M
0.00
0.00
0.00
November 3 2017
0.00
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 27
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Pension Risks P&L Implications
12/16A
12/17E
12/18E
12/19E
Funded obligations periodic costs
€M
0.00
0.00
0.00
0.00
Unfunded obligations periodic costs
€M
0.00
0.00
0.00
0.00
Total periodic costs
€M
0.00
0.00
0.00
0.00
of which incl. in labour costs
€M
0.00
0.00
0.00
0.00
of which incl. in interest expenses
€M
0.00
0.00
0.00
0.00
12/16A
12/17E
12/18E
12/19E
0.00
0.00
0.00
0.00
Funded Obligations Balance beginning of period
€M
Current service cost
€M
0.00
0.00
0.00
Interest expense
€M
0.00
0.00
0.00
Employees' contributions
€M
Impact of change in actuarial assumptions
€M
0.00
0.00
0.00
of which impact of change in discount rate
€M
0.00
of which impact of change in salary increase
€M
0.00
Changes to scope of consolidation
€M
Currency translation effects
€M
Pension payments
€M
Other
€M
Year end obligation
€M
Plan Assets
0.00
0.00
0.00
0.00
12/16A
12/17E
12/18E
12/19E
Value at beginning
€M
0.00
0.00
0.00
Company expected return on plan assets
€M
0.00
0.00
0.00
Actuarial gain /(loss)
€M
0.00
0.00
0.00
Employer's contribution
€M
0.00
0.00
0.00
0.00
Employees' contributions
€M
0.00
0.00
0.00
0.00
Changes to scope of consolidation
€M
Currency translation effects
€M
Pension payments
€M
0.00
0.00
0.00
0.00
Other
€M
Value end of period
€M
0.00
0.00
0.00
0.00
Actual and normalised future return on plan assets
€M
0.00
0.00
0.00
0.00
12/16A
12/17E
12/18E
12/19E
0.00
Unfunded Obligations Balance beginning of period
€M
0.00
0.00
0.00
Current service cost
€M
0.00
0.00
0.00
Interest expense
€M
0.00
0.00
0.00
Employees' contributions
€M
Impact of change in actuarial assumptions
€M
0.00
0.00
0.00
of which Impact of change in discount rate
€M
0.00
of which Impact of change in salary increase
€M
0.00
0.00
0.00
Changes to scope of consolidation
€M
Currency translation effects
€M
Pension payments
€M
Other
€M
Year end obligation
€M
November 3 2017
0.00
0.00
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 28
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Governance & Management
Governance & Management Not much information is available on Gaussin’s governance. What is worth mentioning is that there are four board members and only one, namely Martial Perniceni, seems to be independent, as Christophe Gaussin is the CEO of the company, Volcker Berl is a shareholder of the company and Damien Personeni is an employee of the company. Moreover, no information on their remuneration is available for 2015.
Governance parameters
Existing committees Yes
Weighting 15%
/ No
One share, one vote
Audit / Governance Committee Compensation committee
Chairman vs. Executive split
5%
Financial Statements Committee
Chairman not ex executive
5%
Litigation Committee
Independent directors equals or above 50% of total directors Full disclosure on mgt pay (performance related bonuses, pensions and non financial benefits) Disclosure of performance anchor for bonus trigger
20%
Nomination Committee Safety committee
20%
SRI / Environment
15%
Compensation committee reporting to board of directors
5%
Straightforward, clean by-laws
15%
Governance score
15
100%
Management Name
Function
Birth date
Date in
Date out
Compensation, in k€ (year) Cash Equity linked (2016) (2016)
Christophe GAUSSIN
M
CEO
1994
Michel KUSSELING
M
CFO
2015
(2016)
(2016)
Stéphane HECKY
M
Executive Officer
2015
(2016)
(2016)
Philippe SANDBERG
M
Executive Officer
2015
(2016)
(2016)
Michel LYRSTRAND
M
Executive Officer
2015
(2016)
(2016)
Jean Luc DEJEAN
M
Deputy CEO
2015
(2016)
(2016)
Fees / indemnity, in k€ (year)
Value of holding, in k€ (year)
Board of Directors Name
Indep. Function
Completion Birth of current date mandate
Date in
Date out
Martial PERNICENI
M
Member
(2016)
(2016)
Christophe GAUSSIN
M
Member
2018
1995
(2016)
(2016)
Volcker BERL
M
Member
2017
2006
(2016)
(2016)
Damien PERSONENI
M
Member
2008
(2016)
(2016)
November 3 2017
1964
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 29
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Governance & Management
Human Resources Accidents at work 25% Of H.R. Score
Human resources development 35% Of H.R. Score
Pay 20% Of H.R. Score
Job satisfaction 10% Of H.R. Score
Internal communication 10% Of H.R. Score
HR Breakdown Yes Accidents at work
/ No
25%
Set targets for work safety on all group sites?
40%
Are accidents at work declining?
60%
Human resources development
35%
Rating 25/100 10/100 15/100 28/100
Are competences required to meet medium term targets identified?
10%
4/100
Is there a medium term (2 to 5 years) recruitment plan?
10%
4/100
Is there a training strategy tuned to the company objectives?
10%
0/100
Are employees trained for tomorrow's objectives?
10%
4/100
Can all employees have access to training?
10%
4/100
Has the corporate avoided large restructuring lay-offs over the last year to date?
10%
4/100
Have key competences stayed?
10%
4/100
Are managers given managerial objectives?
10%
4/100
If yes, are managerial results a deciding factor when assessing compensation level?
10%
4/100
Is mobility encouraged between operating units of the group?
10%
Pay
20%
0/100 14/100
Is there a compensation committee?
30%
0/100
Is employees' performance combining group performance AND individual performance?
70%
14/100
Job satisfaction
10%
10/100
Is there a measure of job satisfaction?
33%
3/100
Can anyone participate ?
34%
3/100
Are there action plans to prop up employees' morale?
33%
Internal communication
10%
Are strategy and objectives made available to every employee?
3/100 10/100
100% Human Ressources score:
10/100 87/100
HR Score H.R. Score : 8.7/10
November 3 2017
Capital Goods Gaussin
Copyright Alphavalue - 2017 – corporate.alphavalue.com
Page 30
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Graphics
Momentum
: Strong momentum corresponding to a continuous and overall positive moving average trend confirmed by volumes : Relatively good momentum corresponding to a positively-oriented moving average, but offset by an overbought pattern or lack of confirmation from volumes : Relatively unfavorable momentum with a neutral or negative moving average trend, but offset by an oversold pattern or lack of confirmation from volumes : Strongly negative momentum corresponding to a continuous and overall negative moving average trend confirmed by volumes Momentum analysis consists in evaluating the stock market trend of a given financial instrument, based on the analysis of its trading flows. The main indicators used in our momentum tool are simple moving averages over three time frames: short term (20 trading days), medium term (50 days) and long term (150 days). The positioning of these moving averages relative to each other gives us the direction of the flows over these time frames. For example, if the short and medium-term moving averages are above the long-term moving average, this suggests an uptrend which will need to be confirmed. Attention is also paid to the latest stock price relative to the three moving averages (advance indicator) as well as to the trend in these three moving averages - downtrend, neutral, uptrend - which is more of a lagging indicator. The trend indications derived from the flows through moving averages and stock prices must be confirmed against trading volumes in order to confirm the signal. This is provided by a calculation based on the average increase in volumes over ten weeks together with a buy/sell volume ratio.
November 3 2017
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Page 31
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Graphics
Moving Average MACD & Volume
November 3 2017
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Page 32
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Graphics
€/$ sensitivity
Sector Capital Goods
November 3 2017
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Page 33
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Methodology
November 3 2017
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Page 34
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Methodology
Fundamental Opinion It is implicit that recommendations are made in good faith but should not be regarded as the sole source of advice. Recommendations are geared to a “value” approach. Valuations are computed from the point of view of a secondary market minority holder looking at a medium term (say 6 months) performance. Valuation tools are built around the concepts of transparency, all underlying figures are accessible, and consistency, same methodology whichever the stock, allowing for differences in nature between financial and non financial stocks. A stock with a target price below its current price should not and will not be regarded as an Add or a Buy. Recommendations are based on target prices with no allowance for dividend returns. The thresholds for the four recommendation levels may change from time to time depending on market conditions. Thresholds are defined as follows, ASSUMING long risk free rates remain in the 2-5% region.
Buy
Low Volatility Normal Volatility High Volatility 10 < VIX index < 30 15 < VIX index < 35 35 < VIX index More than 15% upsideMore than 20% upsideMore than 30% upside
Add
From 5% to 15%
From 5% to 20%
From 10% to 30%
Reduce
From -10% to 5%
From -10% to 5%
From -10% to 10%
Sell
Below -10%
Below -10%
Below -10%
Recommendation
There is deliberately no “neutral” recommendation. The principle is that there is no point investing in equities if the return is not at least the risk free rate (and the dividend yield which again is not allowed for). Although recommendations are automated (a function of the target price whenever a new equity research report is released), the management of AlphaValue intends to maintain global consistency within its universe coverage and may, from time to time, decide to change global parameters which may affect the level of recommendation definitions and /or the distribution of recommendations within the four levels above. For instance, lowering the risk premium in a gloomy context may increase the proportion of positive recommendations.
November 3 2017
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Page 35
ALPHAVALUE CORPORATE SERVICES
Gaussin
(Buy)
Engineering-Heavy Constr. / France
Methodology
Valuation Valuation processes have been organized around transparency and consistency as primary objectives. Stocks belong to different categories that recognise their main operating features : Banks, Insurers and Non Financials. Within those three universes, the valuation techniques are the same and in relation to the financial data available. The weighting given to individual valuation techniques is managed centrally and may be changed from time to time. As a rule, all stocks of a similar profile are valued using equivalent weighting of the various valuation techniques. This is for obvious consistency reasons. Within the very large universe of Non Financials, there are in effect 4 sub-categories of weightings to cater for subsets: 1) 'Mainstream' stocks; 2) 'Holding companies' where the stress is on NAV measures; 3) 'Growth' companies where the stress is on peer based valuations; 4) 'Loss making sectors' where peers review is essentially pointing nowhere (ex: Bio techs). The bulk of the valuation is then built on DCF and NAV, in effect pushing back the time horizon. Valuation Issue
Normal Growth industrials industrials
Holding company
Loss runners
Bank
Insurers
DCF
35%
35%
10%
40%
0%
0%
NAV
20%
20%
55%
40%
25%
15%
PE
10%
10%
10%
5%
10%
20%
EV/EBITDA
20%
20%
0%
5%
0%
0%
Yield
10%
10%
20%
5%
15%
15%
P/Book
5%
5%
5%
5%
15%
10%
Banks' instrinsic method
0%
0%
0%
0%
25%
0%
Embedded Value
0%
0%
0%
0%
0%
40%
Mkt Cap/Gross Operating Profit
0%
0%
0%
0%
10%
0%
November 3 2017
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Page 36