Ellomay Capital — 2018 a key year for growth delivery

Ellomay Capital — 2018 a key year for growth delivery

Ellomay Capital is a renewable power and energy infrastructure company currently undertaking significant new development projects. 9M17 results showed significant EBITDA growth (+23% y-o-y), mostly reflecting an increase in solar production thanks to the normalisation in weather conditions. We expect 2018 to be a key year for project delivery as our revised forecasts point to very strong profit growth (EBITDA up 80% y-o-y), mainly driven by the commissioning of two new biogas projects in the Netherlands and full contribution from the solar PV acquisition in Israel. We see project delivery as the main catalyst for the stock.

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Ellomay Capital

2018 a key year for growth delivery

Q3/9M17 results

Alternative energy

30 January 2018

Price*

US$10.59/

NIS36.01

Market cap

US$113m/

NIS384.2m

US$/NIS:3.40

* Priced as at 26 January2018

Estimated net debt ($m) at end 2017

78

Shares in issue

10.7m

Free float

31.7%

Code

ELLO

Primary exchange

NYSE American

Secondary exchange

TASE

Share price performance

%

1m

3m

12m

Abs

15.9

36.4

22.3

Rel (local)

8.1

21.5

(2.2)

52-week high/low

US$10.6

US$7.7

Business description

Ellomay Capital is a renewable power and energy infrastructure owner, operator and developer. Its core asset portfolio includes solar PV plants in Italy (22.6MW), Spain (7.9MW) and Israel (9MW). Ellomay owns a stake in a gas-fired plant in Israel and is building biogas plants in the Netherlands.

Next events

FY17 results

March 2018

Analysts

Dario Carradori

+44 (0)20 3077 5700

Graeme Moyse

+44 (0)20 3077 5700

Ellomay Capital is a renewable power and energy infrastructure company currently undertaking significant new development projects. 9M17 results showed significant EBITDA growth (+23% y-o-y), mostly reflecting an increase in solar production thanks to the normalisation in weather conditions. We expect 2018 to be a key year for project delivery as our revised forecasts point to very strong profit growth (EBITDA up 80% y-o-y), mainly driven by the commissioning of two new biogas projects in the Netherlands and full contribution from the solar PV acquisition in Israel. We see project delivery as the main catalyst for the stock.

Year end

Revenue ($m)

PBT*
($m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/15

13.8

1.9

35.4

0.00

29.9

N/A

12/16

12.9

(1.3)

(13.2)

22.5

N/A

2.1

12/17e

15.1

0.9

(1.2)

0.00

N/A

N/A

12/18e

27.4

6.3

32.8

9.8

32.3

0.9

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

2017 to show strong operating profit pick-up…

Ellomay's latest results (9M17) showed significant growth in EBITDA (+23% y-o-y), mainly reflecting the normalisation in solar PV production in Italy and Spain following unfavourable weather conditions in 2016. At the bottom line, the net loss of $3.6m was mainly the result of a one-off negative impact from revaluation of derivatives and exchange rate differences. Overall, after updating our FX assumptions (reflecting a recent move in the US$ vs €), 9M17 results and updated expectations re timing of growth projects, we forecast $10m FY17 EBITDA (company definition; +33% y-o-y) and a net loss of $3.3m. At the same time, we raise our 2017-20 EBITDA estimates by c 4-16%.

…but 2018 is the year to watch for project delivery

Our revised 2018 forecasts imply strong y-o-y profit growth due to the contribution from recent acquisitions (Israeli solar PV, consolidated from October 2017) and the commissioning of new projects (two biogas projects in the Netherlands). We forecast +80% y-o-y EBITDA growth in 2018. Beyond 2018, Ellomay has a pipeline of two large projects (a 300MW solar PV plant in Spain and a 156MW Israeli pumped-storage plant – recently reduced from 340MW by the regulator), which would represent significant profit growth opportunities in the medium term and an upside to our forecasts. Ellomay announced that it signed a PPA for the sale of electricity from the plant in Spain, which we view positively; financial closure is expected in Q2-Q318.

Valuation: Upside potential with catalysts

We have revisited our SOTP valuation to incorporate our changes in forecasts and updated FX assumptions. Our SOTP valuation of $11.4/share (NIS38.8/share) is broadly unchanged and implies > 20% upside potential to the current share price. We note the stock is trading very close to book value so discounting little ability to create value from existing and future development projects. We believe delivery on 2018 projects would provide an opportunity to crystallise the upside potential.

Exhibit 1: Financial summary

US$000s

2015

2016

2017e

2018e

2019e

2020e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

13,817

12,872

15,063

27,374

28,511

28,511

EBITDA (company definition)

 

9,685

7,492

9,978

17,974

18,911

18,911

EBITDA (Edison definition, excluding associates)

7,218

5,888

7,463

15,974

16,911

16,911

Operating Profit (before amort. and except.)

2,306

1,004

2,563

8,774

9,611

9,611

Intangible Amortisation

0

0

0

0

0

0

Exceptionals

21

99

15

0

0

0

Other

0

0

0

0

0

0

Operating Profit

5,812

1,807

(592)

8,774

9,611

9,611

Net Interest

(2,893)

(3,760)

(4,166)

(4,506)

(4,640)

(4,503)

Share of assocs/JVs gains/(losses)

2,446

1,505

2,500

2,000

2,000

2,000

Forex gains/(losses

0

0

0

0

0

0

Other

3,485

704

(3,170)

0

0

0

Profit Before Tax (norm)

 

 

1,859

(1,251)

897

6,269

6,971

7,108

Profit Before Tax (FRS 3)

 

 

5,365

(448)

(2,258)

6,269

6,971

7,108

Tax

1,933

(625)

(1,171)

(1,567)

(1,743)

(1,777)

Profit After Tax (norm)

3,792

(1,408)

(124)

3,501

3,894

3,970

Profit After Tax (FRS 3)

7,298

(605)

(3,279)

3,501

3,894

3,970

Average Number of Shares Outstanding (m)

10.7

10.7

10.7

10.7

10.7

10.7

EPS - normalised ($)

 

 

0.354

(0.132)

(0.012)

0.328

0.365

0.372

EPS - normalised and fully diluted ($)

 

0.354

(0.132)

(0.012)

0.328

0.365

0.372

EPS - (IFRS) ($)

 

 

0.681

(0.057)

(0.307)

0.328

0.365

0.372

Dividend per share ($)

0.000

0.225

0.000

0.098

0.109

0.112

EBITDA Margin (%)

52.2

45.7

49.5

58.4

59.3

59.3

Operating Margin (before GW and except.) (%)

16.7

7.8

17.0

32.1

33.7

33.7

BALANCE SHEET

Fixed Assets

 

 

126,814

120,628

152,965

160,765

160,465

160,165

Intangible Assets

0

0

0

0

0

0

Tangible Assets

78,975

77,066

110,290

116,090

113,790

111,490

Investments

33,970

30,788

33,288

35,288

37,288

39,288

Other

13,869

12,774

9,387

9,387

9,387

9,387

Current Assets

 

 

33,513

34,641

28,918

23,458

25,976

27,416

Stocks

0

0

0

0

0

0

Debtors

8,218

9,952

12,502

16,275

16,950

16,950

Cash

18,717

23,650

9,828

596

2,438

3,877

Other

6,578

1,039

6,588

6,588

6,588

6,588

Current Liabilities

 

 

(10,103)

(11,102)

(12,499)

(15,188)

(17,346)

(18,346)

Creditors

(4,092)

(4,963)

(6,360)

(6,049)

(6,207)

(6,207)

Short term borrowings

(6,011)

(6,139)

(6,139)

(9,139)

(11,139)

(12,139)

Other

0

0

0

0

0

0

Long Term Liabilities

 

 

(56,159)

(56,302)

(94,763)

(90,763)

(86,763)

(82,763)

Long term borrowings

(48,117)

(48,385)

(83,676)

(79,676)

(75,676)

(71,676)

Other long term liabilities

(8,042)

(7,917)

(11,087)

(11,087)

(11,087)

(11,087)

Net Assets

 

 

94,065

87,865

74,621

78,272

82,332

86,472

CASH FLOW

Operating Cash Flow

 

 

8,056

11,309

6,326

11,891

16,393

16,911

Net Interest

(2,904)

(3,049)

(4,166)

(4,506)

(4,640)

(4,503)

Tax

(241)

(54)

(1,171)

(1,567)

(1,743)

(1,777)

Capex

0

(5,388)

(7,124)

(13,000)

(5,000)

(5,000)

Acquisitions/disposals

0

0

(40,815)

0

0

0

Equity financing

0

0

0

0

0

0

Financing

0

0

0

0

0

0

Dividends

0

(2,404)

0

(1,050)

(1,168)

(1,191)

Other

(4,485)

4,655

3,387

0

0

0

Net Cash Flow

426

5,069

(43,564)

(8,233)

3,842

4,440

Opening net debt/(cash)

 

 

50,264

33,636

34,079

77,643

85,875

82,033

HP finance leases initiated

0

0

0

0

0

0

Other

-461

5512

0

0

0

0

Closing net debt/(cash)

 

 

33,636

34,079

77,643

85,875

82,033

77,594

Source: Ellomay Capital, Edison Investment Research. Note: We now normalise 2017e EPS to remove the one-off $3.17m negative impact from derivative fair value adjustments.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. 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10017, New York

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Level 12, Office 1205

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Israel

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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Disclosure regarding the scheme to enhance the awareness of investors to public companies in the technology and biomed sectors that are listed on the Tel Aviv Stock Exchange and participate in the scheme (hereinafter respectively “the Scheme”, “TASE”, “Participant” and/or “Participants”). Edison Investment Research (Israel) Ltd, the Israeli subsidiary of Edison Investment Research Ltd (hereinafter respectively “Edison Israel” and “Edison”), has entered into an agreement with the TASE for the purpose of providing research analysis (hereinafter “the Agreement”), regarding the Participants and according to the Scheme (hereinafter “the Analysis” or “Analyses”). The Analysis will be distributed and published on the TASE website (Maya), Israel Security Authority (hereinafter “the ISA”) website (Magna), and through various other distribution channels. The Analysis for each participant will be published at least four times a year, after publication of quarterly or annual financial reports, and shall be updated as necessary after publication of an immediate report with respect to the occurrence of a material event regarding a Participant. As set forth in the Agreement, Edison Israel is entitled to fees for providing its investment research services. The fees shall be paid by the Participants directly to the TASE, and TASE shall pay the fees directly to Edison. Subject to the terms and principals of the Agreement, the Annual fees that Edison Israel shall be entitled to for each Participant shall be in the range of $35,000-50,000. As set forth in the Agreement and subject to its terms, the Analyses shall include a description of the Participant and its business activities, which shall inter alia relate to matters such as: shareholders; management; products; relevant intellectual property; the business environment in which the Participant operates; the Participant's standing in such an environment including current and forecasted trends; a description of past and current financial positions of the Participant; and a forecast regarding future developments in and of such a position and any other matter which in the professional view of the Edison (as defined below) should be addressed in a research report (of the nature published) and which may affect the decision of a reasonable investor contemplating an investment in the Participant's securities. To the extent it is relevant, the Analysis shall include a schedule of scientific analysis of an expert in the field of life sciences. An "equity research abstract" shall accompany each Equity Research Report, describing the main points addressed. The full scope reports and reports where the investment case has materially changed will include a thorough analysis and discussion. Short update notes, where the investment case has not materially changed, will include a summary valuation discussion. The Agreement with TASE regarding the participation of Edison in the scheme for the research analysis of public companies does not and shall not constitute an approval or consent on the part of TASE or the ISA or any other exchange on which securities of the Company are listed, or any other securities’ regulatory authority which regulates the issuance of securities by the Company to the content of the Report or to the recommendation contained therein. A summary of this report is also published in the Hebrew language. In the event of any contradiction, inconsistency, discrepancy, ambiguity or variance between the English Report and the Hebrew summary of said Report, the English version shall prevail; and a note to this effect shall appear in any Hebrew summary of a Report. Edison is regulated by the Financial Conduct Authority. According to Article 12.3.2, Chapter 12 of the Conduct of Business Sourcebook, Edison, which produces or disseminates non-independent research, must ensure that it: 1) is clearly identified as a marketing communication; and 2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it: a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. The financial promotion rules apply to non-independent research as though it were a marketing communication.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). 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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney+61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach,46766

Israel

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney+61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach,46766

Israel

APQ Global — CULS issuance and income target achieved

Following shareholder approval at the December EGM, APQ has issued an additional £10.3m in 3.5% convertible unsecured loan stocks (CULS) at a 3% premium to par value. The CULS provide long-term structural gearing at a fixed cost, the proceeds of which will be deployed in line with the company’s business and investment strategy. APQ has also changed its reporting currency from sterling to US dollars so as to more closely match its investments. Separately, it has reported an unaudited 31 December net book value per share of US$128.1 and declared a fourth quarterly DPS of 1.5p. Total DPS of 6.0p declared in respect of 2017 matches the target set at IPO and takes the annual US$ NAV total return to 9.9%.

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