Carbios — A productive and active H119

Carbios (EU: ALCRB)

Last close As at 21/11/2024

36.98

−2.46 (−6.24%)

Market capitalisation

413m

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Research: Industrials

Carbios — A productive and active H119

Carbios’s H119 results confirmed that the business is on a sound financial footing and continues to make progress towards the commercialisation of its technology. Commercial revenues from Carbiolice are scheduled to commence in 2020 and licences for its PET recycling technology are expected to be granted by 2023. Our current DCF-based valuation is €13/share.

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Industrials

Carbios

A productive and active H119

H119 results

Industrial support services

30 September 2019

Price

€5.88

Market cap

€41m

Net cash (€m) as 30 June 2019

3.4

Shares in issue

6.9m

Free float

59.8%

Code

ALCRB

Primary exchange

Euronext Growth

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(13.5)

(10.1)

(25.9)

Rel (local)

(17.2)

(12.5)

(26.2)

52-week high/low

€8.68

€4.30

Business description

Carbios develops enzyme-based processes for biodegradation and bio recycling of plastics, with a long-term aim of displacing current recycling and production processes.

Next events

FY19 results

March 2020

Analyst

Graeme Moyse

+44 (0)20 3077 5700

Carbios is a research client of Edison Investment Research Limited

Carbios’s H119 results confirmed that the business is on a sound financial footing and continues to make progress towards the commercialisation of its technology. Commercial revenues from Carbiolice are scheduled to commence in 2020 and licences for its PET recycling technology are expected to be granted by 2023. Our current DCF-based valuation is €13/share.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/17

1.0

(4.6)

(0.86)

0.0

N/A

N/A

12/18

1.1

(4.3)

(0.67)

0.0

N/A

N/A

12/19e

1.2

(4.8)

(0.60)

0.0

N/A

N/A

12/20e

1.7

(4.0)

(0.42)

0.0

N/A

N/A

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

Comfortable cash position

H119 results from Carbios appear on track to meet our FY19 forecasts. Revenues of €0.7m were slightly ahead of the run rate required to meet our FY19 projection of €1.2m. Lower than anticipated operating costs of €2.72m (FY19e: €5.85m) were offset by a smaller than expected tax credit of €0.3m (FY19e: €1.34m) to produce an H1 net loss of €1.71m (FY19 forecast net loss of €3.45m). Net cash consumption in H1 was €1.8m and as at 30 June Carbios’s net cash position was €3.4m before the proceeds of the equity issue (€13.8m (net) received in July). We expect capex to increase in H2 as Carbios begins construction of its PET recycling demonstration plant. However, with up to maximum of a further €4.1m of non-dilutive funding secured in H1 from SGPI, Carbios believes it should be able to cover its financial needs ‘beyond the next 24 months’. Our forecasts are unchanged.

Scientific and commercial advances

H1 saw Carbios continue with its progress towards commercialisation. As a result of a co-development agreement signed with Novozymes in H1, Carbios has secured the supply of enzymes for the industrialisation of its Carbiolice technology, scheduled for 2020 (initially films and carrier bags). In H1, Carbios also announced that it had produced the first PET bottles made with 100% Purified Terephthalic Acid (rPTA) and signed up Nestlé Waters, PepsiCo and Suntory Beverage & Food Europe, (in addition to L’Oréal) to its PET Consortium to industrialise its PET technology. Construction of the PET recycling demonstration plant is expected to be followed by granting its first commercial licences by 2023.

Valuation: DCF indicative valuation of €13/share

Despite the uncertainties surrounding long-term revenue projections, we continue to believe that a DCF-based valuation remains the most appropriate valuation tool. Our DCF-based approach indicates a valuation of €13/share. The current market valuation reflects a 50% probability of our projections being achieved.

Exhibit 1: Financial summary

 

€m

2014

2015

2016

2017

2018

2019e

2020e

Year end December 31st

 

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

 

 

 

 

 

 

 

 

Revenue

 

0.66

0.84

8.87

0.98

1.08

1.22

1.73

Operating Expenses

 

(3.95)

(4.73)

(5.11)

(5.39)

(5.02)

(5.60)

(5.35)

EBITDA (norm)

 

(3.28)

(3.90)

3.76

(4.41)

(3.94)

(4.38)

(3.62)

Depreciation

 

(0.08)

(0.17)

(0.21)

(0.24)

(0.30)

(0.25)

(0.25)

Reported Operating Profit

 

(3.36)

(4.06)

3.55

(4.65)

(4.24)

(4.63)

(3.87)

Net Interest

 

0.05

0.08

0.08

0.02

(0.03)

(0.16)

(0.15)

Profit before tax (reported)

 

(3.32)

(3.98)

3.63

(4.63)

(4.26)

(4.79)

(4.03)

Reported tax

 

1.09

0.94

1.32

0.70

1.19

1.34

1.12

Profit after tax (reported)

 

(2.23)

(3.05)

4.95

(3.93)

(3.07)

(3.45)

(2.90)

Extraordinary gain or loss

 

0.02

(0.02)

(0.03)

(0.01)

(0.04)

0.00

0.00

Net income (reported)

 

(2.21)

(3.07)

4.92

(3.94)

(3.11)

(3.45)

(2.90)

 

 

 

 

 

 

 

 

Basic average number of shares outstanding (m)

 

3.75

3.78

3.85

4.57

4.62

5.78

6.90

EPS - basic reported (€)

 

(0.59)

(0.81)

1.28

(0.86)

(0.67)

(0.60)

(0.42)

Dividend (c)

 

0.00

0.00

0.00

0.00

0.00

0.00

0.00

 

 

 

 

 

 

 

 

 

Revenue growth (%)

 

-26.2%

26.1%

959.7%

-88.9%

10.2%

12.5%

41.7%

Normalized EBITDA Margin (%)

 

N/A

N/A

42.4%

N/A

N/A

N/A

N/A

Normalized operating margin (%)

 

N/A

N/A

40.0%

N/A

N/A

N/A

N/A

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

Total Current Liabilities

 

0.67

0.91

1.17

2.26

3.40

4.58

4.38

Accounts payable

 

0.20

0.34

0.49

1.43

1.06

1.12

1.02

Other current liabilities

 

0.47

0.57

0.67

0.83

2.34

3.46

3.36

Total Non-Current Liabilities

 

1.95

3.01

3.15

3.71

3.71

3.71

8.71

Debt/Repayable advances

 

1.95

3.01

3.15

3.71

3.71

3.71

8.71

Total Liabilities

 

2.62

3.92

4.32

5.97

7.11

8.29

13.09

 

 

 

 

 

 

 

 

 

Total Shareholders Equity

 

11.12

8.13

13.11

14.55

12.04

22.37

19.47

Common stock / Capital

 

2.63

2.65

2.68

3.20

3.26

3.26

3.26

Additional paid-in capital / Share premium

 

13.65

13.70

13.74

18.59

19.13

32.91

32.91

Retained earnings

 

(2.96)

(5.17)

(8.24)

(3.32)

(7.26)

(10.37)

(13.82)

Other reserves and surplus

 

(2.21)

(3.05)

4.94

(3.94)

(3.10)

(3.44)

(2.89)

Total liabilities and equity

 

13.73

12.04

17.44

20.52

19.15

30.66

32.56

Total assets

 

13.73

12.04

17.44

20.52

19.15

30.66

32.56

Total current assets

 

12.64

10.38

6.16

9.17

6.69

12.56

4.68

Cash and cash equivalents

 

11.10

9.01

3.99

7.55

5.15

11.46

3.34

Accounts receivable

 

1.40

1.22

1.95

1.46

1.48

0.74

0.95

Inventories

 

0.02

0.01

0.02

0.01

0.02

0.32

0.29

Prepaid expenses

 

0.12

0.13

0.22

0.15

0.04

0.04

0.10

Total Non-Current Assets

 

1.09

1.67

11.28

11.35

12.46

18.10

27.88

Property Plant and equipment, net

 

0.74

1.25

1.21

1.11

0.97

4.34

11.73

Other intangible assets

 

0.13

0.23

0.37

0.57

0.69

0.76

0.85

Other non-current assets

 

0.22

0.19

9.70

9.68

10.80

13.00

15.30

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

Cash Flow from Operations

 

 

 

 

 

 

 

 

Net income (loss)

 

(2.21)

(3.07)

4.92

(3.94)

(3.11)

(3.45)

(2.90)

Depreciation and Amortization

 

0.07

0.17

0.22

0.23

0.33

0.25

0.25

Other items

 

(1.36)

0.39

(0.51)

1.49

(0.29)

1.61

(0.44)

 

 

(3.50)

(2.52)

4.64

(2.22)

(3.08)

(1.59)

(3.09)

Cash Flow from Investing

 

 

 

 

 

 

 

 

Purchases of fixed assets

 

(0.85)

(0.79)

(0.30)

(0.33)

(0.30)

(3.69)

(7.73)

Other Investing Activities

 

(0.02)

0.00

(9.53)

0.02

(1.14)

(2.20)

(2.30)

Net cash used in investing activities

 

(0.87)

(0.79)

(9.83)

(0.31)

(1.44)

(5.89)

(10.03)

Cash Flow from Financing

 

 

 

 

 

 

 

 

Change in Debt

 

0.15

0.07

(0.04)

(0.05)

1.52

0.00

5.00

Change in Capital Stock

 

0.17

0.06

0.07

5.38

0.60

13.79

0.00

Other Financing Activities

 

0.55

1.08

0.14

0.77

0.00

0.00

0.00

 

 

0.87

1.22

0.17

6.09

2.12

13.79

5.00

Net Changes in Cash and Cash Equivalent

 

(3.50)

(2.09)

(5.02)

3.56

(2.40)

6.31

(8.12)

Effect of Exchange Rates On Cash

 

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Cash and Cash Equivalents - Beginning

 

14.60

11.10

9.01

3.99

7.55

5.15

11.46

Cash and Cash Equivalents - End

 

11.10

9.01

3.99

7.55

5.15

11.46

3.34

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Carbios and prepared and issued by Edison, in consideration of a fee payable by Carbios. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Frankfurt +49 (0)69 78 8076 960

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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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Carbios and prepared and issued by Edison, in consideration of a fee payable by Carbios. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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