ABO Wind — Consistent levels of profitability

ABO Wind — Consistent levels of profitability

ABO Wind (ABO) has achieved consistent levels of profitability in recent years and looks set to meet FY18 guidance. The company has over 20 years’ experience in developing renewable projects, both in Germany and abroad, and is well positioned to capitalise on the continuing growth expected in the market for renewable energy. The current rating of the shares appears undemanding in comparison to its renewable energy peer group and the wider market.

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Written by

ABO Wind

Renewable energy

Price

€12.90

Market cap

€98m

Share price graph

Share details

Code

AB9 GR

Shares in issue

7.6m

Net (debt) (€m) as at 31 December 2017

6,300

Business description

ABO Wind is a developer of renewable energy projects .Over the last 22 years ABO has developed and installed wind turbines, solar plants and biogas plants with a total capacity of more than 1,400MW. ABO is currently developing wind and solar projects in 16 countries across five continents.

Bull

Portfolio diversification by technology and geography

Strong secular growth in the market for renewable energy

Development of service revenue independent of project development

Bear

Unexpected adjustments to subsidy regimes

Currency fluctuations outside the eurozone

Rising interest rates

Analyst

Graeme Moyse

+44 (0)20 3077 57 00

Consistent levels of profitability

ABO Wind (ABO) has achieved consistent levels of profitability in recent years and looks set to meet FY18 guidance. The company has over 20 years’ experience in developing renewable projects, both in Germany and abroad, and is well positioned to capitalise on the continuing growth expected in the market for renewable energy. The current rating of the shares appears undemanding in comparison to its renewable energy peer group and the wider market.

H118 results show on track to meet FY18 guidance

Recent H118 results from ABO revealed a net profit of c €5.5m and revenue of €56.4m (mainly from wind farms in Germany and Finland). In addition, the company announced that it had grown its pipeline of wind and solar projects in the period and secured new projects with total capacity of 1,600MW. Post the publication of the results ABO also sold a project (up to 50MW not yet built) to Finnish wind farm operator Suomen Hyötytuuli.

Outlook remains strong

According to management the sales planned for the remainder of the year are on schedule and the company remains on track to meet its FY18 guidance of net profit of at least €10m. While profits will not reach the level achieved in FY17, they should amount to the average of the last four years. The macro outlook appears favourable, with strong energy growth anticipated and an increasing renewable energy share, so that by 2040 almost a quarter of all energy is expected to be generated from renewable sources. ABO remains confident and expects that, for the period 2018-20, it will complete projects of c 250MW on an annual basis from the existing pipeline.

Consensus forecasts and valuation

Bloomberg shows consensus forecasts based on the contribution of one analyst. Total output (revenue plus change in WIP) is estimated to be €134m in FY18 (H1 €61.7m) and net profit for the year is forecast to be €11.3m, broadly in line with management’s guidance. ABO’s valuation appears modest based on consensus-based market multiples with an FY18e P/E of c 8.7x and an EV/EBITDA multiple of 2.7x. Both of these multiples are at a significant discount to both wider market multiples (DJ Stoxx 600) of c 14.0x P/E and 9.0x EV/EBITDA and peer group averages of c 20.x and 8.0x, respectively.

Consensus estimates

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

146.8

17.0

2.23

0.30

5.8

2.3

12/18e

134.0

15.7

1.48

0.30

8.7

2.3

12/19e

155.0

17.3

1.55

0.30

8.3

2.3

12/19e

173.0

19.5

1.58

0.30

8.2

2.3

Source: Bloomberg at 10 October 2018

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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

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 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

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). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited ("FTSE") (c) FTSE [2014]. "FTSE(r)" 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.

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

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

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