Deinove — Update 3 October 2016

Deinove (EG: ALDEI)

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0.64

0.00 (0.00%)

Market capitalisation

14m

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Research: Healthcare

Deinove — Update 3 October 2016

Deinove

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Healthcare

Deinove

Strategic refocus

H1 results

Alternative energy

3 October 2016

Price

€2.66

Market cap

€23m

Net cash* (€m) at 30 June 2016
*Company definition

10.4

Shares in issue

8.6m

Free float

66%

Code

ALDEI

Primary exchange

Alternext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(32.8)

(21.8)

(56.5)

Rel (local)

(33.1)

(26.0)

(57.0)

52-week high/low

€6.6

€2.7

Business description

Deinove designs, develops and markets technologies in biochemistry by harnessing the properties of the Deinococcus bacterium.

Next events

FY16 results

March 2017

Analysts

Graeme Moyse

+44 (0)20 3077 5700

Roger Johnston

+44 (0)20 3077 5722

Deinove is a research client of Edison Investment Research Limited

While the H116 financial results were in line with expectations, the decision to suspend the Deinol programme was not. Short-term projections will not be affected by the change in strategy as resources will simply be reallocated, but potential for longer-term revenue generation will switch from biofuels to green chemistry and healthcare.

Year
end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/14

0.2

(6.6)

(94.9)

0.0

N/A

N/A

12/15

0.5

(7.3)

(66.8)

0.0

N/A

N/A

12/16e

0.5

(8.1)

(77.3)

0.0

N/A

N/A

12/17e

0.5

(8.2)

(64.5)

0.0

N/A

N/A

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

Emphasis on carotenoids and antibiotics

Despite a reduction in the relative importance of the Deinol (biofuels) programme over the last two years, we had not anticipated its suspension. Deinove will now focus its efforts on carotenoids (Deinochem) and antibiotics (Deinobiotics), with efforts in the latter area boosted by the purchase of the 51% stake of Deinobiotics that it does not already own. Our short-term forecasts remain largely unchanged, aside from the shares to be issued in Q117 to acquire Deinobiotics. In the longer term, revenue from biofuels now appears less likely (we had assumed that Deinove’s technology was deployed in three ethanol plants by 2025) unless a rise in the oil price (probably to over $100/bbl) encourages Deinove to resume the programme. We expect the first revenues from Deinochem in 2018, although the timing of subsequent revenues could be accelerated given the additional resources to be devoted to the project. We assume no revenue from the antibiotics programme and await further guidance from Deinove on the potential timing of preclinical trials.

H116 results in line with expectations

The H116 results appear in line with our FY16 forecasts, with revenue of €0.2m and a net loss of €3.1m, compared to revenue of €0.1m and a net loss of €3.2m in H115. The net financial position (company definition) at the period end was €10.4m compared to €12.4m at the end of FY15, in part helped by the receipt of €1.5m repayable advance from ADEME. Given that we expect no significant change to the rate of short-term cash burn, we believe that previous statements regarding resources lasting until the end of 2017 hold good.

Valuation: Implied value of Deinochem €17m

At c €2.7/share, Deinove has a market cap of €23m and an EV of €20m. Adjusting for the value of Deinove’s holding in Carbios (c €0.8m) and allowing for a valuation of c €5.0m for Deinobiotics (based on an estimated payment by Deinove of 858k shares at €3/share for 51%) indicates a value for Deinochem of c €14m. A share price of €4 implies a value for Deinochem of €24m, while a share price of €2/share suggests a Deinochem valuation of €10m.

Exhibit 1: Financial summary

€'000s

2014

2015

2016e

2017e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

156

492

500

469

Cost of sales

0

0

0

0

Gross profit

156

492

500

469

EBITDA

 

 

(6,515)

(7,309)

(7,428)

(7,404)

Operating profit (before amort. and except.)

(6,520)

(7,331)

(8,083)

(8,159)

Intangible Amortisation

540

634

37

165

Exceptionals

(735)

(10)

0

0

Other

0

0

0

0

Operating profit

(6,715)

(6,707)

(8,046)

(7,994)

Net Interest

(37)

(14)

14

(38)

Profit before tax (norm)

 

 

(6,557)

(7,345)

(8,069)

(8,196)

Profit before tax (FRS 3)

 

 

(7,832)

(7,989)

(8,106)

(8,361)

Tax

1,374

1,633

1,435

2,118

Profit after tax (norm.)

(5,183)

(5,712)

(6,634)

(6,078)

Profit after tax (FRS 3)

(6,458)

(6,356)

(6,671)

(6,243)

Average number of shares outstanding (m)

5.5

8.6

8.6

9.4

EPS - normalised (c)

 

 

(94.9)

(66.8)

(77.3)

(64.5)

EPS - (IFRS) (c)

 

 

(98.5)

(59.5)

(76.9)

(62.7)

Dividend per share (c)

0.0

0.0

0.0

0.0

Gross margin (%)

100.0

N/A

N/A

N/A

EBITDA margin (%)

N/A

N/A

N/A

N/A

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

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed assets

 

 

2,303

1,968

2,277

4,408

Intangible assets

99

117

80

2,465

Tangible assets

1,407

1,055

900

645

Investments

797

796

1,297

1,298

Current assets

 

 

4,650

15,359

11,269

7,114

Stocks

`

0

0

0

Debtors

2,110

2,393

2,423

2,290

Cash

966

11,932

7,812

3,789

Other

1,574

1,034

1,034

1,034

Current liabilities

 

 

(2,203)

(2,719)

(2,630)

(3,067)

Creditors

(2,203)

(2,719)

(2,630)

(3,067)

Short-term borrowings

0

0

0

0

Long-term liabilities

 

 

(4,555)

(6,512)

(9,400)

(10,632)

Long-term borrowings

(4,550)

(6,497)

(9,385)

(10,617)

Other long-term liabilities

(5)

(15)

(15)

(15)

Net Assets

 

 

195

8,096

1,515

(2,177)

CASH FLOW

Operating cash flow

 

 

(7,691)

(7,324)

(7,434)

(7,221)

Net Interest

(37)

(14)

14

(38)

Tax

1,374

1,633

1,323

2,505

Capex

(1,338)

(289)

(500)

(501)

Acquisitions/disposals

1,307

756

(501)

(2,550)

Financing

4,051

14,257

90

2,550

Dividends

0

0

0

0

Net cash flow

(2,334)

9,019

(7,008)

(5,255)

Opening net debt/(cash)

 

 

1,250

3,584

(5,435)

1,573

HP finance leases initiated

0

0

0

0

Other

0

0

0

0

Closing net debt/(cash)

 

 

3,584

(5,435)

1,573

6,828

Source: Company accounts, Edison Investment Research

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Deinove and 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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”) © FTSE 2016. “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.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Deinove and 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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”) © FTSE 2016. “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.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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