- •Investment Case 11
- •Valuation summary 37
- •Investment case 53
- •Investment Case
- •Companies Compared Stock data
- •Key metrics
- •Per ha comparison
- •Management credibility
- •Market Overview Summary
- •Ukraine in global context Ukraine produces 2-3% of world soft commodities
- •Sunflower oil, corn, wheat, barley and rapeseed are Ukraine’s key soft commodities to export
- •Ukraine is 8th in arable land globally
- •Key inputs used in crop farming Ukraine`s climate favorable for low-cost agriculture
- •Soil fertility map
- •Machinery use far below developed countries
- •Land trade moratorium makes more benefits
- •Fertilizer use
- •Inputs prices: lease cost is Ukraine’s key cost advantage
- •Case study: Production costs in Ukraine vs. Brazil for corn and soybean
- •Farming Efficiency Ukrainian crop yields lag the eu and us, on par with Argentina and Brazil, above Russia’s
- •5Y average yields, t/ha and their respective 10y cagRs
- •Yields at a premium in Ukraine on the company level
- •Growth Growth should come from yield improvement, crop structure reshuffle and acreage increase
- •Crop structure is gradually shifting to more profitable cultures
- •Combined crop structure of listed companies
- •Ukraine`s 2012 harvest outlook
- •Valuation
- •Valuation summary
- •Valuation summary
- •Asset-based approach
- •Asset-based valuation
- •Valuation premium/discount summary
- •Location matters: Value of land by region
- •Yields efficiency comparing to benchmark region
- •Cost efficiency
- •Adding supplementary businesses
- •Valuation summary for other assets
- •Cost of equity assumptions
- •Model assumptions
- •Landbank growth capped at 30%
- •Crop structure
- •Biological revaluation (ias 41) excluded
- •Land ownership
- •Company Profiles Agroton a high cost producer
- •Investment case
- •Valuation
- •Operating assumptions
- •Financials
- •Income statement*, usd mln
- •Agroton in six charts
- •Operati
- •Industrial Milk Company Corn story
- •Investment case
- •A focus on the corn explains high margins
- •Location favourable for corn
- •Well on track with ipo proceeds
- •Weak ebitda margin in 2012 explained by non-cash items
- •Valuation
- •Valuation
- •Operating assumptions
- •Financials
- •Income statement*, usd mln
- •Ksg Agro On the road to space/Not ready to be public
- •Investment Case
- •A 5x yoy boost in total assets looks strange to us
- •Valuation
- •Operating assumptions
- •Financials
- •Income statement*, usd mln
- •Ksg Agro in six charts
- •Mcb Agricole Acquisition target with lack of positives for minorities
- •Investment Case
- •Inventories balance, usd mln
- •Overview of acquisitions of public farming companies in Ukraine
- •Valuation
- •Operating assumptions
- •Financials
- •Income statement, usd mln
- •Mcb Agricole in six charts
- •Mriya Too sweet to be true
- •Investment Case
- •Valuation
- •Operating assumptions
- •Financials
- •Income statement*, usd mln
- •Mriya in six charts
- •Sintal Agriculture
- •Investment Case
- •25% Yoy cost reduction in 2011 should improve margins
- •Irrigation is a growth option
- •Inventory balance, usd mln
- •Valuation
- •Valuation
- •Operating assumptions
- •Financials
- •Income statement*, usd mln
- •Sintal Agriculture in six charts
- •Astarta Sugar maker
- •Kernel Grain trader actively integrating upstream
- •Poultry producer
- •Appendices Land value
- •Current landowner income capitalization model
- •Farmer income capitalization model
- •Normative value
- •Biological asset revaluation
- •How do we adjust the income statement to be on a cost basis?
- •Ias 41 application summary
- •Appendix: Crop production schedule Crop schedule, based on 2012 harvesting year
- •Investment ratings
- •Contacts
Valuation
We use DCF as a 50% input to our target price. Our model shows a fair stock price at USD 5.3 per share (PLN 18.7); upside of 60%. For detailed operating assumptions, please refer to the next page.
DCF output, USD mln
|
2012E |
2013E |
2014E |
2015E |
2016E |
2017E |
2018E |
2019E |
2020E |
2021E |
|||||
EBITDA |
32 |
39 |
41 |
47 |
48 |
49 |
51 |
53 |
56 |
58 |
|||||
EBIT |
26 |
33 |
34 |
40 |
41 |
42 |
44 |
46 |
49 |
51 |
|||||
Effective Tax Rate |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
|||||
Taxed EBIT |
26 |
32 |
34 |
40 |
40 |
41 |
43 |
45 |
48 |
50 |
|||||
Plus D&A |
6 |
6 |
7 |
7 |
7 |
7 |
7 |
7 |
7 |
7 |
|||||
Less CapEx |
(26) |
(19) |
(9) |
(9) |
(7) |
(7) |
(7) |
(7) |
(7) |
(7) |
|||||
Less change in OWC |
(26) |
(15) |
(9) |
2 |
(1) |
(2) |
(3) |
(4) |
(4) |
(4) |
|||||
FCFF |
- |
4 |
22 |
40 |
39 |
39 |
40 |
41 |
43 |
46 |
|||||
WACC |
18% |
18% |
18% |
18% |
18% |
18% |
18% |
18% |
18% |
18% |
|||||
Sum of disct'd CF's |
|
137 |
|
|
|
|
|
|
|
|
|||||
Terminal Value |
|
|
|
|
|
|
|
|
|
314 |
|||||
Disct'd TV |
|
75 |
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Firm value |
|
212 |
|
|
Portion due to TV |
|
|
34.2% |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Less Net Debt |
|
(45) |
|
|
|
|
|
|
|
|
|||||
Equity Value as of 28 May 2013 |
167 |
|
|
Implied exit EBITDA Multiple |
|
5.0 x |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Perpetuity Growth Rate |
|
|
|
|
|
|
|
|
|
3.0% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Fair price of ord. share |
|
USD 5.3 |
|
|
|
|
|
||||||||
|
|
PLN 18.7* |
|
|
|
|
|
||||||||
* At PLN/USD rate of 3.50 as of May 23
Source: Concorde Capital estimates
Sensitivity analysis, PLN per share
|
Perpetuity Growth Rate |
|
|
Exit Multiple (EBITDA) |
|||||||||
|
2.0% |
2.5% |
3.0% |
3.5% |
4.0% |
|
|
3.4 x |
4.4 x |
5.4 x |
6.4 x |
7.4 x |
|
WACC |
|
|
|
|
|
|
WACC |
|
|
|
|
|
|
-3.0% |
21.9 |
22.3 |
22.7 |
23.1 |
23.5 |
|
-3.0% |
18.8 |
20.7 |
22.7 |
24.6 |
26.6 |
|
-2.0% |
20.6 |
20.9 |
21.3 |
21.6 |
22.0 |
|
-2.0% |
17.6 |
19.4 |
21.3 |
23.1 |
24.9 |
|
-1.0% |
19.3 |
19.6 |
19.9 |
20.3 |
20.6 |
|
-1.0% |
16.6 |
18.2 |
19.9 |
21.6 |
23.3 |
|
+0.0% |
18.1 |
18.4 |
18.7 |
19.0 |
19.4 |
|
+0.0% |
15.6 |
17.1 |
18.7 |
20.2 |
21.8 |
|
+1.0% |
17.0 |
17.2 |
17.5 |
17.8 |
18.1 |
|
+1.0% |
14.6 |
16.1 |
17.5 |
19.0 |
20.4 |
|
+2.0% |
15.9 |
16.2 |
16.4 |
16.7 |
17.0 |
|
+2.0% |
13.7 |
15.1 |
16.4 |
17.8 |
19.1 |
|
+3.0% |
14.9 |
15.2 |
15.4 |
15.7 |
16.0 |
|
+3.0% |
12.9 |
14.2 |
15.4 |
16.7 |
17.9 |
|
Source: Concorde Capital estimates
WACC decomposition
|
2011E |
2012E |
2013E |
2014E |
2015E |
2016E |
2017E |
2018E |
2019E |
2020E |
Debt-to-Equity |
0.44 |
0.34 |
0.20 |
0.20 |
0.20 |
0.20 |
0.20 |
0.20 |
0.20 |
0.20 |
Avg. after-tax Interest Rate |
15.3% |
15.1% |
13.9% |
13.8% |
13.8% |
13.9% |
14.0% |
14.1% |
14.1% |
14.3% |
Ukr. Eurobonds YTM |
9.0% |
9.0% |
9.0% |
9.0% |
9.0% |
9.0% |
9.0% |
9.0% |
9.0% |
9.0% |
Equity premium |
6.0% |
6.0% |
6.0% |
6.0% |
6.0% |
6.0% |
6.0% |
6.0% |
6.0% |
6.0% |
Comp.-specif. prem. |
4.0% |
4.0% |
4.0% |
4.0% |
4.0% |
4.0% |
4.0% |
4.0% |
4.0% |
4.0% |
Cost of Equity |
19.0% |
19.0% |
19.0% |
19.0% |
19.0% |
19.0% |
19.0% |
19.0% |
19.0% |
19.0% |
WACC |
17.8% |
17.9% |
18.1% |
18.1% |
18.1% |
18.1% |
18.1% |
18.1% |
18.1% |
18.2% |
WACC to Perpetuity |
18.2% |
|
|
|
|
|
|
|
|
|
Source: Company data, Concorde Capital estimates