- •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
Inventory balance, usd mln
|
2009 |
2010 |
Agricultural produce at year start |
3.3 |
13.2 |
Sales of agricultural produce |
24.9 |
25.7 |
Agricultural produce at year end |
13.2 |
20.8 |
|
|
|
Implied value of harvest |
34.8 |
33.2 |
Value of harvest estimated at APK-Inform prices |
37.6 |
36.5 |
Discount of average selling prices to APK-Inform |
-7% |
-9% |
Source: Company data, Concorde Capital
Valuation
While our asset-based valuation shows a fair value for Sintal of USD 989/ha, the lowest among its domestic peers, but well above its current multiple of USD 420/ha, our valuation via DCF results in a poorer USD 577/ha. As with Agroton and MCB Agricole, we don’t see Sintal`s current management willing/able to achieve its asset-based value and set our target price purely based on DCF: EUR 1.5 per GDR (upside of TT%). We assign a HOLD recommendation due to high stock-specific risks.
Risks
A key risk for minorities is the fact that Sintal Agriculture remains a non-core asset for its majority shareholder, who is focused on real estate. Resulting accountability risk, evident by high costs in 2009-10, is significant for minorities, in our view. Delisting is also a risk for the stock, as the company has not yet moved to a new listing level on the Frankfurt Stock Exchange (though Sintal promises to do so); its current listing level is being phased out. Poor liquidity, common for FSE-listed stocks is also a risk.
Valuation
Our DCF valuation of Sintal yields a fair price of USD 1.9 per GDR (EUR 1.5). For detailed operating assumptions, please refer to the next page.
DCF output, USD mln
|
2011E |
2012E |
2013E |
2014E |
2015E |
2016E |
2017E |
2018E |
2019E |
2020E |
|||||
EBITDA |
9.8 |
17.6 |
17.0 |
19.4 |
20.9 |
22.2 |
23.7 |
25.2 |
26.7 |
28.3 |
|||||
EBIT |
8.4 |
15.3 |
13.9 |
16.0 |
17.2 |
18.3 |
19.4 |
20.6 |
21.8 |
23.1 |
|||||
Effective Tax Rate |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
|||||
Taxed EBIT |
8.2 |
15.0 |
13.7 |
15.7 |
16.9 |
17.9 |
19.0 |
20.2 |
21.4 |
22.6 |
|||||
Plus D&A |
1.5 |
2.3 |
3.1 |
3.4 |
3.7 |
4.0 |
4.3 |
4.6 |
4.9 |
5.2 |
|||||
Less CapEx |
(3.0) |
(11.7) |
(11.9) |
(4.7) |
(4.8) |
(4.9) |
(5.0) |
(5.1) |
(5.2) |
(5.3) |
|||||
Less change in OWC |
(6) |
(4) |
(4) |
(4) |
(2) |
(2) |
(2) |
(2) |
(2) |
(2) |
|||||
FCFF |
- |
- |
0 |
11 |
13 |
15 |
16 |
18 |
19 |
20 |
|||||
WACC |
20% |
20% |
19% |
19% |
19% |
19% |
19% |
19% |
19% |
19% |
|||||
Sum of disct'd CF's |
|
50 |
|
|
|
|
|
|
|
|
|||||
Terminal Value |
|
|
|
|
|
|
|
|
|
128 |
|||||
Disct'd TV |
|
34 |
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Firm value |
|
84 |
|
|
Portion due to TV |
|
|
40.2% |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Less Net Debt |
|
(17) |
|
|
|
|
|
|
|
|
|||||
Equity Value as of 25 May 2013 |
67 |
|
|
Implied exit EBITDA Multiple |
|
4.5 x |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Perpetuity Growth Rate |
|
|
|
|
|
|
|
|
|
3.0% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Fair price of GDR |
|
USD 1.9 |
|
|
|
|
|
||||||||
|
|
EUR 1.5* |
|
|
|
|
|
* At USD/EUR rate of 1.26 as of May 23
Source: Concorde Capital estimates
Sensitivity analysis, EUR per GDR
|
Perpetuity Growth Rate |
|
|
Exit Multiple (EBITDA) |
|||||||||
|
2.0% |
2.5% |
3.0% |
3.5% |
4.0% |
|
|
2.5 x |
3.5 x |
4.5 x |
5.5 x |
6.5 x |
|
WACC |
|
|
|
|
|
|
WACC |
|
|
|
|
|
|
-3.0% |
1.8 |
1.8 |
1.8 |
1.8 |
1.9 |
|
-3.0% |
1.4 |
1.6 |
1.8 |
2.0 |
2.2 |
|
-2.0% |
1.7 |
1.7 |
1.7 |
1.7 |
1.8 |
|
-2.0% |
1.3 |
1.5 |
1.7 |
1.9 |
2.1 |
|
-1.0% |
1.6 |
1.6 |
1.6 |
1.6 |
1.7 |
|
-1.0% |
1.3 |
1.4 |
1.6 |
1.8 |
2.0 |
|
+0.0% |
1.5 |
1.5 |
1.5 |
1.5 |
1.6 |
|
+0.0% |
1.2 |
1.3 |
1.5 |
1.7 |
1.9 |
|
+1.0% |
1.4 |
1.4 |
1.4 |
1.5 |
1.5 |
|
+1.0% |
1.1 |
1.3 |
1.4 |
1.6 |
1.7 |
|
+2.0% |
1.3 |
1.3 |
1.3 |
1.4 |
1.4 |
|
+2.0% |
1.1 |
1.2 |
1.3 |
1.5 |
1.6 |
|
+3.0% |
1.2 |
1.3 |
1.3 |
1.3 |
1.3 |
|
+3.0% |
1.0 |
1.1 |
1.3 |
1.4 |
1.6 |
Source: Concorde Capital estimates
WACC decomposition
|
2011E |
2012E |
2013E |
2014E |
2015E |
2016E |
2017E |
2018E |
2019E |
2020E |
Debt-to-Equity |
0.11 |
0.10 |
0.23 |
0.21 |
0.23 |
0.17 |
0.10 |
0.10 |
0.10 |
0.10 |
Avg. after-tax Interest Rate |
16.0% |
14.9% |
15.1% |
14.8% |
14.3% |
14.2% |
14.3% |
14.4% |
14.4% |
14.4% |
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. |
5.0% |
5.0% |
5.0% |
5.0% |
5.0% |
5.0% |
5.0% |
5.0% |
5.0% |
5.0% |
Cost of Equity |
20.0% |
20.0% |
20.0% |
20.0% |
20.0% |
20.0% |
20.0% |
20.0% |
20.0% |
20.0% |
WACC |
19.6% |
19.5% |
19.0% |
19.1% |
18.9% |
19.1% |
19.4% |
19.5% |
19.5% |
19.5% |
WACC to Perpetuity |
19.5% |
|
|
|
|
|
|
|
|
|
Source: Company data, Concorde Capital estimates