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ERM Power (EPWX)

Business description

ERM Power is an energy retailer and trader. In Australia it operates an electricity supply business and two gas-fired generation plants. A key area of growth is energy solutions, while the company has announced its intention to sell its US business.

Y/E Jun Revenue (A$m) EBITDA (A$m) PBT (A$m) EPS (c) P/E (x) P/CF (x)
2017A 3127.0 78.4 51.7 (10.77) N/A 2.7
2018A 2047.0 97.5 43.1 12.37 13.5 N/A
2019E 2068.0 93.4 36.9 10.88 15.3 3.5
2020E 2124.0 103.5 46.4 14.01 11.9 4.2

Last updated on 26/09/2018

Investment summary

ERM Power has announced the acquisition for up to A$16m of Out Performers, a provider of energy services to large energy customers. This is consistent with a refocusing on core Australian activities, following the recent announcement of the upcoming US business disposal, which we view as positive as we expect the US business to continue to generate significant negative profit and cash flow. We estimate the acquisition of Out Performers implies a P/E multiple (9.9x FY18 or 7.5x excl. earn-out) at a large discount to ERM Power and <5% EPS accretion on a full-year basis.

Last updated on 28/09/2018

Industry outlook

While electricity supply activities in Australia remain very competitive with limited growth opportunities, ERM Power has experienced significant positive momentum which led to a double upgrade to Australian medium-term profit guidance over the last 12 months. The energy market in Australia (and globally) is undergoing significant transformation as a result of the energy transition, the emergence of new technology and customer demand for higher energy efficiency and sustainable solutions. We expect the recently launched Energy Solutions business to take advantage of these changes.

Last updated on 28/09/2018

Key management

Jon Stretch, CEO
James Spence, FD
Olga Alexandratos, Investor Relations

Company address

Level 52, 111 Eagle St,
QLD 4000
+61 7 3020 5100
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