Deinove — Update 11 January 2016

Deinove (EG: ALDEI)

Last close As at 28/03/2024

0.64

0.00 (0.00%)

Market capitalisation

14m

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Research: Healthcare

Deinove — Update 11 January 2016

Deinove

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Written by

Healthcare

Deinove

Broadening the offering

Post-capital raising update

Alternative energy

12 January 2016

Price

€3.99

Market cap

€34m

Forecast net cash* (€m) at FY15
*Company definition

12.1

Shares in issue

8.6m

Free float

66%

Code

ALDEI

Primary exchange

Alternext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(22.5)

(39.9)

(38.4)

Rel (local)

(18.5)

(35.1)

(40.4)

52-week high/low

€8.95

€3.85

Business description

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

Next events

FY15 results

March 2016

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

Deinove has secured additional financial resources that will allow it to continue the development of its technology in the field of green chemistry and biofuels. The majority of the funds raised will be used to finance developments in Deinochem (green chemistry), which we now expect will contribute an increased proportion of future revenues.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/13

0.1

(5.0)

(61.5)

0.0

N/A

N/A

12/14

0.2

(6.6)

(98.6)

0.0

N/A

N/A

12/15e

0.2

(8.1)

(90.3)

0.0

N/A

N/A

12/16e

0.2

(8.1)

(61.2)

0.0

N/A

N/A

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

Successful capital-raising

At the end of 2015 Deinove successfully raised €10.7m (gross) via the issue of new equity. The capital-raising resulted in the issue of 2.37m new shares (at a price of €4.5), taking the total number of shares outstanding to 8.55m. Together with funds raised from the issue of shares as part of its equity drawdown arrangement, Deinove should have sufficient financial resources to continue the development of its major business lines in to 2018.

Increased focus on green chemistry

The proceeds of the capital-raise will be apportioned in the ratio of 60% to Deinochem and 40% to Deinol. The split is indicative of the current focus of the business on green chemistry and will provide for continuing diversification away from potential biofuel-related revenue. However, despite the uncertainty surrounding Deinove’s relationship with Abengoa, we expect that Deinove will continue to develop its green fuel proposition with other partners such as Suez Environnement. Of the Deinochem share, c 30% will be devoted to developing the muconic acid platform, with the rest slated for carotenoid/speciality chemical projects (animal feed/cosmetics with Avril and Flint Hills Resources among others).

Valuation: DCF indicates potential upside

We have updated our valuation and forecasts to reflect the increased number of shares in issue, the enhanced cash balances and changes to our revenue generation assumptions following the partnership agreements announced in H215. We continue to use a DCF as our principal valuation tool and assume commercial revenues commence in FY18. We expect revenues to be generated by both Deinol (biofuels) and Deinochem (green chemistry), but with a greater percentage than previously assumed from Deinochem (40% of revenues by 2020). Using a discount rate of 11% (no terminal value) and assuming a long-term ethanol price of $1.50/gallon, our valuation indicates a value of €7.9/share. Long-term ethanol prices of $2/gallon would increase the valuation of the business to c €11.3/share.

Exhibit 1: Financial summary

€'000s

2013

2014

2015e

2016e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

51

156

220

225

Cost of sales

0

0

0

0

Gross profit

51

156

220

225

EBITDA

 

 

(5,156)

(6,515)

(7,354)

(7,230)

Operating profit (before amort. and except.)

(5,156)

(6,520)

(8,253)

(8,504)

Intangible Amortisation

367

540

26

26

Exceptionals

21

(735)

0

0

Other

0

0

0

0

Operating profit

(4,768)

(6,715)

(8,227)

(8,478)

Net Interest

122

(37)

144

449

Profit before tax (norm)

 

 

(5,034)

(6,557)

(8,110)

(8,055)

Profit before tax (FRS 3)

 

 

(5,380)

(7,832)

(8,136)

(8,081)

Tax

1,960

1,374

1,780

2,550

Profit after tax (norm.)

(3,074)

(5,183)

(6,330)

(5,505)

Profit after tax (FRS 3)

(3,420)

(6,458)

(6,356)

(5,531)

Average number of shares outstanding (m)

5.0

5.3

7.0

9.0

EPS - normalised (c)

 

 

(61.5)

(98.6)

(90.3)

(61.2)

EPS - (IFRS) (c)

 

 

(53.7)

(102.3)

(90.0)

(60.9)

Dividend per share (c)

0.0

0.0

0.0

0.0

Gross margin (%)

100.0

100.0

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

 

 

2,833

2,303

2,880

3,080

Intangible assets

85

99

73

47

Tangible assets

609

1,407

2,008

2,234

Investments

2,139

797

799

799

Current assets

 

 

4,129

4,650

14,113

16,816

Stocks

0

0

0

0

Debtors

2,188

2,110

1,665

1,775

Cash

1,872

966

10,874

13,467

Other

69

1,574

1,574

1,574

Current liabilities

 

 

(1,303)

(2,203)

(1,441)

(1,441)

Creditors

(1,238)

(1,441)

(1,441)

(1,441)

Short-term borrowings

(65)

(762)

0

0

Long-term liabilities

 

 

(3,057)

(4,554)

(6,756)

(8,756)

Long-term borrowings

(3,057)

(4,550)

(6,750)

(8,750)

Other long-term liabilities

0

(4)

(6)

(6)

Net Assets

 

 

2,602

196

8,796

9,698

CASH FLOW

Operating cash flow

 

 

(5,499)

(8,453)

(6,909)

(7,340)

Net Interest

122

(37)

144

449

Tax

1,960

1,374

1,780

2,550

Capex

(375)

(1,338)

(1,500)

(1,500)

Acquisitions/disposals

3,779

1,307

0

0

Financing

768

4,051

14,956

6,433

Dividends

0

0

0

0

Net cash flow

755

(3,096)

8,470

593

Opening net debt/(cash)

 

 

2,005

1,250

4,346

(4,124)

HP finance leases initiated

0

0

0

0

Other

0

0

0

0

Closing net debt/(cash)

 

 

1,250

4,346

(4,124)

(4,717)

Source: Company accounts, Edison Investment Research

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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

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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