endeavour and execution - ipl...
TRANSCRIPT
See the end of this report for important disclosures and analyst certification. All authors are Research Analysts unless otherwise stated.
One51 Closing price:170c
April 29 2016
Declan Morrissey [email protected] / +353 1 6149192
Food, Beverage and Pharmaceuticals Team Cathal Kenny, Jack Gorman, John O'Reilly,
Declan Morrissey
Share Price Performance
Key financials (€m)
Year End Dec15 Dec16E Dec17E
Revenue 366.0 435.9 468.0
EBITDA 36.1 53.8 58.5
PBT 21.6 20.4 20.9
EPS Basic 11.8 11.0 11.3
EPS Diluted (Adj) 7.0 9.9 10.8
Cash EPS (Diluted) 15.9 23.9 26.7
Dividend 0.0 0.0 0.0
NBV 97.2 112.2 123.0
Valuation
P/E 24.4 17.1 15.7
FCF Yield (pre div)
(%) 1.5 0.4 6.7
Dividend Yield (%) 0.0 0.0 0.0
Price / Book 1.7 1.5 1.4
EV / EBITDA 11.6 7.8 6.9
Group Int. Cover
(x) 7.2 3.0 3.2
Debt / EBITDA (x) 4.2 2.9 2.4
Financial Data
One51 :Financial model and valuation analysis
Energy Sector Review
Endeavour and execution
One51 management transformed the group from one with poor
growth prospects and financial difficulties into a sustainable
and scalable business with financial flexibility. A constant focus
on operational excellence, combined with transformative M&A,
now makes One51 an attractive investment.
Building a successful and scalable Plastics business
One51’s Plastics division was transformed by the acquisition of IPL in July 2015; the
business immediately doubled in size, making it a market leader in several segments. The
division was rebranded as OnePlastics Group (OPG) in 2014 and has three operating
segments: Environmental Containers, Packaging and Industrial Products. In FY2015, the
Plastics division generated revenue of €231.8m, up 89% year-on-year (yoy), and EBITDA
of €33.1m, up 108% yoy, including the contribution from the IPL acquisition in North
America and the full year impact and successful integration of Straight plc, acquired in
August 2014.
The group now has a well-invested asset base with nine manufacturing facilities across
five countries that it can leverage further by adding adjacent product categories and
implementing rapid payback automation projects to increase asset utilisation. Scale
benefits also accrue from the increased purchasing power of the group both on raw
materials and capital items. One51 will also bring the working capital and capex
discipline it fostered at OPG to IPL. The group is well positioned to continue to act as a
consolidator in a fragmented plastics landscape. While its quoted peer group comprises
much larger companies, One51 does have leading and defensible positions in niche
categories and geographies.
Transitioning ClearCircle Environmental
One51 is seeking to transition its ClearCircle Environmental business towards more
specialised hazardous waste management in Ireland and the UK and away from the more
commoditised metals recycling business. Two recent acquisitions in the division bear out
this strategy: Greenway Environmental Services was acquired in September 2015, while
H&T Labour and Vacuumation Services was acquired post year-end. In 2015, ClearCircle
generated revenue of €134.2m, down 13% yoy, and EBITDA of €9.1m, down 15% yoy.
The rationalisation and divestment of a number of underperforming metals recycling
businesses in the UK impacted overall performance. The hazardous waste segment
exhibits many attractive investment traits: it is a highly regulated sector with EPA and EA
licencing acting as a key barrier for new entrants; revenue visibility is underpinned by
multi-year contracts with blue-chip customers; and low- to mid-teens EBITDA margins
appear sustainable.
One51
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Table of Contents
Group overview 3 Recent trading – operational progress continues 4
Plastics division – investment thesis 5 What makes plastics an attractive investment? 5
Key drivers of a successful plastics business 7
Plastics division – an overview 9 Recent performance 11
IPL acquisition was transformative 12
Asset footprint 13
Understanding resin prices 13
Plastics division – competitive landscape 15
Environmental Services – investment thesis 18
ClearCircle Environmental 19 Overview of waste industry 20
Hazardous waste 20
Metals recycling 21
Environmental Services – competitive landscape 23
Valuation 25
Important disclosures 29
One51
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Group overview Over the past three years, One51 has transformed from a UK/Irish-based business
lacking scale to an international business focussed on two core operating activities –
Plastics and Specialist Environmental Services. Management deserves credit for cleaning
up its balance sheet and significantly improving its operating performance over this
period. As a result, it returned to revenue and profit growth last year, and management
is now confident that it can sustain growth via organic investments, further enhanced by
M&A. The recent IPL acquisition signals management’s growth ambitions, particularly
for the Plastics business.
Two operating divisions – Plastics and Environmental Services
One51 comprises two operating divisions: Plastics and Environmental Services
(ClearCircle).
Plastics is the group’s largest division by profitability and consists of two sub-divisions
– OnePlastics Group (OPG) and IPL. Plastics supplies products to a broad range of
customers across the following market sectors in Ireland, the UK, North America and
China from nine production facilities (four in the UK, one in Ireland, one in China and
three in North America):
– Environmental Containers – wheeled bins and caddies for the waste
management and recycling industries;
– Packaging – rigid plastic packaging for the FMCG, food service and
pharmaceutical industries;
– Industrial Products – manufacturing partner to blue-chip customers in the
agricultural adhesive coating, construction, furniture and material handling
sectors.
ClearCircle Environmental is the umbrella brand for Specialist Environmental Services
(includes hazardous waste management and industrial services), the Metals Recycling
business and the Materials Recycling business. ClearCircle provides environmental
services to a broad range of customers from 12 operating facilities in Ireland and the
UK.
One51 returned to revenue and
profit growth last year, and
management is now confident that
it can sustain growth via organic
investments, further enhanced by
M&A
One51 comprises two operating
divisions: Plastics and
Environmental Services
Figure 1: Group revenue split (€000)
Source: Company reports
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FY2014 FY2015 FY2016F FY2017F
One Plastics IPL ClearCircle SES
One51
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Recent trading – operational progress continues
FY2015 headline numbers
One51 FY2015 group revenues came in at €366m, up 32% yoy. Group EBITDA was
€36.1m, up 67% yoy. Group adjusted diluted EPS was 6.98c, up 30.5% yoy. Group net
debt came in at €120.3m, helped by the receipt of €51.8m cash from its investment in
NTR.
Solid operating performance in both divisions in FY2015
The Plastics division generated revenue of €231.8m, up 89% yoy, and EBITDA of
€33.1m, up 108% yoy. Trading in the underlying business was described as “solid”,
while the majority of the yoy EBITDA uplift came from the IPL acquisition in North
America and the full year impact and successful integration of Straight plc, acquired in
August 2014. The on-going integration of IPL is said to be progressing well.
ClearCircle Environmental generated revenue of €134.2m, down 13% yoy, and EBITDA
of €9.1m, down 15% yoy. The underlying performance of ClearCircle is also described
as “solid”, with the rationalisation and divestment of a number of underperforming
metals recycling businesses in the UK impacting the overall performance. The group has
made some recent bolt-on acquisitions in the division: Greenway Environmental Services
was acquired in September 2015, while H&T Labour and Vacuumation Services was
acquired post year-end.
Figure 2: Group EBITDA (€000)
Source: Company reports
In 2015, the Plastics division
generated revenue of €231.8m, up
89% yoy, and EBITDA of €33.1m,
up 108% yoy
ClearCircle Environmental
generated revenue of €134.2m,
down 13% yoy, and EBITDA of
€9.1m, down 15% yoy
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FY2014 FY2015 FY2016F FY2017F
One Plastics IPL ClearCircle SES
One51
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Plastics division – investment thesis The overall investment case for One51 can be looked at as an amalgam of two separate
investment cases: one for the Plastics business and one for the Environmental Services
business.
We make some observations below on what makes the segment an attractive
investment in a broader context and the criteria we deem necessary for a successful
plastics business.
What makes plastics an attractive investment? the revenue opportunity created by the switch to plastic packaging from traditional
packaging materials;
EU legislation, which is driving demand in Environmental Containers;
multi-year customer contracts with raw material price pass-through mechanism;
potential to leverage existing asset footprint by filling gaps in existing product range
and by implementing rapid payback automation projects;
building scale and size in niche segments, products and geographies;
fragmented landscape offering opportunity to add value via M&A activity.
Revenue opportunity created by the switch to plastic packaging from
traditional materials
The global packaging market is estimated to be worth $800bn with rigid packaging
valued at c.$171bn. Global rigid plastic packaging is forecast to grow at 5.8% CAGR
over the next five years, faster than average global GDP of 3.4%. Growth is being driven
by its comparatively lower cost, lighter weight and greater flexibility compared with
traditional packaging materials. Rigid plastic has a wide application in the food and
beverage sector, which is seen as less susceptible to macro-economic influences than
other industries.
Table 1: Global rigid packaging market (US$bn)
2015 2020 CAGR
Non-food 64.3 38% 98.3 43% 8.9%
Food 46.6 27% 57.2 25% 4.2%
Beverage 39.3 23% 45.1 20% 2.8%
Industrial 20.4 12% 25.8 11% 4.8%
Global rigid packaging 171 226 5.8%
Source: Company reports
Legislation drives demand in Environmental Containers
OPG has a leading position in the UK market for environmental containers (wheelie bins,
kitchen caddies, recycling boxes). Demand in this market is driven by EU legislation; the
EU Waste Framework Directive 2008 stipulates that 50% of all household waste must
be recycled by 2020 with separate waste streams for paper, metal, plastic and glass
from January 2015 onward. There is also an on-going requirement for replacement
wheelie bins, which comprise c.50% of the market in the UK.
In the UK, local authorities are responsible for implementing this legislation and as such
are OPG’s main customers. Contracts awarded can be quite lumpy, e.g. OPG won a
large contract from Birmingham City Council two years ago. Similarly, in Canada, IPL has
a strong regional position in Environmental Containers and won a contract in 2014 to
supply the municipality of Peel, outside Toronto, with wheelie bins.
Growth in rigid plastic packaging is
being driven by its comparatively
lower cost, lighter weight and
greater flexibility compared with
traditional packaging materials
The EU Waste Framework Directive
2008 stipulates that 50% of all
household waste must be recycled
by 2020 with separate waste
streams for paper, metal, plastic
and glass from January 2015
onward
One51
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The US market is more immature than the UK or Canada with low penetration rates of
wheelie bins; most roadside collections still involve metal trash cans, which can corrode
and are easily damaged during collection. Some US municipalities are now beginning to
roll out wheelie bin infrastructure, but this is still at an early stage of development. The
opportunity set in the US is significant with potential for much larger contract sizes (e.g.
LA municipality).
Multi-year customer contracts with raw material price pass-through
mechanism
OPG and IPL enjoy a high degree of revenue visibility across all three product segments,
with c.70% of revenues coming from multi-year customer contracts. As a general rule, if
the manufacturer invests in specialised tooling for a customer product, then it will
demand a minimum volume per year over a three- to five-year period from the customer
to recompense it for the upfront investment in tooling. Larger customers will usually also
agree a pass-through mechanism in the contract to account for fluctuations in resin
pricing. Smaller customers may not have the scope to engage in such contracts but are
usually willing to pay a higher price.
Potential to leverage existing asset footprint by filling gaps in existing
product range and by implementing rapid payback automation projects
OPG’s main sites in the UK are flexible and can be adopted to produce many different
products on one site. This is a deliberate move to help maximise asset utilisation; tooling
can be changed quickly when a production run ends to produce a different product. The
sites are also run 24/5 with the flexibility to run 24/7 subject to customer demand. Some
higher value customers have exclusivity over specific injection moulding machines, but
this is not common practice. The recent announcement of an €8m investment in a food
grade facility in Cork is evidence of OPG filling product gaps on a site-by-site basis and
leveraging IPL food packaging products into new markets.
IPL operates somewhat differently with sites such as Lee’s Summit and Edmundston
dedicated solely to food grade packaging. One51 believes it can better utilise the site by
adding some capacity in Environmental Containers. In addition, while the IPL assets are
very well invested, One51 sees a number of rapid payback automation projects that can
increase labour efficiency and output.
Building scale and size in niche segments, products and geographies
OPG has built a leading position in the UK in the Environmental Containers segment,
while IPL has done the same in Canada. IPL is also the leading producer of overcaps in
North America and has a strong regional presence in retail packaging in Eastern Canada.
OPG has a strong presence in niche segments of the industrial products and rigid
packaging markets, e.g. it is the largest supplier to EMC and a leading UK manufacturer
of paint cans and pails.
Fragmented landscape offering opportunity to add value via M&A activity
The plastics landscape in which One51 operates remains very fragmented. In the EU
alone, there are c.56,000 converters (businesses that convert plastic pellets into plastic
products) with aggregate revenues of c.€220bn. This equates to an average revenue per
operator of c.€4m per annum. Given that there are some large converters with a global
footprint operating in this market, this implies a very long tail of SME operators. We
view this as an opportunity; as the major customers for plastic packaging (e.g. food and
beverage companies) continue to consolidate, they will seek to deal with larger suppliers
also. The story in the North American market is no different; if anything, the plastics
OPG and IPL enjoy a high degree
of revenue visibility across all
three product segments, with
c.70% of revenues coming from
multi-year customer contracts
OPG’s main sites in the UK are
flexible and can be adopted to
produce many different products
on one site
OPG has built a leading position in
the UK in the Environmental
Containers segment, while IPL has
done the same in Canada
One51
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packaging market is less mature in North America than in Europe with huge scope for
increased penetration.
Key drivers of a successful plastics business well-invested production assets;
in-market presence with larger products;
asset utilisation and degree of automation;
in-house product design and engineering capabilities;
flexible approach to raw material procurement;
capex discipline;
scope for improved cash management at IPL;
extending into adjacent product categories from existing sites.
Well-invested production assets
The most important piece of the injection moulding process is the machine itself and
related automated systems requiring substantial investment. Both IPL and OPG have a
wide range of injection moulding machines from 90-3,500 tonnes, most of which were
purchased within the last five years. Over time, there should be significant savings from
centralised procurement of equipment for OPG and IPL. Larger orders attract higher
discounts and more flexible payment terms.
In-market presence with larger products
The economics of shipping plastic containers becomes less favourable with size, thus
requiring manufacturers to have an in-market presence for bigger items such as large
food and agri-feed buckets, paint pails and environmental containers. As a general rule
of thumb, shipping these products over 1,500km is not competitive. In contrast, smaller
items such as retail food packaging and overcaps can be shipped over 2,000km. In this
context, and given the sheer size and scale of the North American market, the logic of
adding products to the Lee’s Summit site in IPL makes sense.
Asset utilisation
OPG has a keen focus on operating metrics such as cycle times, waste, resin usage and
labour per unit which drive asset utilisation. Site MDs have access to this information in
real time and can react quickly if necessary. Since the acquisition of IPL, One51 has been
implementing the same processes and controls as those on the OPG sites.
In-house product design and engineering capabilities
Both IPL and OPG have in-house product design and engineering capabilities – a key
differentiator with customers. This is a service that smaller competitors usually do not
offer, and few customers have in-house capabilities. IPL has 20 design patents granted
and another 15 pending, arising from its in-house R&D, particularly in retail packaging.
The scale of OPG’s R&D is smaller and it tends to focus on re-engineering existing
products for customers such as EMC, delivering savings on raw materials or assembly
times.
Flexible approach to raw material procurement
Circa 50% of the material cost of injection moulded products is resin, making it by far
the biggest line item in COGS. Labels are the second-biggest line item on the OPG and
IPL bill of materials. A hybrid approach to resin procurement has worked best for OPG
historically, and this approach is now being rolled out at IPL. At certain times, a
centralised approach works best while at other times opportunistic spot purchases can
work out cheaper. Ultimately, every factory MD is responsible for raw material
procurement but can leverage central buying power when appropriate. One51 expects
Over time, there should be
significant savings from centralised
procurement of equipment for
OPG and IPL
Both IPL and OPG have in-house
product design and engineering
capabilities – a key differentiator
with customers
One51 expects to achieve c.€1m
per annum in resin procurement
savings from leveraging the
collective buying power of IPL and
OPG
One51
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to achieve c.€1m per annum in resin procurement savings from leveraging the collective
buying power of IPL and OPG.
Capex discipline
Injection moulding is a relatively capital-intensive business and low returns on capital can
occur if poor decisions are made regarding capital allocation, e.g. the price differential
between manufacturers can be significant and some offer more flexible payment terms
than others.
Scope for improved cash management at IPL
Tight cash management has been evident in OPG for the past three years, reflected in
the reduction of working capital/sales and capex/sales. At the end of 2015, working
capital accounted for only c.2% of sales versus 15% of sales at IPL. One51 sees the
medium-term working capital requirement for IPL being 10-12% of sales. Achieving this
could result in a significant cash release for the group.
Extending into adjacent product categories from existing sites
IPL has a strong regional presence in the northeast but is restricted beyond this region. It
is only economical to ship larger bulk and environmental products less than 1,500km.
The Lee’s Summit facility, which has no bulk and environmental capacity at the moment,
could provide the ideal springboard for the central US states. Such a move would not be
as expensive as a greenfield site, while adding additional product categories could
increase deliver cost synergies on-site.
Tight cash management has been
evident in OPG for the past three
years, reflected in the reduction of
working capital/sales and
capex/sales
One51
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Plastics division – an overview One51’s Plastics division was rebranded as OnePlastics Group (OPG) in 2014 and has
three operating segments: Packaging, Environmental Containers and Industrial Products.
The division was transformed by the acquisition of IPL in July 2015; the business
immediately doubled in size, making it a market leader in several segments.
One51’s Plastics division was
transformed by the acquisition of
IPL in July 2015; the business
immediately doubled in size,
making it a market leader in
several segments Figure 3: Packaging
Source: One51
Figure 4: Environmental Containers
Source: One51
Electronics1%
Food74%
Non-food industrial
10%
Construction6%
Non-food packaging
2%
Other7%
End markets
48%
2015 revenue split
Other8%
Environmental -public62%
Environmental -private20%
Non-food industrial
7%
Food3%
32%
2015 revenue split End markets
One51
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Until the appointment of a new executive management team in 2013, the division was
run as a number of separate businesses acquired by One51 from 2006 onward in
addition to some greenfield investments in China. Today, the OPG and IPL businesses
are run as integrated businesses and have management teams that report to the central
executive team.
Figure 5: Industrial Products
Source: One51
Figure 6: Plastics overview
Source: Company presentation
20%
Electronics42%
Construction21%
Non-food industrial
10%
Non-food packaging
12%
Food14%
Other1%
End markets2015 revenue split
One51
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Table 2: OPG timeline
2006 Acquired Protech Performance Plastics
Acquired Enplast
2007 Acquired Foamalite
Acquired Thormac Engineering
2008 Acquired AAC Structural Foam
Acquired MGB Plastics
2010 Established Protech Performance Plastics China
Disposed of Enplast and Foamalite
2014 Rebranded OnePlastics Group
Acquired Straight PLC
2015 Disposed of Thormac Engineering
Established innovation centre in Cork
New senior management team appointed
€8m investment in food grade facility in Cork
Source: Company reports
Recent performance The Plastics division generated revenue of €231.8m in 2015, up 89% yoy, and EBITDA
of €33.1m, up 108% yoy. Trading in the underlying business was described as “solid”,
while the majority of the yoy EBITDA uplift came from the IPL acquisition in North
America and the full year impact and successful integration of Straight plc, acquired in
August 2014. The on-going integration of IPL is said to be progressing well.
OPG OPG operates from six sites across Ireland, the UK and China. It has circa 400,000
square feet of manufacturing and warehousing space, approximately 130 moulding
machines and about 500 employees. The division’s product range spans across
Environmental Containers, Packaging and Industrial Products.
Table 3: One Plastics forecasts
One Plastics FY2014 FY2015 FY2016 FY2017
Revenue 122,482 145,157 141,300 145,200
Growth yoy 23.4% 18.5% (2.7%) 2.8%
EBITDA 15,709 20,512 21,208 22,043
Growth yoy 0.8% 30.6% 3.4% 3.9%
EBITDA margin 12.8% 14.1% 15.0% 15.2%
EBIT 11,152 14,567
Growth yoy 30.6%
EBIT margin 9.1% 10.0%
D&A 4,557 5,945 6,700 7,600
as a % of sales 3.7% 4.1%
Capex 4,672 8,955 10,000 10,000
as a % of sales 3.8% 6.2% 7.1% 6.9%
Working capital (1,474) 3,184 3,000 3,000
as a % of sales (1.2%) 2.2% 2.1% 2.1%
Source: Davy
One51
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IPL acquisition was transformative One51’s acquisition of a majority stake in Canadian firm IPL creates a scalable,
international plastics business with potential for significant cost and revenue synergies.
The transaction more than doubles the EBITDA line on a pro-forma basis. IPL’s 2015F
pro-forma revenue for 2015 was c.CAD$275m with adjusted EBITDA of c.CAD$40m.
This equates to a forward multiple of 7x.
IPL transaction
One51, together with two Canadian equity partners, acquired Canadian firm IPL Inc.
from Novacap and Fonds de solidarité FTQ (FSTQ) for a total consideration of
CAD$280m. One51 acquired a majority share of 67% in IPL, with Caisse de dépôt et
placement du Québec (CDPQ) also becoming a shareholder (22%) and FSTQ remaining
a shareholder (11%), while Investissement Quebec is also participating in the financing
package. The total equity contribution amounted to CAD$135m with One51’s share at
CAD$90m. IPL was acquired on a 2014 EV/EBITDA multiple of 9x and a forward multiple
of 7x.
Table 4: IPL transaction details
CADm One51 CDPQ FSTQ IQ
Debt 155.0 110.0 20.0 15.0 10.0
Equity 135.0 90.45 29.7 14.85 0
290.0 200.5 49.7 29.9 10.0
Source: Davy
IPL is a well-established North American plastics business, founded in 1939, which was
taken private by Novacap in 2010 and was formerly listed on the Toronto Stock
Exchange. IPL’s injection moulding business has significant overlap with One51’s OPG,
which has operations in Ireland, the UK and China that manufacture similar products.
The acquisition also offers exposure to a new product category – food packaging. IPL
has significant scale in this segment and is a supplier to some major US food and
beverage companies. The integration of both businesses should result in significant cost
synergies, mainly in raw materials procurement, while top-line synergies should also
emerge as a result of cross-selling and a more complete product offering. The
acquisition should also lead to significant capex savings in the medium term through
capex avoidance and the scale purchasing of machine tooling, etc.
Table 5: IPL forecasts
IPL FY2014 FY2015 FY2016 FY2017
Revenue 86,635 183,400 198,574
Growth yoy 111.7% 8.3%
EBITDA 12,572 27,900 30,638
Growth yoy 121.9% 9.8%
EBITDA margin 14.5% 15.2% 15.4%
EBIT 7,246 14,400 15,038
Growth yoy 98.7% 4.4%
EBIT margin 8.4% 7.9% 7.6%
D&A 5,326 13,500 15,600
as a % of sales 6.1% 7.4% 7.9%
Capex 8,345 11,000 9,600
as a % of sales 9.6% 6.0% 4.8%
Working capital 28,416 33,000 36,100
as a % of sales 32.8% 18.0% 18.2%
Source: Davy
One51’s acquisition of a majority
stake in Canadian firm IPL creates a
scalable, international plastics
business with potential for
significant cost and revenue
synergies
One51
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Asset footprint OPG comprises five manufacturing facilities with one in Ireland and China respectively
and three in the UK. Its asset configuration in the UK allows it to serve the entire market
across its Environmental Containers, Packaging and Industrial Products divisions. The
facility in Ireland serves a mixture of rigid packaging customers (primarily paint
containers, infant formula overcaps and agri-feed buckets) and its industrial customer,
EMC. In China, it has a dedicated facility for EMC, manufacturing injection moulded
server components.
In the UK, MGB in Rotherham is the group’s dedicated wheelie bin facility while the
other sites produce a mix of environmental containers, paint cans, agri-feed buckets and
industrial products. The Straights facility in Hull also manufactures a range of
environmental containers, including kitchen caddies and kerbside recycling containers.
IPL comprises three sites: two in northeastern Canada and one in Missouri, USA. The
largest facility in Canada is St. Damien in Quebec which produces bulk and
environmental packaging and is by far the largest site in the group. Edmundston is the
other Canadian site and concentrates on the production of thin wall containers for the
retail packaging segment (mainly food packaging). Lee’s Summit, which is just outside
Kansas City in Missouri, is the largest producer of lids and overcaps in the US with
customers such as Kraft, Smuckers and Mondelez.
Understanding resin prices Resin and related inputs (labelling) typically account for c.50% of sales for a rigid
packaging manufacturer and comprise mainly polypropylene of different grades. The
group currently procures resin in North America and Europe and uses both virgin and
recycled resin across all three product categories. Oil is a price factor but there are other
factors such as resin production capacity, the supply and type of cracking feedstock
available and converter demand. With the resin market controlled by a handful of large
integrated chemical companies in Europe and the US, resin pricing is rarely a direct
function of oil or gas prices.
The majority of customers (>60%) have resin price pass-through mechanisms in their
contracts. The following chart shows that while oil and polypropylene resin prices have
Figure 7: Asset footprint
Source: Company reports
One51
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some relationship, polypropylene prices have not exhibited the same volatility at extreme
points in the cycle.
Group procurement of resin should drive synergies over the medium term, but it will
take time to standardise resin grades across the group. It is also important to retain
some flexibility in resin procurement, allowing localised, opportunistic procurement
where appropriate. One51 has identified c.€1m per annum in resin procurement
savings, but we view this figure as conservative. There is also scope for further savings
on labels via group procurement over the medium term.
Figure 8: Polypropylene prices versus oil and gas
Source: FactSet
Group procurement of resin should
drive synergies over the medium
term, but it will take time to
standardise resin grades across the
group
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Plastics Polypropylene (Injection) Uk Domestic Price (USD/MT)
Crude Oil Brent ICE Near Term ($/bbl)
Natural Gas NYMEX Near Term ($/btu)
One51
15
Plastics division – competitive landscape Although the competitive landscape for polymer converters remains very fragmented
(there are c.56,000 businesses in Europe alone), there are some large regional players in
both Europe and North America. Most of these players have a presence in rigid
packaging, particularly with large blue-chip food and beverage customers. The peer
average FY1 EV/EBITDA for the group is 9.5x.
Table 6: Peer summary financials
Sales FY1 EBITDA FY1 EBITDA (%)
RPC Group Plc £1,649 £252 15.3%
Berry Plastics Group, Inc. $6,674 $1,181 17.7%
Bemis Company, Inc. $4,094 $609 14.9%
Aptargroup, Inc. $2,382 $489 20.5%
Amcor Ltd $12,436 $1,846 14.8%
Source: FactSet
RPC
RPC is a leading plastic products design and engineering company for packaging and
non-packaging markets, with 18 design and engineering development centres and 89
manufacturing sites in 24 countries employing more than 15,000 people and
manufacturing a wide range of standard and bespoke packaging and other products for
the food and non-food consumer and industrial markets.
RPC converts polymer into finished packaging and other products by a combination of
moulding and assembly processes, with certain products undergoing additional value-
added decoration techniques such as printing or label application. RPC uses three of the
main polymer conversion processes – blow moulding, injection moulding and
thermoforming. RPC converts approximately 475,000 tonnes of polymer per annum.
Although the competitive
landscape for polymer converters
remains very fragmented, there
are some large regional players in
both Europe and North America
Figure 9: Peer EV/EBITDA multiples
Source: Bloomberg
0x
2x
4x
6x
8x
10x
12x
Am
cor
Huhta
mak
i
Apta
rGro
up
Bem
is
RPC
Pact
Gro
up
Ber
ry P
last
ics
Gro
upe
Guill
in
2016 EV/EBITDA 2017 EV/EBITDA 2016 Average 2017 Average
One51
16
It services a wide range of customers, from large multinational companies such as
Unilever, Kraft, Nestlé and Procter & Gamble to local small and medium-sized
enterprises. It has positions in the personal care sector, in open-topped pails for a wide
range of consumer and industrial segments, in the spreads and dairy industry and in
multi-layer and other barrier packs for oxygen-sensitive food products. The business is
organised and managed according to product and market characteristics and is split into
two segments – packaging and non-packaging. The packaging businesses serve the
food, non-food, personal care, beverage and healthcare markets; the non-packaging
businesses design and manufacture moulds, moulded products and technical
components for other markets.
In December 2015, RPC acquired GCS – a leading global manufacturer of plastic
closures and dispensing systems for a wide range of end markets. The enterprise value
was €650m, representing a 6.8x LTM EBITDA multiple. The acquisition was financed by
a £233m rights issue (35% discount) and extension of credit facilities.
Berry
Berry is primarily a North American manufacturer of value-added consumer packaging
and engineered materials with annual revenue of nearly $5bn. As a global leader in the
manufacture of plastic packaging, Berry specialises in value-added, customised rigid
plastic containers, thin-wall thermoformed drink cups, dispensing lids as well as
technical engineered materials for industrial applications. The company serves several of
the world's largest consumer product manufacturers, focusing on food and beverage,
household consumer product and personal care/specialty end markets. The engineered
materials business also serves a variety of end markets including oil, water and gas
infrastructure, construction and select consumer-oriented markets. The majority of sales
and operations are in North America (97% of sales) followed by Europe (2% of sales)
and other regions.
In October 2015, Berry acquired Avintiv for $2.45bn. The acquisition was financed by
$400m in 6% loan notes and an increase in Berry's credit facilities by $2.1bn. The
acquisition multiple was 6.9x (post synergies). Avintiv is the world's largest maker of
non-woven fabrics.
Bemis
Bemis Company, Inc. is a global packaging company with a market-leading position in
flexible packaging and has a sizeable presence in the pressure sensitive materials market.
The company generates 70% of its sales in North America and has expanded its
international footprint largely through acquisitions. With the acquisitions of Dixie Toga
and Food Americas, Bemis is the largest flexible packager in Latin America. The company
generates the majority of its sales from food and beverage (70% of sales), personal care,
consumer goods and pharmaceuticals. Bemis' customer base comprises blue-chip
companies including Kraft, Nestlé, Kimberly Clark, Coca-Cola, Owens Corning, Tyson
and Boston Scientific. Through its flexible packaging segment (c.89% of sales), the
company manufactures multilayer flexible polymer film structures and laminates for
food, medical and personal care products and non-food applications utilising vacuum or
modified atmosphere packaging. For the pressure sensitive materials segment (c.11% of
sales), it manufactures pressure sensitive adhesive coated paper and film substrates
comprising label market products such as narrow-Web rolls of pressure sensitive paper,
film and metallised film printing stocks used in high-speed printing and die cutting.
One51
17
Aptar
AptarGroup Inc. (ATR) is a global provider of consumer product dispensing systems and
is the result of a spin-off from Pittway Corporation in 1993. Products include non-
aerosol spray and lotion pumps, plastic dispensing and non-dispensing closures and
metered-dose aerosol valves. The company operates manufacturing facilities in 19
countries located in North America, Europe, Asia and South America. Approximately
56% of ATR's sales are derived in Europe, roughly 26% in the US and the remaining
18% in other parts of the world. The company operates through three reporting
segments: Beauty + Home (primarily pumps to the fragrance/cosmetic, personal care
and household markets), Pharmaceutical (pumps and metered dose inhaler valves for
allergy or nasal decongestant, cold and flu treatments) and Food + Beverage (dispensing
and non-dispensing closures for food/beverage, personal care and household
applications). ATR sells to over 5,000 customers with the largest customer accounting
for approximately 6% of revenue. The Beauty + Home segment accounts for
approximately two-thirds of company revenues, while the Pharmaceutical segment
generates over half of ATR's operating income. Food and beverage applications are the
company's fastest growing markets with growth rates in the low-teens.
Amcor
Amcor (AMC) is a global, market-leading packaging business with two distinct business
units – flexibles and rigid plastics. It operates in 43 countries and has more than 180
plants. AMC's sales consist mostly of defensive industries (beverages, food, healthcare
and tobacco). Its main geographical exposures are developed markets across Europe,
North America and Australia/New Zealand, with emerging markets providing c.32% of
FY2015 revenue. With 80-90% of products created sold in the region, AMC's success is
supported by its scale and global presence, which give it an immediate advantage in
terms of its proximity to customers.
One51
18
Environmental Services – investment thesis The investment thesis for Environmental Services is quite different to that of Plastics.
One51 is seeking to transition the business toward more specialised hazardous waste
management in Ireland and the UK and away from the more commoditised metals
recycling business. Two recent acquisitions in the division bear out this strategy:
Greenway Environmental Services was acquired in September 2015, while H&T Labour
and Vacuumation Services was acquired post year-end.
Regulation is the key barrier to entry in the sector
All of ClearCircle’s waste treatment sites in Ireland and the UK are EPA and EA-licensed,
a requirement for all participants in the sector. ClearCircle sites can be audited at any
time by the EPA or local authorities and must adhere to any change in legislation.
Obtaining a new EPA licence is difficult, with most operators preferring to buy an
existing site that is EPA licensed.
Site location also important
Proximity to customer sites is a requisite when dealing with bulky materials such as
contaminated soils and hazardous wastes from energy plants. In Ireland, ClearCircle’s
main site in Rathcoole, Co. Dublin, is close to the city centre and strategically located to
handle waste streams from industrial and construction customers. In the UK, Future
Industrial Services has four sites spanning the length of England that can cope with a
variety of industrial waste streams. All are near to major industrial centres and key
customers.
Organic growth correlated to economic recovery
Demand for some of ClearCircle’s service offering is closely correlated to industrial and
construction activity, e.g. demand for soil remediation services in Ireland is highly
dependent on construction activity. In contrast, Industrial Services in the UK is less
correlated to the broader economic cycle.
Bolt-on M&A in Ireland and UK can fill service and location gaps
ClearCircle has identified a number of targets in Ireland and the UK that are either
complementary to the existing service offering or extend its reach into a new territory.
Most of these bolt-ons are less than €10m EBITDA and meet its acquisition criteria of
12-13% EBITDA margin and >10% ROCE.
Multi-year contracts in Specialist Environmental Services offer greater
revenue visibility
The revenue model for Industrial Services in the UK tends to revolve around fixed term
service agreements with blue-chip customers.
Positive mix effect on margin as the business mix transitions toward
Specialist Environmental Services
Specialist Environmental Services attracts a higher EBITDA margin than Metals Recycling.
One51 is targeting an EBITDA margin of 12-13% for the division in the medium term as
it transitions the business mix away from Metals Recycling.
One51 is seeking to transition the
business toward more specialised
hazardous waste management in
Ireland and the UK and away from
the more commoditised metals
recycling business
One51
19
ClearCircle Environmental ClearCircle Environmental is the umbrella brand for One51’s hazardous waste
management and material and metals recycling businesses. The businesses within the
division are primarily focused on metals recycling and hazardous waste management in
Ireland and the UK. The division is structured into two segments: Specialist
Environmental Services (SES) and Metals Recycling.
Table 7: ClearCircle forecasts
ClearCircle SES FY2014 FY2015 FY2016 FY2017
Revenue 154,025 134,218 111,186 124,274
growth yoy 1.6% -12.9% -17.2% 11.8%
EBITDA 10,708 9,120 10,310 11,452
growth yoy 9.7% -14.8% 13.0% 11.1%
EBITDA margin 7.0% 6.8% 9.3% 9.2%
EBIT 6,319 4,619 5,610 6,552
growth yoy -26.9% 21.5% 16.8%
EBIT margin 5.2% 3.2% 4.0% 4.5%
D&A 4,389 4,501 4,700 4,900
as a % of sales 2.8% 3.4% 4.2% 3.9%
Capex 4,527 8,638 5,500 2,500
as a % of sales 2.9% 6.4% 4.9% 2.0%
Working capital 3,845 -2,972 -191 247
as a % of sales 2.5% -2.2% -0.2% 0.2%
Source: Davy
ClearCircle Environmental is the
umbrella brand for One51’s
hazardous waste management and
material and metals recycling
businesses
Figure 10: ClearCircle overview
Source: Company reports
One51
20
Overview of waste industry The waste industry consists of numerous waste streams. Waste collection is followed by
identification, sorting and then either disposal or recovery. Due to different processing
requirements, the waste industry is highly fragmented with different processors focused
on different waste streams. ClearCircle Environmental is divided along the lines of the
three principal waste streams processed and is made up of a number of separate
businesses that are integrated to varying degrees.
The waste industry continues to evolve, driven by three main forces – economic and
social change, legislation and government policy and the emergence of new processing
technologies.
Two scalable models are typically adopted by industry participants – originator-centric
firms that are broad-based and look to control the front end of multiple waste streams
and product-centric operators looking to maximise value in one or two waste streams.
Product-centric operators have an end-to-end focus on a small number of higher value
waste streams.
ClearCircle Environmental is a product-centric operator focused on fewer niche waste
streams. Value is driven through the specialisation and value-add of the equipment and
the processes together with service delivery.
ClearCircle operates within two niche segments of the overall waste value chain, metal
recycling and hazardous waste, through a number of separate businesses that are
integrated to varying degrees.
Recent performance ClearCircle Environmental generated 2015 revenue of €134.2m (Davy: €123.4m), down
13% yoy, and EBITDA of €9.1m (Davy: €9.1m), down 15% yoy. The underlying
performance of ClearCircle is described as “solid”, with the rationalisation and
divestment of a number of underperforming metals recycling businesses in the UK
impacting the overall performance.
Hazardous waste Waste is generally classified as hazardous when it displays one or more hazardous
properties such as explosive, oxidizing, flammable, irritant, harmful, toxic or
carcinogenic. The overall quantity of hazardous waste managed in Ireland in 2011 (most
recent data) was 287,376 tonnes, representing a <0.1% reduction on that reported for
2009. Around half of this is exported for treatment (149,037 tonnes in 2011) with 39%
of this volume shipped to Britain and 21% shipped to Germany. We estimate that
ClearCircle, through its Rilta Environmental business, has a 30% market share in the
Irish market, while its Future Industrial Services provides a foothold in the much larger
UK market. The UK market is greater than 3m tonnes in size (depending on definition).
Increasingly stringent environmental regulation has dramatically reduced the proportion
of hazardous waste sent to landfill in both Ireland and the UK with a much higher
proportion being treated or remediated. Specialist licensed operators such as Rilta and
Future are mandated to treat and dispose of such waste. There are approximately 20
licensed facilities in Ireland to deal with hazardous waste. In the UK, the structure of the
market is more fragmented with a number of smaller specialist companies dealing with
specific waste streams as well as a few major integrated players such as Veolia and Sita.
ClearCircle Environmental is a
product-centric operator focused
on fewer niche waste streams
We estimate that ClearCircle,
through its Rilta Environmental
business, has a 30% market share
in the Irish market, while its Future
Industrial Services provides a
foothold in the much larger UK
market
One51
21
Rilta Environmental
Acquired in 2005, Rilta Environmental is the market leader in hazardous waste solutions
in Ireland – providing an all-Ireland service from a single site in Rathcoole, County
Dublin. Rilta’s competitive advantage lies in its broad service offering, on-going
innovation (Rilta now recycles waste oil to fuel grade specification for resale) and
technical and commercial know-how in extracting value from complicated hazardous
waste materials. Another point of differentiation is its list of blue-chip clients, including
Irish Rail and ESB.
Future Industrial Services
Acquired in 2008, Future Industrial Services Ltd provides services relating to hazardous
waste and operates from four EA-licensed facilities in strategic locations in the UK –
Newport near Cardiff; Berwick in the northeast; the main site, Kirkby in Liverpool; and
Rugby in the south. The business provides three main service offerings – industrial site
services, waste treatment and transfer and other services including mercury disposal.
One51 recently expanded its UK reach via the acquisitions of Greenway Environmental
Services and H&T Vacuumation Services, both of which are highly complementary to
Future’s existing service offering.
Materials NI
Materials NI comprises a single site in Northern Ireland that is home to Ireland’s only
licenced WEELABEX compliant plant. This plant is the only authorised facility for the
recycling of white goods on the island of Ireland.
Metal recycling Metals make up a high proportion of the total value recovered at the end of the overall
waste stream, particularly supported by high prices attained for non-ferrous
commodities. Metal recycling tends to be a pro-cyclical business with volumes highly
correlated to new housing starts and new vehicle registrations. The sector has gone
through a very difficult period of volume and price decline, particularly in Ireland, over
the last few years due to reduced levels of industrial and construction activity. Any
meaningful upturn in construction or industrial output should result in an inflection
point in volumes and prices.
Rilta’s competitive advantage lies
in its broad service offering, on-
going innovation and technical
and commercial know-how in
extracting value from complicated
hazardous waste materials
Figure 11: Steel prices
Source: FactSet
0
100
200
300
400
500
600
700
800
900
1000
Apr 11 Oct 11 Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Apr 15 Oct 15 Apr 16
US MW Dom HRC Steel Near Term (NYM $/t)
One51
22
Market drivers
Metal recycling is essentially a commodity/brokerage-type business. The starting point is
scrap metal, usually in the form of waste from the construction sector and end-of-life
vehicles. This is fragmentised and non-metallic waste is separated and the metallic
elements are sorted and aggregated before being sold on to smelters. Metal prices tend
to be a good proxy for market pricing, while new housing starts and vehicle registrations
tend to be a good proxy for input market volumes.
Metals Ireland
ClearCircle’s metals recycling business in Ireland operates in four sites – Cork, Galway,
Limerick and Mountmellick. These operations are engaged in scrap metal processing,
end of life vehicle processing and ferrous/non-ferrous metals trading.
Metals UK
Two facilities are operated in the southeast of England, engaging in the collection and
processing of end of life ferrous and non-ferrous material for resale. During the year,
One51 decided to wind down its ES Metals (North) operations in the greater Manchester
area which comprises three facilities. One51 is in the process of divesting the remaining
assets from that business. One part of the business was disposed of to a third party.
One51
23
Environmental Services – competitive landscape There are several UK-listed Specialist Environmental Services peers for One51 along with
some international conglomerates that have a presence in the UK and Irish market. The
average EV/EBITDA of the group outlined below is 6.1x. There are also a number of
other sizeable players in the UK that are privately held.
Table 8: Peer FY1 sales and EBITDA
Sales FY1 EBITDA FY1 EBITDA (%)
AUG-GB Augean PLC £58 £13 22.5%
SKS-GB Shanks Group plc £587 £73 12.4%
VIE-FR Veolia Environnement SA €25,604 €2,980 11.6%
SEV-FR SUEZ Environnement Co. SA €15,412 €2,567 16.7%
SCHP-FR Seche Environnement SA €467 €90 19.3%
Source: FactSet
Alder & Allen
Adler & Allan (A&A) is a long-established provider of environmental technical and
consulting services and also specialises in the removal and treatment of hazardous waste
across the UK. A&A is management owned and supported by LDC (Lloyds Development
Capital). A MBO supported by LDC was completed in September 2014 from Spirit
Capital (spin-off from Aberdeen Asset Management) and Maven Capital. HSBC provided
senior debt finance.
Augean
Augean plc is one of the UK’s leading waste management businesses, providing
specialist services focused on managing hazardous waste. Augean provides a range of
waste recovery, recycling, treatment and disposal solutions. The group operates from
nine locations across the UK – from Lerwick in the north to Kent and Avonmouth in the
south.
Figure 12: Peer EV/EBITDA multiples
Source: Bloomberg
0x
1x
2x
3x
4x
5x
6x
7x
8x
Suez Environnment Shanks Veolia Environnment Seche Environment Augean
2016 EV/EBITDA 2017 EV/EBITDA 2016 Average 2017 Average
One51
24
DCC – Enva
Enva Ireland Ltd, as part of the Environmental division of DCC plc, provides waste
management and environmental solutions covering areas such as the treatment and
disposal of oil and hazardous waste, on-site cleaning services, water and effluent
treatment and contaminated soil.
Shanks
Shanks is a leading international waste-to-product business positioned to deliver cost-
effective alternatives to environmentally harmful landfill sites or capital-intensive
incineration plants.
Veolia
Veolia Environnement S.A., branded as Veolia, is a French transnational company with
activities in three main service and utility areas traditionally managed by public
authorities – water management, waste management and energy services.
One51
25
Valuation
Sum-of-the-parts (SOTP) approach
Using this approach we look at the peer average EV/EBITDA multiple for the Plastics and
Environmental Services divisions and apply this to the respective EBITDA contributions
from each division. Central costs are proportionately shared across the three operating
divisions. We derive a group Enterprise Value (EV) from the aggregate EVs for each
division and then subtract net debt and deferred consideration and add back
investments to get the implied equity value. The SOTP approach yields a 2016F valuation
of €2/share assuming a 9.5x average EV/EBITDA multiple for the Plastics business and a
6.1x EV/EBITDA multiple for the Environmental Services business.
Table 9: Sum-of-the-parts valuation
EBITDA 2016F Adjusted EBITDA Peer multiple EV by division
Group 53,818
One Plastics 21,208 19,209 9.5x 182,487
36%
IPL 27,900 25,270 9.5x 240,070
47%
Environmental 10,310 9,338 6.1x 56,961
17%
Central (5,600)
(10%)
Derived Enterprise Value 479,518
Blended group multiple 8.9x
- Debt 117,726
- Deferred consideration 36,000
- Minorities 0
Value of equity 327,319
Number of shares 163,407
Derived value/share 2.00
Source: Davy
ROIC/WACC approach
This approach assumes that the ratio of EV to Invested Capital (IC) should trend toward
the ratio of Return on Invested Capital (ROIC) to Weighted Average Cost of Capital
(WACC) over time. One51’s EV/IC currently trades at a discount to its ROIC/WACC ratio
of 1.64x. An EV/IC of 1.64x equates to a share price of €2.31.
The SOTP approach yields a 2016F
valuation of €2/share assuming a
9.5x average EV/EBITDA multiple
for the Plastics business and a 6.1x
EV/EBITDA multiple for the
Environmental Services business
This approach assumes that the
ratio of EV to IC should trend
toward the ratio of ROIC to WACC
over time
One51
26
Table 10: ROIC WACC valuation
2016F
Current Enterprise Value (EV) 431,518
EV/IC 1.33
WACC 4.90%
ROIC/WACC 1.64
EV implied by a 1:1 ROIC:WACC relationship 531,083
Debt 117,726
Deferred 36,000
Equity 377,357
Number of shares 163,407
Implied equity value/share 2.31
Source: Davy
DCF approach
An alternative approach is to forecast the future free cash flows of One51, discount
these back to a present value using an appropriate discount rate and, assuming the EV
holds constant, add this to the equity portion of the EV. This approach yields the lowest
value per share of €1.71 as the value of deferred consideration for IPL is expected to
increase over time.
Table 11: Cash flow (€m)
2016F 2017F 2018 2019 2020
Revenue growth rate 19% 7% 2% 2% 2%
Revenue 435,886 465,048 474,349 483,836 493,512
EBITDA 53,818 58,533
Free cash flow margin (pre-capex) 6% 9% 9% 9% 9%
Free cash flow (pre-capex) 27,534 40,003 40,803 41,619 42,452
EBITDA margin 12.3% 12.6%
Capex (26,500) (22,100) (22,100) (22,100) (22,100)
Capex/sales 6.1% 4.8% 4.7% 4.6% 4.5%
Free cash flow (post-capex) 1,034 17,903 18,703 19,519 20,352
FCF margin 0.2% 3.8% 3.9% 4.0% 4.1%
Net debt 117,726 98,283 79,580 60,061 39,709
Leverage 2.19x 1.68x
Current enterprise value 431,518 431,518
- Debt 117,726 39,709
- deferred consideration 36,000 52,570
Value of equity 277,792 339,239
Number of shares 163,407 163,407
Estimated value/share 1.70 2.08
Discount rate 4.96%
Present value of
equity/share
1.71
Source: Davy
The DCF approach yields the
lowest value per share of €1.71 as
the value of deferred
consideration for IPL is expected to
increase over time
One51
27
Valuation summary
A simple average of all three approaches yields a valuation of €2.01/share.
Table 12: Valuation summary
SOTP 2.00
ROIC/WACC 2.31
DCF 1.71
Average 2.01
Source: Davy
28
One51
29
Important Disclosures
Analyst certification I, Declan Morrissey, hereby certify that: (1) the views expressed in this research report accurately reflect my personal views about any or all of the subject securities or issuers referred to in this report and (2) no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in this report.
Price performance (% change) Stock 2011 2012 2013 2014 2015
ONE51 -30.0 -78.6 -333.3 69.2 45.5
Source: Datastream
WARNING: Past performance is not a reliable guide to future performance
Investment ratings definitions
Davy ratings are indicators of the expected performance of the stock relative to its sector index (FTSE E300) over the next 12 months. At times, the performance might fall outside the general ranges stated below due to near-term events, market conditions, stock volatility or – in some cases – company-specific issues. Research reports and ratings should not be relied upon as individual investment advice. As always, an investor's decision to buy or sell a security must depend on individual circumstances, including existing holdings, time horizons and risk tolerance.
Our ratings are based on the following parameters:
Outperform: Outperforms the relevant E300 sector by 10% or more over the next 12 months.
Neutral: Performs in-line with the relevant E300 sector (+/-10%) over the next 12 months.
Underperform: Underperforms the relevant E300 sector by 10% or more over the next 12 months.
Under Review: Rating is actively under review.
Suspended: Rating is suspended until further notice.
Restricted: The rating has been removed in accordance with Davy policy and/or applicable law and regulations where Davy is engaged in an investment banking transaction and in certain other circumstances.
Distribution of ratings/investment banking relationships
Investment banking services/Past 12 months
Rating Count Percent Count Percent
Outperform 71 53 29 74
Neutral 38 28 4 10
Underperform 12 9 0 0
Under Review 3 2 2 5
Suspended 5 3 0 0
Restricted 4 3 4 10
This is a summary of Davy ratings for all companies under research coverage, including those companies under coverage to which Davy has provided material investment banking services in the previous 12 months. This summary is updated on a quarterly basis. The term 'material investment banking services' includes Davy acting as broker as well as the provision of corporate finance services, such as underwriting and managing or advising on a public offer.
Regulatory and other important information J&E Davy, trading as Davy, is regulated by the Central Bank of Ireland. Davy is a member of the Irish Stock Exchange, the London Stock Exchange and Euronext. In the UK, Davy is authorised by the Central Bank of Ireland and authorised and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our authorisation and regulation by the Financial Conduct Authority are available from us on request. No part of this document is to be reproduced without our written permission. This publication is solely for information purposes and does not constitute an offer or solicitation to buy or sell securities. This document does not constitute investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities/strategy discussed in this report may not be suitable or appropriate for all investors. The value of investments can fall as well as rise and there is no guarantee that investors will receive back their capital invested. Past performance and simulated performance is not a reliable guide to future performance. Projected returns are estimates only and are not a reliable guide to the future performance of this investment. Forecasted returns depend on assumptions that involve subjective judgment and on analysis that may or may not be correct. Any information related to the tax status of the securities discussed herein is not intended to provide tax advice or to be used as tax advice. Tax treatment depends on individual circumstances and may be subject to change. You should consult your tax adviser about the rules that apply in your individual circumstances.
This document has been prepared and issued by Davy on the basis of publicly available information, internally developed data and other sources believed to be reliable. While all reasonable care has been taken in the preparation of this document, we do not guarantee the accuracy or completeness of the information contained herein. Any opinion expressed (including estimates and forecasts) may be subject to change without notice. We or any of our connected or affiliated companies or their employees may have a position in any of the securities or may have provided, within the last twelve months, significant advice or investment services in relation to any of the securities or related investments referred to in this document.
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30
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We are satisfied that our internal policy on share ownership does not compromise the objectivity of analysts in issuing recommendations.
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Investors should be aware that this research has been disclosed to the issuer(s) in advance of publication in order to correct factual inaccuracies. We are satisfied that this has not compromised the report's objectivity. The remuneration of the analyst(s) who prepared this report is based on various factors including company profitability, which may be affected to some extent by revenues derived from investment banking.
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A summary of our standard valuation methods is available at www.davy.ie/ValuationMethodologies. All prices used in this report are as of close of business April 27th unless otherwise indicated. A summary of existing and previous ratings for each company under coverage, together with an indication of which of these companies Davy has provided investment banking services to, is available at www.davy.ie/ratings.
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Neither Davy Securities nor its affiliates hold a proprietary position and/or controls on a discretionary basis more than 1% of the total issued share capital of this company.
This information was current as of the last business day of the month preceding the date of the report.
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