Novafives Memo 110222
- Understand Fives’ Smart Automated Solutions (SAS) business – revenue and EBITDA split by countries, legal entities and Logistics vs Automotive components; Fives’ strongest niches within warehouse automation solutions market and market share and revenue within each niche; assessment of Fives’ competitive position technologically; remaining growth potential and how SAS’ EBITDA and EBITDA margin are likely to evolve as its services / maintenance revenue increases vs new equipment revenue over time; likely acquirers of SAS were it for sale; valuation of SAS based on transactions and listed comparables’ multiples
- Understand how well covered Novafives’ SSNs are by DCF EV (+ cash), taking into account: (1) current structural subordination, pension deficit and performance guarantees; (2) uncertainties around the macroeconomic environment given rising interest rates and elevated inflation; (3) future potential for structural subordination and SSNs priming / collateral dilution
- Understand prospects for Novafives to refinance its capital structure
- Deep dive analysis on Fives’ Smart Automated Solutions (SAS) business – solo entity financial statement analysis; technology vs competitors; market shares within sub-segments of warehouse automation solutions market and growth prospects
- SAS – M&A analysis; potential acquirers; valuation of SAS based on transactions and listed comparables’ multiples
- Group financial projections, DCF and sum-of-the-parts valuations and sensitivities – base, bull and bear cases
- What is SAS worth and who would be interested in acquiring it?
- Management guided at Q3 21 for: (1) Adj EBITDA (IFRS 16) to exceed pre-COVID FY 19 level of €120m in FY 22E (Q3 21 LTM c. €105m); (2) Adj EBITDA margin to reach 7% over the long-term (Q3 21 LTM 6.1%); (3) net leverage to decline < 6.0x some time in FY 22E (Q3 21 LTM 7.2x on our figures). How achievable is this guidance and what is the bridge from current levels to guidance?
- Former Logistics segment (now the bulk of SAS segment) revenue grew at a CAGR of c. 30% over FY 15 – FY 18. SAS has since grown at a CAGR of c. 7% over FY 19 – Q3 21 LTM. How much growth potential remains for SAS and what risk is there of being out-competed technologically by competitors?
- How is SAS’ EBITDA margin likely to evolve as its revenue mix over time sees an increase in the share of service / maintenance revenue vs new equipment revenue?
- What are the post-COVID recovery prospects for Novafives’ High Precision Machines segment, with exposure to the much COVID-impacted aircraft sector?
- Is a smooth refinancing prior to Novafives’ SS RCF maturing in FY 24 likely?
- How sensitive are SSNs recovery prospects to the global macroeconomic environment?