UBS Investment Research
Strong results. More to come.
We reiterate our Buy rating, post 9M 09 results
Mgmt has transformed Ebro from a pure domestic commodity processor into a
multinational branded food company with leading market positions in niche
categories (branded rice/pasta). In our view, the process is not over.
Marginally better than expected 9M09 and upbeat guidance.
Revs of €1.7bn (-23% y/y) were 2% below UBSe & csus; EBITDA of €227m
(+5% y/y) was 6% above UBSe & csus. Net profit of €135m (+45% y/y) was bang
in line with UBSe & 2% above csus. Ebro expects 09E revs of €2.2bn; EBITDA of
€306m, (7% above csus); and adj NP of €136m (2% above csus). Net debt is
expected to reach €603m, 2.0x ND/EBITDA. Management is positive on 2010 as
they expect: 1) raw material prices to keep decreasing; and 2) further synergies
from their European & US operations following recent acquisitions.
Next catalyst: 2010-12 strategic presentation (January?)
Following two years marked by de-gearing & extracting synergies, we believe
Ebro could return to the acquisition path. We underline management’s strong track
record in acquisitions. According to several Spanish press reports, Ebro could be
interested in acquiring SOS’ rice business.
Valuation: DCF-based SOTP of €15.8ps (+16%)
We have adjusted our earnings following new upbeat guidance. On the back of our
earnings upgrade and factoring a lower WACC (7.5% vs 8.2% prev on lower rates
& risk premium) our PT moves to €15.8ps. Ebro trades on 7.6x 2010E
EV/EBITDA, a 20% discount to its peers in Europe.
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