IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 1
IMA ITALY / Capital Goods
4Q16 Preliminary results
HOLD (Unchanged) Target: € 65 (Prev. € 57) Risk: Medium
STOCK DATA Ord
Price € 65.5
Bloomberg code IMA IM
Market Cap. (€ mn) 2,525
Free Float 43%
Shares Out. (mn) 38.6
52-week range 45.65 - 66.8
Daily Volumes ('000) 68.26
PERFORMANCE 1M 3M 12M
Absolute 7.7% 12.7% 35.6%
Rel. to FTSE all shares 9.8% -1.6% 25.3%
MAIN METRICS 2015 2016E 2017E
Revenues 1,110 1,311 1,415
Adjusted EBITDA 158 185 209
Net income 70 98 100
Adj. EPS - € cents 186 242 279
DPS ord - € cents 140.0 142.0 144.0
MULTIPLES 2015 2016E 2017E
P/E adj 24.7 x 27.7 x 23.5 x
EV/EBITDA 13.2 x 15.0 x 12.6 x
REMUNERATION 2015 2016E 2017E
Div. Yield ord 3.1% 2.2% 2.2%
FCF yield 1.9% 3.3% 4.0%
INDEBTEDNESS 2015 2016E 2017E
NFP -163 -100 -64
Debt/EBITDA 1.1 x 0.6 x 0.3 x
Interests cov 10.2 x 14.8 x 17.6 x
PRICE ORD LAST 365 DAYS
ANALYSTS Domenico Ghilotti - +39026204249 - [email protected] February 23, 2017 # 67
GROWTH OPPORTUNITIES ARE NOT OVER
IMA reported 2016 preliminary results showing good sales,
profitability and cashflow. Order intake was lower-than-expected, but
growth opportunities for 2017-18 remain robust, driven by tobacco,
coffee and integration of recent acquisitions.
Good P&L and FCF, lower order intake
IMA reported better-than-expected preliminary FY16 P&L and FCF data:
- Sales € 1,311 mn +18% vs. +16% exp. (+10% organic vs. 7.3% exp.)
- Adj EBITDA € 185.1 mn (+17.5%) vs € 184 mn expected. EBITDA
margin was 14.1% vs. 14.3% expected
- EBITDA € 179 mn (+21%) vs € 180 mn exp. (€ 2 mn one-off costs in 4Q16)
- Net debt € 100 mn vs. € 111 expected, probably thanks to working capital
Order backlog stood at € 766 mn vs. € 844 mn expected. The weaker
order backlog (€ 78 mn) was partly the result of higher 4Q16 revenues
(€ 28 mn), partly (we estimate € 20/25 mn) due to the lower contribution
provided by the new Medtech business (which recorded limited orders in
4Q after an outstanding 3Q) and partly due to fewer organic orders (we
estimate a decline of around -5% in 4Q vs. +2% expected).
On a FY basis, order backlog grew by 18%, or +9% organically.
Prospects supported by higher order backlog and opportunities
from tobacco, coffee and integration of recent acquisitions
Full 2016 results will be disclosed on March 14th, but we are revising our
2017-2018 estimates upwards for the following reasons:
- Order backlog was up 9% organically and order intake was
positive again in January;
- We think we underestimated the medium-term opportunities
arising from the tobacco industry, which is facing a shift from the
mature consumption of conventional cigarettes to new kinds of reduced
risk products (RRP) launched by the main tobacco players. IMA has
been able to exploit the opportunity triggered by this evolution by
offering state-of-the-art packaging technology and a high-level
service whilst gaining share in a large and wealthy market
- We remain confident on the opportunity arising from the coffee
business, where we expect a steady growth trend regardless of the
potential orders from Nespresso
- IMA has the opportunity to improve profitability from the integration
of recently acquired companies (like IMA Dairy and Medtech, still
well below the full-stream mid-teens target) and to improve the lower
performing areas (such as Ilapak);
- We expect moderate organic growth (3%) ex-tobacco and M&A
contribution.
All in all, we are lifting 2017-2018 sales by 3-4% and EBITDA by 4-7%, fully
driven by the Food&others division. Adj. EPS has been upgraded by 7-8%,
reaching € 3.1 PS (+19% CAGR 2015-2018).
We are raising our target to € 65, based on a target multiple of 20x
applied to 2019 estimates (from 2018) discounted to present value.
The stock is currently trading at 13-11x EV/EBITDA and 24-21x Adj.
PE 2017-2018, in the highest part vs. the historical range and the main
listed peers.
IMA – February 23, 2017
IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 2
MAIN FIGURES € mn 2013 2014 2015 2016E 2017E 2018E
Revenues 761 855 1,110 1,311 1,415 1,484
Growth 4% 12% 30% 18% 8% 5%
EBITDA 112 130 148 179 209 229
Growth 10% 16% 14% 21% 17% 9%
Adjusted EBITDA 113 132 158 185 209 229
Growth 12% 16% 20% 18% 13% 9%
EBIT 87 108 116 141 169 188
Growth 7% 25% 7% 22% 19% 11%
Profit before tax 79 91 115 150 157 176
Growth 10% 15% 27% 30% 5% 12%
Net income 52 52 70 98 100 113
Growth 8% 0% 36% 41% 1% 13%
Adj. net income 52 56 68 91 108 120
Growth 15% 8% 22% 33% 18% 11%
MARGIN 2013 2014 2015 2016E 2017E 2018E
Ebitda Margin 14.7% 15.2% 13.3% 13.7% 14.8% 15.4%
Ebitda adj Margin 14.9% 15.4% 14.2% 14.1% 14.8% 15.4%
Ebit margin 11.4% 12.6% 10.4% 10.8% 11.9% 12.6%
Pbt margin 10.4% 10.6% 10.4% 11.4% 11.1% 11.9%
Ni rep margin 6.8% 6.0% 6.3% 7.5% 7.0% 7.6%
Ni adj margin 6.8% 6.6% 6.2% 6.9% 7.6% 8.1%
SHARE DATA 2013 2014 2015 2016E 2017E 2018E
EPS - € cents 140.2 140.2 190.2 261.0 258.9 293.3
Growth 8% 0% 36% 37% -1% 13%
Adj. EPS - € cents 141.4 152.6 186.0 241.8 279.5 311.0
Growth 15% 8% 22% 30% 16% 11%
DPS ord - € cents 250.0 135.0 140.0 142.0 144.0 146.0
BVPS - € 3.1 2.8 4.3 7.7 8.8 10.3
VARIOUS - € mn 2013 2014 2015 2016E 2017E 2018E
Capital employed 246 222 322 395 404 402
FCF 45 87 33 83 101 115
Capex 21 23 35 37 38 40
Working capital 30 -16 28 31 35 37
INDEBTNESS - €mn 2013 2014 2015 2016E 2017E 2018E
NFP -130 -118 -163 -100 -64 -4
D/E 1.13 x 1.15 x 1.03 x 0.34 x 0.19 x 0.01 x
Debt/EBITDA 1.2 x 0.9 x 1.1 x 0.6 x 0.3 x 0.0 x
Interests cov 12.8 x 10.2 x 10.2 x 14.8 x 17.6 x 19.7 x
MARKET RATIOS 2013 2014 2015 2016E 2017E 2018E
P/E 19.2 x 24.4 x 24.1 x 25.7 x 25.3 x 22.3 x
P/E adj 19.0 x 22.4 x 24.7 x 27.7 x 23.5 x 21.1 x
PBV 8.5 x 12.2 x 10.6 x 8.5 x 7.4 x 6.3 x
P/CF 12.8 x 16.0 x 16.7 x 19.6 x 17.0 x 15.7 x
EV FIGURES 2013 2014 2015 2016E 2017E 2018E
EV/Sales 1.5 x 1.7 x 1.8 x 2.0 x 1.9 x 1.7 x
EV/EBITDA 10.2 x 11.0 x 13.2 x 15.0 x 12.6 x 11.3 x
EV/EBIT 13.2 x 13.3 x 17.0 x 19.0 x 15.7 x 13.8 x
EV/CE 4.6 x 6.5 x 6.1 x 6.8 x 6.6 x 6.4 x
REMUNERATION 2013 2014 2015 2016E 2017E 2018E
Div. Yield ord 9.3% 3.9% 3.1% 2.2% 2.2% 2.2%
FCF yield 4.6% 6.9% 1.9% 3.3% 4.0% 4.5%
ROE 38.4% 47.1% 53.3% 43.2% 31.4% 30.6%
ROCE 23.7% 31.5% 26.5% 27.0% 29.6% 33.1%
Source: EQUITA SIM estimates and company data
IMA – February 23, 2017
IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 3
SALES BREAKDOWN - 2015
Pharma rev enues
47%
Food&Others rev enues
53%
Other rev enues
0%
EBIT BREAKDOWN - 2015
Pharma EBIT56%
Food&Others EBIT44%
Other EBIT0%
BUSINESS DESCRIPTION
Established in 1961, IMA S.p.A. is the parent company of a Group world
leader in the design and manufacture of automatic machines for the
processing and packaging of pharmaceuticals, cosmetics, tea, coffee
and foods. Its marketing companies sell and provide customer service in
the relevant geographical areas and an extensive network of agencies in
the areas not covered by the branch offices.
IMA features:
- Around 5,000 employees
- More than € 1,300 mn sales, of which about 90% outside of Italy
- More than 1,400 patents worldwide
IMA’s most relevant markets are:
1. Packaging and processing machinery for the pharmaceutical
sector (47% of group sales in 2015), a market still fragmented and
dominated by Italian and German players, with high barriers to entry
and strong customer loyalty;
2. Machinery for food packaging, with undisputed worldwide
leadership in some market niches (tea bag machinery, soup cubes,
processed cheese) and exposure to high growth segments (e.g. coffee
capsules);
3. Flexible packaging machinery, addressed mainly through the Ilapak
acquisition (leader in solutions for bakery, cheese, meat and wet wipe
industries);
4. Machinery for the packing of tobacco;
5. Machinery for assembling plastic components (Medtech business),
addressed by GIMA and by the recent acquisitions (Komax assets,
Telerobot).
7-YEARS HISTORICAL RESULTS (€ mn)
IMA 2009 2010 2011 2012 2013 2014 2015
Revenues 506 503 669 734 761 855 1110
EBITDA 83 60 92 101 113 132 158
Net Profit 36 25 39 45 52 56 68
NFP -113 -114 -157 -132 -130 -118 -163
In the period 2015-18E, we expect c20% adj. EPS CAGR, driven by:
1. Mid-single-digit organic growth in pharma and food divisions
2. Full integration of recent acquisitions in new end-markets
3. Full development of new initiatives in coffee capsules and tobacco.
IMA is 57% controlled by the Vacchi family.
Strenghts/opportunities Weaknesses/threats
Leading position in almost all segments
operated
Product innovation led by strong R&D
skills
High customer loyalty and strong barriers
to entry
Flexible business model (outsourced
production)
Good FCF and dividend yield and limited
financial leverage
M&A opportunities
Limited operating leverage and scalability
on the organic performance, due to
outsourced production
Moderate end-market growth, given the
low cyclical nature of end-market demand
Risk of integration of acquired companies
IMA – February 23, 2017
IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 4
GOOD P&L AND FCF, LOWER-THAN-EXPECTED ORDER INTAKE
IMA reported better-than-expected preliminary 2016 P&L and FCF data:
- Sales € 1,311 mn +18% vs. +16% exp. (+10% organic vs. 7.3% exp.)
- Adj EBITDA € 185.1 mn (+17.5%) vs € 184 mn expected. EBITDA margin was
14.1% vs. 14.3% expected
- EBITDA € 179 mn (+21%) vs € 180 mn exp. (€ 2 mn one-off costs in 4Q16)
- Net debt € 100 mn vs. € 111 expected, probably thanks to working capital
Order backlog stood at € 766 mn vs. € 844 mn expected. The weaker order
backlog (€ 78 mn) was partly the result of higher 4Q16 revenues (€ 28 mn), partly
(we estimate € 20/25 mn) due to the lower contribution provided by the new
Medtech business (which recorded limited orders in 4Q after an outstanding 3Q)
and partly due to fewer organic orders (we estimate a decline of around -5% in 4Q
vs. +2% expected).
On a FY basis, order backlog grew by 18%, or +9% organically.
PROSPECTS SUPPORTED BY ORDER BACKLOG AND OPPORTUNITIES
FROM TOBACCO, COFFEE AND INTEGRATION OF RECENT ACQUISITIONS
Full FY16 results will be disclosed on March 14th, but we are revising our 2017-
2018 estimates upwards for the following reasons:
- Order backlog was up 9% organically and order intake was positive
again in January, lending weight to 2017 growth expectations;
- We remain confident on the opportunity arising from the coffee
business, where we expect a steady growth trend regardless of potential big
orders from Nespresso. Indeed, IMA is expanding its product range with the
very recent acquisition of Mapster (closing expected in 1Q17) and is targeting
customers with a dedicated salesforce.
- IMA has the opportunity to improve profitability from the integration of
recently acquired companies (like IMA Dairy and Medtech, still well below
the full-stream mid-teens target) and to improve the lower performing areas
(such as Ilapak);
- We expect moderate organic growth (3%) ex-tobacco and M&A
contribution;
- We think we underestimated the medium-term opportunities arising from
the tobacco industry, which is facing a shift from the mature consumption of
conventional cigarettes to new kinds of reduced risk products (RRP) launched
by the main tobacco players. The growth has been particularly strong after the
introduction of tobacco heating products, offering a lower exposure to
toxicants but a better consumer experience vs. electronic cigarettes.
IMA – February 23, 2017
IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 5
PRODUCT RANGE: FROM CONVENTIONAL CIGARETTES TO REDUCED RISK PRODUCTS
Source: BAT presentation
IMA has been able to exploit the opportunity triggered by this evolution by
offering state-of-the-art packaging technology and a high-level service whilst
gaining share in a large and wealthy market. We think IMA reached around € 100
mn sales in 2016 after essentially starting from a greenfield situation in 2013. We
now believe this trend could continue over the medium term (we assume € 20
mn additional sales per year over the 2017-2020 period), given the rapid take-up
of RRPs reported by the major tobacco companies and the still early
development of these projects compared to mass market conventional cigarette
consumption.
For example, Philip Morris International sold just 7 bn units in 2016 of its HeatStick
products vs. sale of more than 800 bn units for its conventional products and has
announced to reach a 50 bn unit capacity in 2017 from 15 bn in 2016 for its
leading RRP platform IQOS (an investment which has already supported the
strong growth in IMA’s tobacco sales and order backlog) while British American
Tobacco targets to double capacity in 2018 vs. 2017.
IMA – February 23, 2017
IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 6
IQOS EXPANSION CAPACITY TARGETS
Source: Philip Morris International presentation
PHILP MORRIS INTERNATIONAL REDUCED RISK PRODUCT PLATFORMS
Source: Philip Morris International presentation
IQOS MARKETING LAUNCH PLAN
Source: Philip Morris International presentation
In light of these elements, despite the weaker-than-expected order intake booked
in 4Q16, we are raising 2017-2018 sales by 3-4% and EBITDA by 4-7%. Adj.
EPS has been upgraded by 7-8%, reaching € 3.1 PS (+19% CAGR 2015-2018).
IMA – February 23, 2017
IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 7
ESTIMATE REVISION (€ mn)
2015A 2016E 2016E 2017E 2017E 2018E 2018E
Prev. Curr. Prev. Curr. Prev. Curr.
Revenues 1,109.5 1,282.9 1,310.8 1,369.4 1,414.6 1,434.1 1,484.2
% chg 2.2% 3.3% 3.5%
Abs chg 28 45 50
Adj. EBITDA 157.5 184.0 185.1 200.7 209.5 214.6 229.0
% chg 0.6% 4.4% 6.7%
Abs chg 1 9 14
EBITDA 148.1 179.6 179.2 200.7 209.5 214.6 229.0
% chg -0.2% 4.4% 6.7%
Abs chg 0 9 14
EBIT 115.6 141.8 141.3 160.2 168.8 173.2 187.5
% chg -0.4% 5.4% 8.2%
Abs chg -1 9 14
Net income 69.9 98.6 98.2 93.1 99.7 102.8 113.0
% chg -0.3% 7.1% 9.9%
Abs chg 0 7 10
Adj. EPS 186.0 240.0 239.2 262.1 279.5 287.0 311.0
% chg -0.3% 6.6% 8.4%
Abs chg -1 17 24
Order Intake 1,164.4 1,406.0 1,358.7 1,445.2 1,463.0 1,480.0 1,533.0
% chg -3.4% 1.2% 3.6%
Abs chg -47 18 53
Order backlog 649.9 844.1 766.2 919.9 821.0 965.8 869.8
% chg -9.2% -10.7% -9.9%
Abs chg -78 -99 -96
NFP -163.1 -111.9 -99.9 -78.4 -63.5 -36.2 -4.2
% chg -10.7% -19.0% -88.5%
Abs chg 12 15 32
DPS ord - € cents 140.0 142.0 142.0 144.0 144.0 146.0 146.0
% chg 0.0% 0.0% 0.0%
Abs chg 0 0 0 Source: EQUITA SIM estimates
REVENUES BREAKDOWN (€ mn)
2013 2014 2015 2016E 2017E 2018E
Pharma revenues 452 453 519 550 561 578
Food&Others revenues 309 401 590 761 853 906
Revenues 761 855 1,110 1,311 1,415 1,484
Pharma revenues -1% 0% 14% 6% 2% 3%
Food&Others revenues 10% 30% 47% 29% 12% 6%
Revenue growth (reported) 4% 12% 30% 18% 8% 5% Source: Company data and EQUITA SIM estimates
EBITDA BREAKDOWN (€ mn)
2013 2014 2015 2016E 2017E 2018E
Pharma EBITDA 59 63 74 85 87 91
Food&Others EBITDA 53 68 75 94 122 138
EBITDA 112 130 148 179 209 229
Pharma - EBITDA margin 13.1% 13.9% 14.3% 15.5% 15.6% 15.7%
Food&Others - EBITDA margin 17.0% 16.8% 12.8% 12.4% 14.3% 15.3%
EBITDA margin 14.7% 15.2% 13.3% 13.7% 14.8% 15.4% Source: Company data and EQUITA SIM estimates
IMA – February 23, 2017
IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 8
VALUATION RAISED TO € 65 TO FACTOR IN THE REVISED ESTIMATES
We are raising our target to € 65, based on a target multiple of 20x applied to
2019 estimates and discounted to present value.
The stock is currently trading at 13-11x EV/EBITDA and 24-21x Adj. PE 2017-
2018, in the highest part vs. the historical range and the main listed peers. This
premium is justified by a higher-than-peers underlying performance and higher
growth arising from more recent opportunities (tobacco/coffee/recent acquisitions).
MULTIPLE VALUATION SENSITIVITY ANALYSIS
(A) 2019E multiple 20.0 x 16.0 x 18.0 x 20.0 x 22.0 x 24.0 x
(B) 2019 fully diluted eps @ target (€) 3.4 3.4 3.4 3.4 3.4 3.4
(C)=(A)x(B) Stock value (€) 69 55 62 69 76 83
(D) Dividends to be cashed-in (€) 4.3 4.3 4.3 4.3 4.3 4.3
(E) = (C)+(D) Total stock value (€ PS) 73 59 66 73 80 87
(F) Discount (1+Ke)n 1.12 1.12 1.12 1.12 1.12 1.12
(G)=(E)/(F) Target (€ PS) 65 53 59 65 72 78 Source: EQUITA SIM estimates
MAIN FOOD MACHINERY PEERS MULTIPLES
STOCKS Mkt cap Performance EV/EBITDA EV/EBIT PE EBIT MARGIN
Name (€ mn) 1m 3m 12m 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018
KRONES AG 3,126 6 12 -1 8.7 7.9 7.1 12.2 11.0 9.8 19.0 17.8 16.5 7% 7% 7%
GEA GROUP AG 7,384 2 15 -7 12.9 11.2 10.0 15.1 13.3 11.8 21.2 19.7 15.5 11% 12% 13%
ALFA LAVAL AB 7,252 5 20 19 13.4 13.1 12.3 17.9 18.1 16.4 16.8 21.4 20.2 13% 13% 13%
Average 11.7 10.8 9.8 15.1 14.1 12.7 19.0 19.6 17.4 10% 10% 11%
IMA 2,558
8 12 34 14.7 13.3 12.2 17.0 15.5 14.1 28.0 25.1 22.9 12% 13% 13% Source: Bloomberg consensus
DCF VALUATION
ASSUMPTIONS IMA DCF (€ mn)
g 1.0%
2017E 2018E 2019E 2020E 2021E Beyond
WACC 5.9%
Sales 1,415 1,484 1,553 1,619 1,687 1,704
Change % 8% 5% 5% 4% 4% 1%
EBITDA 209 229 246 261 274 267
Change % 16.9% 9.3% 7.4% 5.9% 5.2% 16.7%
Margin 14.8 15.4 15.8 16.1 16.2 15.7
D&A -29 -29 -30 -31 -32 -45
Valuation (€ mn)
EBITA 181 200 216 229 242 222
Change % 18.0% 10.3% 8.1% 6.3% 5.5% -8.2%
NPV of Free Cash Flows (2017-21) 567
Margin 12.8 13.4 13.9 14.2 14.3 13.0
NPV of Terminal Value 2,258
Taxes -61 -68 -73 -78 -82 -76
Estimated Enterprise Value 2,825
EBIT after Tax 119 132 142 151 160 147
2016A NFP -100
Change % 18.0% 10.3% 8.1% 6.3% 5.5% 3.0%
Adj. to NFP -10 IMA Equity 2,715
Capex -38 -40 -41 -43 -45 -45
Peripherals & other -60.5
(increase) decrease in NWC -4 -3 -3 -3 -3 -3
Total Equity 2,655
Free Cash Flow before minorities 106 119 129 137 144 144
FCF Minorities 0 0 0 0 0 0
# of shares (mn) 38.6
Free Cash Flow after minorities 106 119 129 137 144 144
Target Price (€) 69
Discount Factor 0.99 1.05 1.11 1.17 1.24 1.24
Upside 5%
PV of FCF 107 113 116 117 116 116 Source: EQUITA SIM estimates and company data
IMA – February 23, 2017
IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 9
IMA: DCF SENSITIVITY (€)
LONG-TERM GROWTH
0.5% 1.0% 1.5%
5.4% 71 77 86
WACC 5.9% 64 69 76
6.4% 58 63 68 Source: EQUITA SIM estimates
STATEMENT OF RISK
The primary factors that could negatively affect our view on IMA are the following:
Weaker/stronger order intake, able to change IMA growth prospects;
Ability/inability to integrate acquired companies;
Ability/inability to provide proper service to clients;
Ability/inability to execute orders without relevant cost overruns;
Ability/inability to protect proprietary technology and patents;
Change in the competitive pressure in Pharma and Food segments
Exchange rate fluctuations, in particular a weakening/strengthening of the USD
vs. EUR
Deterioration/improvement of the economic cycle;
Change in interest rates
IMA – February 23, 2017
IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 10
APPENDIX
ACQUISITIONS IN THE SEGMENT OF PLASTIC ASSEMBLY MACHINES
In March 2016, IMA announced two acquisitions in the sector of plastic
assembly machines (Medtech business).
IMA has acquired three companies owned by the Komax group based in
Switzerland, USA and Malaysia which produce machines used to assemble
plastic self-medication devices (inhalers, insulin syringes). The acquired
companies are expected to generate sales of CHF 84 mn and EBITDA of
CHF 5.6 mn (6.7% margin) in 2016, with EV estimated at CHF 30 mn (CHF 36 mn
including an earn-out on the minorities of the Malaysian subsidiary), corresponding
to around 6x EV/EBITDA. IMA expects to generate commercial and logistical
synergies (by changing the current production set-up) in order to improve
profitability to almost 10% initially, and subsequently move it in line with the
group average of 13-15%.
The second acquisition involves Telerobot, an Italian company that produces
assembly machines for plastic food packaging. Telerobot is forecast to generate
sales of € 10 mn and € 1 mn EBITDA in 2016 and was valued € 3 mn.
The deals strengthen IMA's position in the sector of industrial automation,
where it was already present via some assets operated by Gima that have
now reached a more significant size (sales of approximately € 100 mn), with an
estimated positive impact on EPS of 4-5% by 2018, factored in our estimates at
the time of the announcement.
MEDTECH BUSINESS
Source: company presentation
IMA – February 23, 2017
IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 11
IMA DAIRY&FOOD ACQUISITION
In December 2014, IMA announced the acquisition of an 80% interest in five
companies (Benhil, Erca, Hassia, Hamba and Gasti) grouped under the
Dairy&Food holding (now called “IMA Dairy&Food”) and leaders in packaging for
the food industry, the dairy segment in particular. The acquired companies
have some 850 employees spread over 8 assembly facilities located in Germany,
France, Spain and India and 1 sales and service centre based in USA.
The acquisition was closed on February 28th 2015 and the companies have been
consolidated as of March 2015 under the Food&Others division.
The acquired companies are world leaders in 3 key technologies for the food
packaging industry:
- # 1 global positioning in cup Form, Fill and Seal (FFS), a technology
providing automatic machinery able to form, fill and seal plastic
cups/trays/bags. This market is worth some € 165 mn in terms of sales and is
expected to grow by close to 5% per year;
- Among the top 4 players in Fill and Seal (FS), a technology providing
automatic machinery able to fill and seal pre-formed cups and trays. This
market is worth € 309 mn and is expected to grow by around 6% per year;
- # 1 position in primary packaging Wrapping. This market is worth € 124 mn, of
which around € 40 mn (related to butter/margarine wrapping) is currently
addressed by the companies and € 20 mn (related to soft/cream cheese) will be
addressable in the near future. Market growth is expected at around 4.2% per year.
DAIRY&FOOD KEY TECHNOLOGIES
Source: company presentation
The target was valued on a debt free basis at € 65 mn (for the 80% stake) or a
multiple of around 6x 2014 EV/EBITDA.
IMA Dairy&Food contributed € 143 mn sales and € 3 mn EBITDA to 2015
numbers, well below original expectations (€ 165 mn sales and € 15 mn EBITDA)
due to some extra-costs linked to projects executed by IMA Dairy&Food before the
change of ownership. The lower profitability generated by IMA Dairy&Food in
2015-2016 led IMA to repurchase the 20% minorities in 2Q16 for € 4 mn, a much
lower price than initially negotiated, generating a € 19 mn capital gain.
IMA – February 23, 2017
IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 12
We think the deal is strategically, industrially and financially attractive:
- It strengthens the group’s position in the food packaging business, where
IMA thus reaches the n° 2 position worldwide, not far off the market leaders
Bosch and Coesia;
- It rebalances IMA’s exposure between pharma and food (we now estimate
a very similar EBITDA contribution from the two segments);
- It enlarges IMA’s product portfolio, now featuring worldwide leadership in
three new technologies (FFS, FS and Wrapping technologies);
- It offers opportunities to generate industrial and distribution synergies
thanks to IMA’s more efficient supply chain, improved ability to provide turn-key
solutions to tier1 clients and post-sale services and higher critical mass;
IMA – February 23, 2017
IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 13
P&L 2013 2014 2015 2016E 2017E 2018E
Revenues 761 855 1,110 1,311 1,415 1,484
Growth 4% 12% 30% 18% 8% 5%
Total opex -658 -727 -956 -1,158 -1,219 -1,270
Growth 3% 10% 31% 21% 5% 4%
Margin -87% -85% -86% -88% -86% -86%
EBITDA 112 130 148 179 209 229
Growth 10% 16% 14% 21% 17% 9%
Margin 15% 15% 13% 14% 15% 15%
Depreciation&amortization -24 -21 -32 -37 -39 -40
Provisions -2 -2 -1 -1 -1 -1
Depreciation&provision -25 -22 -32 -38 -41 -41
EBIT 87 108 116 141 169 188
Growth 7% 25% 7% 22% 19% 11%
Margin 11% 13% 10% 11% 12% 13%
Net financial profit/Expenses -9 -13 -15 -12 -12 -12
Profits/exp from equity inv 1 1 1 2 0 0
Other financial profit/Exp 0 -4 -3 0 0 0
Total financial expenses -8 -16 -17 -10 -12 -12
Non recurring pre tax 0 -2 16 19 0 0
Profit before tax 79 91 115 150 157 176
Growth 10% 15% 27% 30% 5% 12%
Taxes -30 -34 -37 -46 -53 -59
Tax rate 38% 37% 32% 31% 34% 33%
Minoritiy interests -3 -5 -8 -6 -4 -4
Non recurring post tax 6 0 0 0 0 0
Net income 52 52 70 98 100 113
Growth 8% 0% 36% 41% 1% 13%
Margin 7% 6% 6% 7% 7% 8%
Adj. net income 52 56 68 91 108 120
Growth 15% 8% 22% 33% 18% 11%
Margin 7% 7% 6% 7% 8% 8%
CF Statement 2013 2014 2015 2016E 2017E 2018E
Cash Flow from Operations 73 77 92 122 143 157
(Increase) decrease in OWC 8 43 -38 -2 -4 -3
(Purchase of fixed assets) -21 -23 -35 -37 -38 -40
(Other net investments) 39 -29 -56 -58 -10 0
(Distribution of dividends) -83 -46 -51 -53 -55 -55
Rights issue 0 0 29 91 0 0
Other -15 -10 14 0 0 0
(Increase) Decrease in Net Debt 1 12 -45 63 36 59
Source: EQUITA SIM estimates and company data
IMA – February 23, 2017
IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 14
INFORMATION PURSUANT TO ARTICLE 69 ET SEQ. OF CONSOB (Italian securities & exchange commission) REGULATION no. 11971/1999 This publication has been prepared by Domenico Ghilotti on behalf of EQUITA SIM SpA (licensed to practice by CONSOB resolution no. 11761 of December 22nd 1998 and registered as no. 67 in the Italian central register of investment service companies and financial intermediaries)
In the past EQUITA SIM has published studies on IMA EQUITA SIM is distributing this publication to more than 700 qualified operators and to unqualified operators via Borsa Italiana website today: February 23, 2017 The prices of the financial instruments shown in the report are the reference prices posted on the day before publication of the same.
EQUITA SIM intends to provide continuous coverage of the financial instrument forming the subject of the present publication, with a semi-annual frequency and, in any case, with a frequency consistent with the timing of the issuer’s periodical financial reporting and of any exceptional event occurring in the issuer’s sphere of activity. The information contained in this publication is based on sources believed to be reliable. Although EQUITA SIM makes every reasonable endeavour to obtain information from sources that it deems to be reliable, it accepts no responsibility or liability as to the completeness, accuracy or exactitude of such information. If there are doubts in this respect, EQUITA SIM clearly highlights this circumstance. The most important sources of information used are the issuer’s public corporate documentation (such as, for example, annual and interim reports, press releases, and presentations) besides information made available by financial service companies (such as, for example, Bloomberg and Reuters) and domestic and international business publications. It is EQUITA SIM’s practice to submit a pre-publication draft of its reports for review to the Investor Relations Department of the issuer forming the subject of the report, solely for the purpose of correcting any inadvertent material inaccuracies. This note has been submitted to the issuer. EQUITA SIM has adopted internal procedures able to assure the independence of its financial analysts and that establish appropriate rules of conduct for them.
Furthermore, it is pointed out that EQUITA SIM SpA is an intermediary licensed to provide all investment services as per Italian Legislative Decree no. 58/1998. Given this, EQUITA SIM might hold positions in and execute transactions concerning the financial instruments covered by the present publication, or could provide, or wish to provide, investment and/or related services to the issuers of the financial instruments covered by this publication. Consequently, it might have a potential conflict of interest concerning the issuers, financial issuers and transactions forming the subject of the present publication.
Equita SIM S.p.A. has placed/has executed an ABB/RABB in the last 12 months for financial instruments issued by Industria Macchine Automatiche IMA SPA Equita SIM S.p.A. provides or has provided in the last 12 months investment banking services for Industria Macchine Automatiche IMA SPA Equita SIM S.p.A. perform or has performed in the last 12 months the role of specialist for financial instruments issued by Industria Macchine Automatiche IMA SPA
In addition, it is also pointed out that, within the constraints of current internal procedures, EQUITA SIM’s directors, employees and/or outside professionals might hold long or short positions in the financial instruments covered by this publication and buy or sell them at any time, both on their own account and that of third parties.
The remuneration of the financial analysts who have produced the publication is not directly linked to corporate finance transactions undertaken by EQUITA SIM.
The recommendations to BUY, HOLD and REDUCE are based on Expected Total Return (ETR – expected absolute performance in the next 12 months inclusive of the dividend paid out by the stock’s issuer) and on the degree of risk associated with the stock, as per the matrix shown in the table. The level of risk is based on the stock’s liquidity and volatility and on the analyst’s opinion of the business model of the company being analysed. Due to fluctuations of the stock, the ETR might temporarily fall outside the ranges shown in the table.
EXPECTED TOTAL RETURN FOR THE VARIOUS CATEGORIES OF RECOMMENDATION AND RISK PROFILE
RECOMMENDATION/RATING Low Risk Medium Risk High Risk
BUY ETR >= 10% ETR >= 15% ETR >= 20%
HOLD -5% <ETR< 10% -5% <ETR< 15% 0% <ETR< 20%
REDUCE ETR <= -5% ETR <= -5% ETR <= 0%
The methods preferred by EQUITA SIM to evaluate and set a value on the stocks forming the subject of the publication, and therefore the Expected Total Return in 12 months, are those most commonly used in market practice, i.e. multiples comparison (comparison with market ratios, e.g. P/E, EV/EBITDA, and others, expressed by stocks belonging to the same or similar sectors), or classical financial methods such as discounted cash flow (DCF) models, or others based on similar concepts. For financial stocks, EQUITA SIM also uses valuation methods based on comparison of ROE (ROEV – return on embedded value – in the case of insurance companies), cost of capital and P/BV (P/EV – ratio of price to embedded value – in the case of insurance companies).
MOST RECENT CHANGES IN RECOMMENDATION AND/OR IN TARGET PRICE (OLD ONES IN BRACKETS):
Date Rec. Target Price (€) Risk Comment
Nil
DISCLAIMER The purpose of this publication is merely to provide information that is up to date and as accurate as possible. The publication does not represent to be, nor can it be construed as being, an offer or solicitation to buy, subscribe or sell financial products or instruments, or to execute any operation whatsoever concerning such products or instruments. EQUITA SIM does not guarantee any specific result as regards the information contained in the present publication, and accepts no responsibility or liability for the outcome of the transactions recommended therein or for the results produced by such transactions. Each and every investment/divestiture decision is the sole responsibility of the party receiving the advice and recommendations, who is free to decide whether or not to implement them. Therefore, EQUITA SIM and/or the author of the present publication cannot in any way be held liable for any losses, damage or lower earnings that the party using the publication might suffer following execution of transactions on the basis of the information and/or recommendations contained therein. The estimates and opinions expressed in the publication may be subject to change without notice.
EQUITY RATING DISPERSION AS OF DECEMBER 31, 2016 (art. 69-quinquies c. 2 lett. B e c. 3 reg. Consob 11971/99)
COMPANIES COVERED COMPANIES COVERED WITH BANKING RELATIONSHIP
BUY 41.4% 58.3%
HOLD 58.0% 41.7%
REDUCE 0.6% 0.0%
NOT RATED 0.0% 0.0%
The list of all conflicts of interest, rating dispersion and other important legal disclaimers are available on www.equitasim.it in the “avvertenze legali” section.