Carbios: A Productive And Active H119
Edison | Sep 30, 2019 06:09AM ET
Carbios (PA:ALCRB)’s H119 results confirmed that the business is on a sound financial footing and continues to make progress towards the commercialisation of its technology. Commercial revenues from Carbiolice are scheduled to commence in 2020 and licences for its PET recycling technology are expected to be granted by 2023. Our current DCF-based valuation is €13/share.
Comfortable cash position
H119 results from Carbios appear on track to meet our FY19 forecasts. Revenues of €0.7m were slightly ahead of the run rate required to meet our FY19 projection of €1.2m. Lower than anticipated operating costs of €2.72m (FY19e: €5.85m) were offset by a smaller than expected tax credit of €0.3m (FY19e: €1.34m) to produce an H1 net loss of €1.71m (FY19 forecast net loss of €3.45m). Net cash consumption in H1 was €1.8m and as at 30 June Carbios’s net cash position was €3.4m before the proceeds of the equity issue (€13.8m (net) received in July). We expect capex to increase in H2 as Carbios begins construction of its PET recycling demonstration plant. However, with up to maximum of a further €4.1m of non-dilutive funding secured in H1 from SGPI, Carbios believes it should be able to cover its financial needs ‘beyond the next 24 months’. Our forecasts are unchanged.
Scientific and commercial advances
H1 saw Carbios continue with its progress towards commercialisation. As a result of a co-development agreement signed with Novozymes in H1, Carbios has secured the supply of enzymes for the industrialisation of its Carbiolice technology, scheduled for 2020 (initially films and carrier bags). In H1, Carbios also announced that it had produced the first PET bottles made with 100% Purified Terephthalic Acid (rPTA) and signed up Nestlé Waters, PepsiCo (NASDAQ:PEP) and Suntory Beverage & Food Europe, (in addition to L’Oréal) to its PET Consortium to industrialise its PET technology. Construction of the PET recycling demonstration plant is expected to be followed by granting its first commercial licences by 2023.
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Valuation: DCF indicative valuation of €13/share
Despite the uncertainties surrounding long-term revenue projections, we continue to believe that a DCF-based valuation remains the most appropriate valuation tool. Our DCF-based approach indicates a valuation of €13/share. The current market valuation reflects a 50% probability of our projections being achieved.
Business description
Carbios develops enzyme-based processes for biodegradation and bio recycling of plastics, with a long-term aim of displacing current recycling and production processes.
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