Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
CSM<br />
Netherlands/Food & Beverage Analyser<br />
CSM (Buy)<br />
Buy<br />
from Accumulate<br />
Share price: EUR<br />
closing price as of 07/05/2012<br />
Target price: EUR<br />
from Target Price: EUR<br />
Reuters/Bloomberg<br />
12.94<br />
18.00<br />
13.00<br />
CSMNc.AS/CSM NA<br />
Market capitalisation (EURm) 896<br />
Current N° of shares (m) 69<br />
Free float 78%<br />
Daily avg. no. trad. sh. 12 mth 457,503<br />
Daily avg. trad. vol. 12 mth (m) 7<br />
Price high 12 mth (EUR) 25.17<br />
Price low 12 mth (EUR) 9.25<br />
Abs. perf. 1 mth -0.39%<br />
Abs. perf. 3 mth -15.35%<br />
Abs. perf. 12 mth -48.36%<br />
Key financials (EUR) 12/11 12/12e 12/13e<br />
Sales (m) 3,113 3,338 3,536<br />
EBITDA (m) 205 205 268<br />
EBITDA margin 6.6% 6.1% 7.6%<br />
EBIT (m) (150) 97 157<br />
EBIT margin nm 2.9% 4.4%<br />
Net Profit (adj.)(m) 63 68 88<br />
ROCE -7.7% 3.7% 5.9%<br />
Net debt/(cash) (m) 616 601 549<br />
Net Debt/Equity 0.6 0.6 0.5<br />
Debt/EBITDA 3.0 2.9 2.0<br />
Int. cover(EBITDA/Fin. int) 6.9 6.7 9.5<br />
EV/Sales 0.5 0.5 0.4<br />
EV/EBITDA 7.2 7.5 5.6<br />
EV/EBITDA (adj.) 7.2 7.5 5.6<br />
EV/EBIT nm 15.9 9.6<br />
P/E (adj.) 13.0 13.1 10.4<br />
P/BV 0.9 0.9 0.9<br />
OpFCF yield 6.5% 4.3% 8.3%<br />
Dividend yield 5.4% 5.4% 5.4%<br />
EPS (adj.) 0.93 0.98 1.24<br />
BVPS 14.03 14.05 14.66<br />
DPS 0.70 0.70 0.70<br />
26 vvdsvdvsdy<br />
24<br />
22<br />
20<br />
18<br />
16<br />
14<br />
12<br />
10<br />
8<br />
Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12<br />
Source: Factset<br />
CSM Midkap (Rebased)<br />
Shareholders: ING Groep 11%; Fortis Utrecht 6%;<br />
BriTel Fund Trustees 6%;<br />
Analyst(s):<br />
Richard Withagen, SNS Securities<br />
richard.withagen@snssecurities.nl<br />
+312 0 5508572<br />
Valuing all the parts<br />
The facts: We have made a detailed valuation analysis of CSM after the<br />
announcement to sell the majority of its Bakery Supplies business. We believe the<br />
value per share amounts to EUR 15 at the low end and even EUR 26 per share in<br />
an optimistic scenario. We set our TP at EUR 18 and move from Accumulate to<br />
Buy.<br />
Our analysis: CSM management has never made a secret of its intention to<br />
eventually split Purac from the Bakery Supplies businesses. However, yesterday<br />
announcement to basically sell the Bakery Supplies divisions came much quicker<br />
than expected.<br />
The main reason for the major transformation appear to be the difficult market<br />
conditions of recent years as consumers cut down on spending and CSM faced<br />
volatile commodity costs. In the meantime, the company's balance sheet ratio's<br />
worsened. Finally, there appears to be more interest for some of the businesses<br />
that CSM has already put up for sale in February.<br />
Management has indicated that disposal proceeds will initially be re-invested in the<br />
new core Purac and Caravan Ingredients businesses. The debt level on the<br />
balance sheet of New CSM will also be lower than current levels and finally, funds<br />
will be returned to shareholders.<br />
We have valued the to-be-divested Bakery Supplies business based on 2011<br />
earnings, but also based on the average operating margin in the past three years.<br />
We have attached multiples of 8.0x EBITDA to the US business and 7.5x EBITDA<br />
to the European operations. The low-end valuation of Bakery Supplies is pegged<br />
at EUR 940m based on 2011 earnings. Taking the average operating margin in<br />
the last 3 years into account, the valuation amounts to EUR 1,220m.<br />
The business to be retained has been valued at peer group multiples, which trade<br />
in an EV/EBITDA range of 8-13x. The correlation between profitability and<br />
valuation suggests that New CSM should be valued at c. 10x EBITDA. Based on<br />
2011 EBITDA, the mid-point value would be EUR 1,240m. We have also included<br />
a low-end and high-end valuation scenario in the report.<br />
At group level, we also need to take central costs into account. We have valued<br />
these at 9x EBITDA 2011. Obviously, there will be room to lower these costs in the<br />
future. Finally, in the valuation, we have also taken net debt, pensions and<br />
financial assets into consideration. Our three scenarios (low, mid, high) generate<br />
per share values of EUR 15, EUR 21 and EUR 26 respectively. Our new EUR 18<br />
target price is set broadly halfway the low-end and mid-point valuation.<br />
Conclusion & Action: CSM has always shown a lot of confidence in Purac, but<br />
the decision to sell the vast majority of the Bakery Supplies business still comes<br />
much earlier than expected. Difficult market conditions, disappointing results and<br />
interest for the activities that have been put up for sale earlier this year all appear<br />
to have done the trick. The CSM stock price whereabouts in the near future will be<br />
dictated to a large extent by the disposal process. We have analysed various<br />
valuation scenarios and find a low-end valuation of c. EUR 15 per share, a midpoint<br />
scenario of EUR 21 per share, while the high end would go all the way to<br />
EUR 26. We are moving our target price to EUR 18, broadly halfway the low and<br />
mid-end valuation scenario. This implies c. 40% upside from current levels. We<br />
therefore raise our rating to Buy from Accumulate.<br />
Page 51 of 80 European Securities Network<br />
Please refer to important disclaimer on the last page
Change language