1 | SYPR | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
2 | Current Price $0.83 | Target $1.90 | Worst $0.50 | R/R 1 to 3.2 | BUY | |||||
3 | Updated on: 30-Jul-18 | Entry Price $0.97 | ||||||||
4 | The Story | |||||||||
5 | Company that sales components for cars, electronics and O&G. A couple of years ago they decided to divest from OEM for cars as it was a low margin business and started focusing on trucks where they have more negotiation power. So in the first couple of years revenues and margins decreased. Lately they have been delivering on the cost reduction promised and strategy. However, the market wasnt helping a lot. But end of 2018 things turned around. | |||||||||
6 | Story Jul/18 | |||||||||
7 | Why the Stock is trading where it is | |||||||||
8 | The company is not profitable now and people are hesitant about the industry going forward. | |||||||||
9 | The Catalysts | Risks | ||||||||
10 | - Revenue and margins increased - Positive industry news (O&G, electronics and trucks) | Medium Term | - Inability to increase revenues profitably | $0.50 | ||||||
11 | What has changes since the last STORY? | |||||||||
12 | I declined the growth expectation for 2020 to be more inline with current industry pace (result a -0.20 per share).Margins of Tech segment seem stagnant and electronics not imprroving fast enough. Modified margins going forward, result -0.30 per share | |||||||||
13 | The Assumptions | |||||||||
14 | Figures in USD | Base year | Year 1 to 5 | Year 6 to 10 | After year 10 | |||||
15 | 0 | 2018 | 1 | 5 | 6 | 10 | 11 | |||
16 | Revenues | 88 | 22.3% | 7.0% | 6.0% | 2.0% | 1.0% | Revenues to increase to reach 250MM in the long term | ||
17 | EBITDA Margin | -2.3% | 4.9% | 6.1% | 6.3% | 7.1% | 7.4% | Margins to reach the weighted average of the expected margin of each industry. | ||
18 | Tax rate | 0.0% | 21.0% | 21.0% | 21.0% | 21.0% | 21.0% | In the first years, the tax rate could be a bit lower due to NOL. | ||
19 | Capex Intensity | 1.1% | 6.0% | 4.9% | 4.6% | 3.5% | 3.0% | |||
20 | Cash Cyle | 28 | 63 | 63 | 63 | 63 | 63 | No significant changes forecasted | ||
21 | Dividends | 0 | 0 | 0 | 0 | 0 | 0 | |||
22 | ROIC | -22.6% | 5.7% | 11.7% | 12.1% | 11.7% | 11.4% | |||
23 | Net Debt / EBITDA | 0.5 x | 2.3 x | 2.4 x | 2.3 x | 1.1 x | 0.6 x | |||
24 | Historical Figures | |||||||||
25 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||
26 | Revenue growth | -9.1% | 14.1% | -59.2% | -36.6% | -10.9% | 7.3% | |||
27 | Gross Margin | 9.6% | 11.0% | 0.0% | 1.1% | 3.7% | 9.1% | |||
28 | EBITDA Margin | 2.9% | 3.7% | -14.5% | -17.4% | -9.8% | -2.3% | |||
29 | ROIC | -8.7% | 3.0% | -25.9% | 24.9% | -22.6% | -8.5% | |||
30 | FCF / Equity | -4.8% | -3.6% | 2.1% | 155.0% | -30.8% | 5.9% | |||
31 | Capex Intensity | 1.0% | 1.4% | -9.7% | -54.3% | -1.2% | 1.1% | |||
32 | Net Debt / EBITDA | 0.6 x | 0.8 x | -0.8 x | 0.4 x | -0.4 x | 0.5 x | |||
33 | Prices | WACC | ||||||||
34 | Asset | $2.24 | 25.0% | U. beta | Link | 1.07 | Average beta for auto parts, O&G and electronics (0.96,1.07,1.18) | |||
35 | Adj. EV/EBITDA | $2.40 | 25.0% | Cost of Equity Adj. | 0.00% | |||||
36 | DCF | $1.70 | 25.0% | Long-term debt rate | 7.00% | |||||
37 | Propierty MULTIECON | $1.31 | 25.0% | Optimal Debt to Capital | 50.0% | |||||
38 | Target | $1.90 | WACC | 8.80% | ||||||
39 | DCF Valuation | Top 13 Questions | ||||||||
40 | Discounted terminal value | 35 | Most of the value is in the long future, more speculative | Check the new NOL | ||||||
41 | NPV Cashflows | 2 | figure out why inventories increased in 1q19 and payables decreased | |||||||
42 | Enterprise value | 37 | ||||||||
43 | (+) Cash | 11 | ||||||||
44 | (+) Investments | 0 | ||||||||
45 | (-) Debt | -10 | ||||||||
46 | (-) Minority Interest | 0 | ||||||||
47 | (-) Preferred Stocks | 0 | ||||||||
48 | (-) Other | |||||||||
49 | Market Cap | 38 | M USD | |||||||
50 | Number of shares | 21.3 | mm shares | |||||||
51 | Fair share price | $1.70 | ||||||||
52 | Multiples | Base | -$1.50 | |||||||
53 | Current | Avg. 5 yr | DCF | Fair impl. | EBITDA | 0.70 | ||||
54 | P/B | 1.2 | 1.2 | 2.2 | 5.0 | Capex | 0.30 | |||
55 | P/E | 20.1 | 2.7 | 23.3 | 8.3 | Tax | 0.10 | |||
56 | EV/EBITDA | 5.7 | -2.3 | 7.5 | 2.2 | WACC | -0.10 | |||
57 | EV/FCF | -2.5 | 10.7 | -19.5 | ||||||
58 | EV/IC | 1.2 | 0.9 | 1.8 | 1.3 | g | 2.90 | |||
59 | Asset Aproach | Dec-18 | Adj. | Recovery | ||||||
60 | Cash | 11.0 | 100% | 11.0 | ||||||
61 | Short term Investments | 0.0 | 0% | 0.0 | ||||||
62 | Account Receivables | 10.0 | 91% | 9.1 | ||||||
63 | Inventories | 19.0 | 45% | 8.6 | ||||||
64 | Other current assets | 5.0 | 20% | 1.0 | ||||||
65 | PPE | 15.0 | 353% | 53.0 | ||||||
66 | Other Long Term Assets | 2.0 | 0% | 0.0 | ||||||
67 | Total Assets | 62.0 | 133% | 82.7 | ||||||
68 | Account payables | 13.0 | 100% | 13.0 | ||||||
69 | Note Payables | 0.0 | 100% | 0.0 | ||||||
70 | Debt and capital leases, current | 1.0 | 100% | 1.0 | ||||||
71 | Other current liabilities | 15.0 | 49% | 7.4 | ||||||
72 | Long term Debt | 9.0 | 100% | 9.0 | ||||||
73 | Other long term liabilities | 9.0 | 51% | 4.5 | ||||||
74 | Total Liabilities | 47.0 | 74% | 34.9 | ||||||
75 | Minority | 0.0 | 100% | 0.0 | ||||||
76 | Equity | 15.0 | 319% | 47.8 | ||||||
77 | Equity per share | $0.70 | $2.24 | |||||||
78 | EV/EBITDA Aproach | 4Q18 | Adj. | Proforma | ||||||
79 | EBITDA Margin | -2.3% | 1,040 bps | 8.1% | ||||||
80 | Capex Margin | 1.1% | 270 bps | 3.8% | ||||||
81 | Tax Rate | 0.0% | 1,550 bps | 15.5% | ||||||
82 | WACC | 8.8% | -120 bps | 7.6% | ||||||
83 | g | 0.0% | 100 bps | 1.0% | ||||||
84 | EV/EBITDA | 17.0 x | -10.3 x | 6.8 x | ||||||
85 | Adj EBITDA | -2.0 | -475.0% | 7.5 | ||||||
86 | Fair share price | -$1.50 | $2.40 | |||||||