Maire Tecnimont MT IM
March 14, 2014 - 2:29pm EST by
pokey351
2014 2015
Price: 1.82 EPS $0.06 $0.20
Shares Out. (in M): 305 P/E 30.0x 9.0x
Market Cap (in $M): 410 P/FCF 30.0x 9.0x
Net Debt (in $M): 220 EBIT 90 100
TEV ($): 630 TEV/EBIT 7.0x 6.3x

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Description

Maire Tecnimont (ticker = MT IM) is an Italian EPC company in the process of a turnaround.
 
Historically, MT operated in 3 segments:
 
1) Oil, Gas, and Petrochemicals (OGP)
2) Power/Energy
3) Infrastructure
 
Beginning in 2011, MT suffered catastrophic losses on projects associated with its Power segment (and less so relating to its Infrastructure division).
MT was a contractor for the Bocamina II Thermoelectric Plant in Chile for its customer, Endesa Chile (Enel Group). As a result of an earthquake and violent population unrest, the project was a disaster, and MT experienced significant losses.
 
There are 3 key issues to be aware of here:
 
1) While these losses impacted its Power segment, its other key segment, OGP continued to hum right a long -- ie good business/bad business dynamic.
2) MT has no remaining liabilities associated w/ the aforementioned disasterous contracts.
3) MT is going through an arbitration process w/ Endesa -- MT is seeking to recover $1.3B or ~EUR 1B.
 
You can read about the arbitration here:
 
http://www.mairetecnimont.com/en/media/pressrelease/2013/17.01.2013-tecnimont-presenta-domanda-arbitrale-per-usd1-3-miliardi-contro-endesa-chile-gruppo-enel?set_language=en
 
The pressent situation is that:
 
1) The OGP business continues to perform, and MT has targets of ~EUR165m EBITDA /yr from this segment over the next several years -- it has generated between 90m and 130m EBITDA in each of the last 5 years.
 
2) MT is in the process of selling off non-core assets in its Infrastructure business which could generate an additioanl EUR150m+ over the next few years -- this would be worth EUR 0.50/shr
 
3) If MT receives the full amount it is seeking in arbitration, that would be worth approximately EUR 3.00/shr.
 
 
So to summarize -- if you give only credit for th OGP business as it exists today (~100m EBITDA run rate), MT is doing ~EUR 0.15/shr eps --> and if it hits its targets in a few years to generate EUR 165m EBITDA, it will generate ~EUR 0.29 per share.
 
Stock Price is EUR 1.80 -- so in the base case it is 12X historically demonstrated EPS, and in the upside it is ~6x eps.
 
Additionally, proceeds from the Infrastructure assets it is trying to sell could be worth an additional EUR 150m or EUR 0.50/shr
 
And lastly, the arbitration could be worth ~EUR1B or ~EUR3.00/shr
 
So it's reasonably priced on the base business, very cheap on its 2-3 year target eps (implied by its EBITDA  targets) -- and extraordinarily cheap if it achieves any portion of its future asset sales or arbitration claims.
 
See Below for summary financials:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
I do not hold a position of employment, directorship, or consultancy with the issuer.
I and/or others I advise hold a material investment in the issuer's securities.

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