ITM Power – Full steam ahead post fund raising – price target 37.9p
Full steam ahead post fund raising - price target 37.9p
Since our initiation of coverage in August 2016, renewable energy specialist ITM Power has made good operational progress in its two divisions, with the wider hydrogen energy industry continuing to attract investment from governments and industry across its target markets.
-
£5.7 million fundraising completed to support growth
ITM’s cash position of £1.7 million as at 31st October 2016 was recently boosted by the proceeds of a £5.7 million firm placing. The funds will be used for working capital to support the growing order book, to strengthen the balance sheet and drive the move towards positive cash flow.
-
Current EV a significant discount to invested capital
From being valued at almost £400 million ten years ago to an enterprise value of approximately £32.8 million currently, ITM is now being valued at less than 40% of the capital invested in growing and establishing its IP.
-
Power-to-Gas division scaling up
In the Power-to-Gas division, ITM has announced three further contracts for the supply of electrolysers, including for a landmark UK trial. The focus now is upon scaling up its electrolysis equipment to serve larger markets.
-
Developing relationship with Shell in Clean Fuel
In collaboration with industry partners, including energy giant Shell, ITM has continued with the successful roll-out of its hydrogen refueling stations across the UK. Driving the monetisation of its estate, six further fuel contracts with fleet operators have been signed over the past six months & more expected.
-
Valuation suggests significant upside from current levels
With ITM continuing to trade in line with expectations we maintain our forecasts as set out in our initiation of coverage note. Accounting for the increased number of shares in issue following the placing our fair value target moves to 37.9p from 43.8p. With this implying 110% upside from the current share price of 18p, we maintain our Conviction Buy stance.
-
DISCLAIMER
ITM Power is a research client of Align Research. Align Research owns shares in ITM Power. For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
| Year to April | 2015A | 2016A | 2017E | 2018E |
|---|---|---|---|---|
| Total income (£m) | 5.06 | 8.19 | 10.87 | 15.11 |
| PBT (£m) | (5.71) | (4.36) | (2.81) | (1.50) |
| EPS (p) | (3.39) | (2.17) | (1.25) | (0.65) |