Soft quarter, construction as planned

Cash rich next quarter, capacity to grow

Order book of SEK 3.9bn and an extensive portfolio

An uneventful quarter, as expected
As expected, Q3 ’17/18 suffered from a lack of new project deliveries, resulting in modest group sales of SEK 22.6m (expected 19.8m). EBIT of SEK -10m was 9% better than our estimate while EBITDA of SEK -8m was in line. However, net financials were heavily boosted by an FX revaluation (which we didn’t expect) and therefore EPS significantly exceeded our estimates. In our view, the quarter was undramatic and should be seen as a non-event. The take away is 1) construction proceeds according to plan, and 2) a slower pace of depreciation.

Huge recoup to come sooner rather than later
What the P/L doesn’t show is high operational activity, with the construction of several projects to be finalised in the coming years. Revenue recognition is tail-heavy since the percentage of completions are not applied. The upcoming project Jenåsen should be completed in the next quarter (Q4´17/18e). After looking through our estimates we expect Q4 sales unchanged of SEK 1.1bn (85% of FY17/18e) but lower EBIT to SEK 120m (145m) on the back of unsure accounting treatment of certificates. More importantly, cash generation should be major. Despite working capital build-up, we estimate a year-end net cash position of SEK 314m (263m prior Q3’17/18), i.e. 37% of MCAP. Eolus possesses financial and managerial muscle to grasp the positive momentum in the industry. The latter is supported by its track record, order intake and portfolio.

Solid pipeline – ready to be executed
Looking at the order book, signed orders total SEK 3.9bn, which does not consider the huge project Öyfjellet (order value 3bn ABGSCe). We assess that near-term business accounts for ~70% of today’s MCAP, implying that the market ascribes a value of SEK 250m to the project portfolio. But Öyfjellet could be worth SEK 140m (ABGSCe time-adjusted CF), so the total
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