Olje og energi

pålern
23.03.2018 kl 15:44 7284

SB1 Markets: SSO (Buy tp NOK55): Undervalued growth opportunities

Conclusion
We initiate coverage of Scatec Solar with a Buy recommendation and a target price of NOK55 per share. The company develops, owns and operates solar power plants around the world based on off-take agreements with 20-25 year duration. We argue that the share price has significant valuation support at NOK48/share from existing plants under development, which will generate cash of NOK100 per share over the next 20 years on our estimate. In addition, we argue that the current share price underestimates the potential for growth beyond 2018/2019 in the solar power market, a market that has been growing with 40% p.a. the last ten years.

Our analysis
• Strong fundamental value support from existing plants… SSO has a project portfolio with a combined capacity of 322MW in operation, 434MW under construction and 749MW in the backlog. Based on these projects alone, we estimate that SSO’s power producing assets will generate NOK100 per share over the next 20 years and we see a risk-weighted value support at NOK48/share. If the projects are realised and we remove the risk weight, the fundamental value of SSO excluding growth opportunities is NOK51/share, 18% above the current share price.
• … combined with operations in a market growing by 40% p.a. … In addition to the current project portfolio, we believe SSO will continue to grow as the company operates in a market that has been growing with 40% p.a. the last ten years and is expected to continue the growth trend. We value growth opportunities at NOK6.8 per share, which only equates to approximately two average value projects.
• … gives attractive upside to our NOK55 per share target price. Our NOK55 target price is based on a SOTP bottom up analysis of each project based on the cash flow it is estimated to generate over the project lifetime, weighted by the probability of realisation. The cash flows are discounted by country/currency specific cost of equity. If all the projects are realised, and we remove the risk weighting, SSO has a value of NOK64/share on our estimates.
Redigert 21.01.2021 kl 08:07

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