Rosetti Marino : April 17, 2019 Banca IMI Equity Company Note

	Equity Company Note
		MID CORPORATE
Rosetti Marino
		17 April 2019: 12:21 CET
		Date and time of production
FY18A Results
		No Rating

Rosetti Marino - Key estimates and data
Y/E December		2018A	2019E	2020E
Revenues	EUR M	260.5	377.1	381.7
EBITDA	EUR M	28.50	14.34	16.03
EBIT	EUR M	17.49	8.35	10.53
Net Income	EUR M	5.54	5.66	7.52
Dividend ord.	EUR	0.70	0.70	0.70
Adj. EPS	EUR	1.39	1.42	1.88
EV/EBITDA	x	0.81	4.2	3.7
Adj. P/E	x	27.3	28.4	21.4

A: actual; E: estimates; Source: Company data and Intesa Sanpaolo Research

FY18A results. Consolidated revenues were EUR 260.5M, up by around 26% yoy. The increase was mainly driven by the Energy activities which posted revenues of around EUR 229M vs. EUR 168M in FY17A, while the Process Plant segment reported revenues of EUR 32M vs. EUR 36M in FY17A. Shipbuilding activities did not contribute to FY18A revenues, as the company acquired the first order of a superyacht at the end of the year. EBITDA was EUR 28.5M vs. EUR 6.4M in FY17A, with a margin of 10.9%. The increase was mainly due to the economies of scale obtained as a result of the growth in sales volumes. Net profit came in at EUR 5.5M vs. a loss of EUR 5.8M in FY17A. The (short-term) net cash position stood at EUR 128M vs. EUR 61.2M at YE17A. During 2018, investments in intangible assets were EUR 0.6M and investments in tangible assets EUR 6.1M.

Italy/Oil Equipment &

Services

Company Update

Intesa Sanpaolo Research Department

Gabriele Berti Research Analyst [phone]

[e-mail]

Sebastiano Grisetti

Research Analyst

[phone]

[e-mail]

Corporate Broking Research

Alberto Francese

Gabriele Berti

Sebastiano Grisetti

Outlook. The recovery of the Oil & Gas market allowed Rosetti to acquire a significant order book at the end of 2018. The Energy division order backlog amounted to EUR 387M (vs. EUR 373M at YE17), the Process Plant segment orders were EUR 16M, equal to that of YE17, and lastly the order backlog of shipbuilding activities amounted to EUR 9M (vs. a zero backlog at YE17). For the Oil & Gas platforms, FY18 was characterised by an intense activity in the design and management of contracts for North Sea projects, which should continue throughout 2019, when the bulk of supplies and construction should be developed. The projects acquired in the previous years should lead to increasing volumes in 2019, resulting from construction activities carried out at the Piomboni Shipyard in Marina di Ravenna, but also in Qatar, Kazakhstan, Egypt and Nigeria. With regards to shipbuilding activities, management is seeing a growing demand for information and offers from dealers, global brokers, designers and naval architecture firms and also foresees the possibility of an entry into the US market. In the Processing Plant segment, together with the renewed commercial campaign, the review of the processes and the new business development strategies, the group is striving to optimise production costs, reduce execution times and the weighting of structural costs. All the above should allow Rosetti to recover margins and effectiveness so as to improve its market position and competitiveness.

Estimates and valuation. Based on FY18A results and management's outlook we slightly revised upwards our top-line projections, while we decreased profitability levels. For 2019E in particular, we raised our top-line estimate by around 7.9% vs. our previous assumptions, while we reduced our FY19E EBITDA by around 2.4%, implying an EBITDA margin of 3.8% vs. 4.2% previously. Our FY19E bottom line now stands at around EUR 5.7M vs. EUR 6.9M previously. We project a positive short-term cash position of about EUR 101M in 2019E. In view of Rosetti Marino's stable shareholding structure and limited trading volumes, we do not assign a rating or target price to the company.

Key risks. The global economic performance and oil price could affect the company's future results. We also believe that the small size of the company, compared to that of its peers, could be a risk in the presence of competitive pressure.

Price performance, -1Y

16/04/2019

120

115

110

105

100

95

90

85

80

75 A M J J A S O N D J F M A

Rosetti Marino FTSE IT All Sh - PRICE INDEX

Source: FactSet

Date and time of first circulation:

17 April 2019: 13:00 CET

AIM

Priced at market close on 16/04/2019*

Market price (€)		40.20
52Wk range (€)		41.8/35.0
Market cap (€ M)		160.80
No. of shares		4.00
Free float (%)		0.2
Major shr		Rosfin
(%)		56.0
Reuters		YRM.MI
Bloomberg		YRM IM
FTSE IT All Sh		23981
Performance %
Absolute	Rel. to FTSE IT All
-1M	0.5 -1M	-3.3
-3M	-1.5-3M	-12.1
-12M	12.6 -12M	20.0

*unless otherwise indicated within report. Source: FactSet and Intesa Sanpaolo Research estimates

See page 9 for full disclosures and analyst certification Banca IMI is Specialist to Rosetti Marino

Rosetti Marino

17 April 2019

Contents

FY18A Results	3
Earnings Outlook	4
Estimates Revision	4
Valuation	5
Multiples comparison	5
DCF model	6

2	Intesa Sanpaolo Research Department

FY18A Results

In FY18A, Rosetti Marino posted the following key items:

Total revenues of EUR 260.5M in FY18A vs. EUR 207.2M in FY17A. The increase was mainly driven by the Energy activities, which posted revenues of around EUR 229M vs. EUR 168M in FY17A, while the Process Plant segment reported revenues of EUR 32M vs. EUR 36M in FY17A. Shipbuilding activities did not contribute to FY18A revenues;

	Rosetti Marino - FY18A results
EUR M		FY17A	FY18A	yoy %	FY18E	A/E %
Turnover		207.2	260.5	25.8	286.2	-9.0
EBITDA		6.4	28.5	NM	5.6	NM
EBITDA margin (%)		3.1	10.9		2.0
EBIT		-2.2	17.5	NM	0.6	NM
EBIT margin (%)		-1.0	6.7
Net Profit		-5.8	5.5	NM	0.0	NM
Net Debt/(Cash)		-61.2	-128.0	109.0	-55.2	NM

NM: not meaningful; A: actual; E: estimates; Source: Company data and Intesa Sanpaolo Research

On a divisional basis, the group reported the following performances:

The Energy division, with a turnover of approximately EUR 229M (EUR 168M in FY17), has been confirmed as the main sector in which the group operates. Regarding Oil & Gas platforms, the year was characterised by intense planning and management activities for projects destined for the North Sea. The construction of Living Quarters in Qatar has started, and works will continue throughout 2019. On the Kazakh front, Rosetti continued to follow an important project acquired in 2017 and two minor projects acquired during 2018, that will also have operational queues in 2019. Two Subsea projects and one Onshore project have been concluded. Lastly, in 2H18 the group started operations in Nigeria (Brownfield type operations).

The Shipbuilding activities posted zero revenues in FY18 (EUR 3M in FY17), but at the end of the year the group successfully acquired its first order of a superyacht. According to management, there has been an ever-increasing market interest in explorer and supply vessels.

The Process Plant segment reported revenues of EUR 32M vs. EUR 36M in FY17. In this regard, it should be noted that although the group posted lower volumes, there was a significant improvement in margins. This sector, after suffering in prior years due to a poorly effective commercial policy, showed signs of a recovery in order acquisitions, especially towards the end of the year.

	Rosetti Marino - Revenues breakdown by business unit
EUR M		FY17A	FY18A	yoy %
Energy		168	229	36
Process Plants		36	32	-11
Shipbuilding		3	0	-100
Total Revenue		207	261	26

Source: Company data

EBITDA was EUR 28.5M vs. EUR 6.4M in FY17A, with a margin of 10.9%. The increase was mainly due to the economies of scale obtained as a result of the growth in sales volumes;

Net profit came in at EUR 5.5M vs. a loss of EUR 5.8M in FY17A;

The short-term net cash position stood at EUR 128M vs. EUR 61.2M at YE17A;

During 2018, investments in intangible assets came to EUR 0.6M and investments in tangible assets were EUR 6.1M;

Lastly, we highlight that the BoD will propose a dividend of EUR 0.70/share for 2018 at the shareholders' meeting.

Intesa Sanpaolo Research Department

Rosetti Marino

17 April 2019

3

Rosetti Marino

17 April 2019

Earnings Outlook

The recovery of the Oil & Gas market allowed Rosetti to acquire a significant order book at the end of 2018. The Energy division order backlog amounted to EUR 387M (vs. EUR 373M at YE17), the Process Plant segment orders were EUR 16M, equal to that of YE17, and lastly the order backlog of shipbuilding activities amounted to EUR 9M (vs. a zero backlog at YE17).

For the Oil & Gas platforms, FY18 was characterised by an intense activity in the design and management of contracts for North Sea projects, which should continue throughout 2019, when the bulk of supplies and construction should be developed. The projects acquired in the previous years should lead to increasing volumes in 2019, resulting from construction activities carried out at the Piomboni Shipyard in Marina di Ravenna, but also in Qatar, Kazakhstan, Egypt and Nigeria.

With regards to shipbuilding activities, management is seeing a growing demand for information and offers from dealers, global brokers, designers and naval architecture firms and also foresees the possibility of an entry into the US market.

In the Processing Plant segment, together with the renewed commercial campaign, the review of the processes and the new business development strategies, the group is striving to optimise production costs, reduce execution times and the weighting of structural costs. All the above should allow Rosetti to recover margins and effectiveness so as to improve its market position and competitiveness.

Estimates Revision

Based on FY18A results and management's outlook we slightly revised upwards our top-line projections, while we decreased profitability levels. For 2019E in particular, we raised our top- line estimate by around 7.9% vs. our previous assumptions, while we reduced our FY19E EBITDA by around 2.4%, implying an EBITDA margin of 3.8% vs. 4.2% previously, due to a less profitable expected sales mix. Our FY19E bottom line now stands at around EUR 5.7M vs. EUR 6.9M previously. We project a positive short term cash position of about EUR 101M in 2019E.

	Rosetti Marino - 2019E-20E estimates revision
EUR M			2019E			2020E
		Old	New	chg. %	Old	New	chg. %
Revenues		349.4	377.1	7.9	377.7	381.7	1.1
EBITDA		14.7	14.3	-2.4	25.7	16.0	-37.6
EBITDA margin (%)		4.2	3.8		6.8	4.2
EBIT		9.4	8.4	-11.1	20.2	10.5	-47.9
Net profit		6.9	5.7	-17.9	14.8	7.5	-49.2
Net debt (-cash)		-50.6	-101.1		-59.8	-101.7

Source: Intesa Sanpaolo Research estimates

4	Intesa Sanpaolo Research Department

Rosetti Marino

17 April 2019

Valuation

We based our valuation of Rosetti Marino on a multiples comparison and DCF model.

Multiples comparison

In our multiples comparison, we identified a sample of comparable companies as reported in the following tables.

We highlight that the profitability of Rosetti Marino, in terms of EBIT margin and net income margin, is below the peers' average.

Rosetti Marino - 2017E-18E margins comparison
	Mkt cap	EBIT margin	EBIT margin	Net income	Net income
				margin	margin
	(EUR M)**	FY19E %	FY20E %
				FY19E %	FY20E %
Saipem	4,646	10.8	11.5	1.5	2.6
Trevi Finanziaria Industriale	49	8.0	10.3	-0.6	1.4
Tenaris	15,347	20.6	22.2	12.0	13.6
Tecnicas Reunidas	1,486	3.4	3.8	2.0	2.3
Petrofac	2,083	9.9	9.6	5.7	5.5
National Oilwell Varco	9,283	9.1	11.7	0.2	2.8
Average		10.3	11.5	3.5	4.7
Rosetti Marino*		2.2	2.8	1.5	2.0

Note: (**) data priced at market close on 16.04.2019. Source: FactSet and (*) Intesa Sanpaolo Research

In terms of FY19E EV/EBIT, the multiples of the selected companies are between 5.0-15.3x, with a median of 10.5x, while the FY20E EV/EBIT multiples are between 4.7-26.7x, with a median of 10.3x.

Regarding the FY19E P/E, the peers' multiples are within a 7.6-35.3x range, with a median of 17.0x, while the FY20E P/E multiples are between 7.4-43.4x, with a median of 14.6x.

Rosetti Marino - Multiples comparison
x	Price (EUR)**	EV/EBIT	EV/EBIT	P/E	P/E
		FY19E	FY20E	FY19E	FY20E
Saipem	4.6	11.9	10.3	35.3	19.1
Trevi Finanziaria Industriale	0.3	NM	NM	NM	NM
Tenaris	26.1	15.3	11.3	17.7	14.6
Tecnicas Reunidas	26.6	9.1	7.8	16.3	14.0
Petrofac	6.0	5.0	4.7	7.6	7.4
National Oilwell Varco	24.1	NM	26.7	NA	43.4
Median		10.5	10.3	17.0	14.6
Rosetti Marino*	40.2	7.1	5.6	28.4	21.4

NA: not available; NM: not meaningful; Note: (**) data priced at market close on 16.04.2019. Source: FactSet and (*) Intesa

Sanpaolo Research

Intesa Sanpaolo Research Department

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