Rosetti Marino : April 8, 2021 Banca IMI Equity Company Note

Equity

Company Note

Rosetti Marino

FY20 Results

The uncertainties that characterised the market due to the pandemic continued to impact the company's production and commercial activity in 2H20. FY20 revenues were down by 39.5% yoy and order backlog at end-2020 was lower vs. end-2019(-50%) and end-June 2020. Following FY20 results, we revise downwards our estimates.

FY20 results

The key results were: 1) total revenues declining by 39.5% yoy to EUR 205M (vs. EUR 254M in our projections), with a decrease in all segments; 2) EBITDA was negative by EUR 32.7M vs. EUR 33.4M in FY19A; 3) net result was a loss of EUR 32.6M (EUR -16M in our projections) vs. EUR 4.5M profit in FY19A; and 4) the (short-term) net cash position stood at EUR 65.1M vs. EUR 120.2M at YE19A. The order backlog at 31 December 2020 was lower than last year, with the following breakdown: a) the Energy division totalled EUR 77M (vs. EUR 188M at YE19); b) the Process Plant segment amounted to EUR 21M (EUR 29M at YE19); while c) the shipbuilding activities came in at EUR 26M (vs. EUR 29M at YE19).

Outlook and estimates revision

Management stated that they see a rebound in the energy market, which had stopped due to the health emergency. However, in light of the performance below our FY20E estimates and considering the value of the order backlog, we revise our estimates. In FY21E, we reduce by around 19.8% our top-line assumption, now looking for a EUR 3M positive EBITDA and net loss of EUR 4.1M. We also cut our FY22E-23E revenues estimates by around -10%, assuming a less robust rebound in demand. We continue to see an EBITDA margin increasing over the two-year period (at 3% in 2022E and 5% in 2023E).

Valuation

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.

MID CORPORATE

8 April 2021: 13:20 CET

Date and time of production

No Rating

Italy/Oil Equipment & Services Update

AIM

Price Performance

(RIC: YRM.MI, BB: YRM IM)

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Rosetti Marino FTSE IT All Sh - PRICE INDEX

Rosetti Marino - Key Data

Price date (market close)	06/04/2021
Market price (EUR)				35.40
Market cap (EUR M)			141.60
52Wk range (EUR)			40.6/34.0
Price performance % 1M	3M	12M
Absolute		0.0	0.6	-0.6
Rel. to FTSE IT All Sh	-7.5	-7.7	-31.6
Y/E Dec (EUR M)	FY20A	FY21E	FY22E
Revenues	205.0		287.0	390.0
EBITDA	-32.67		3.00	10.50
EBIT	-40.42		-5.05	3.10
Net income	-32.60		-4.05	1.30
EPS (EUR)	-8.15		-1.01	0.33
Net debt/-cash	-65.10	-57.14	-57.90
Adj P/E (x)	Neg.		Neg.	NM
EV/EBITDA (x)	Neg.		13.4	3.7
EV/EBIT (x)	Neg.		Neg.	12.6
Div ord yield (%)	0		0	0

Source: Company data, FactSet and Intesa Sanpaolo Research estimates

Intesa Sanpaolo Research Dept.

Arianna Terazzi - Research Analyst [phone] [e-mail]

Gabriele Berti - Research Analyst [phone] [e-mail]

Corporate Broking Research

Alberto Francese, Gabriele Berti

Youness N. El Alaoui, Arianna Terazzi

See page 8 for full disclosure and analyst certification	8 April 2021: 13:22 CET
Intesa Sanpaolo is Specialist to Rosetti Marino
	Date and time of first circulation

Rosetti Marino	8 April 2021

FY20 Results

Results came in below our estimates at all levels. The drop in productivity was mainly caused by the Covid-19 pandemic and the subsequent uncertainties that characterised the market throughout 2020, with signs of recovery shown only in the recent months. The key financials of Rosetti Marino's FY20 were:

• Total revenues of EUR 205M (vs. EUR 254M in our projections), -39.5% vs. EUR 338.6M in FY19A. All segments recorded a decrease: the Energy sector's production dropped by around 43% (EUR 165M vs. EUR 291M in FY19); the Process Plant sector realised EUR 34M production (EUR 40M in FY19), while the Naval sector recorded the smallest decline (EUR 6M vs. EUR 7M in FY19);
• EBITDA was negative for EUR 32.7M vs. EUR 33.4M in FY19A;
• Net loss was EUR 32.6M (EUR -16M in our projections) vs. EUR 4.5M net profit in FY19A;
• The (short-term) net cash position stood at EUR 65.1M vs. EUR 120.2M at YE19A;

Rosetti Marino - FY20 results

	EUR M	2H19A	2H20A	yoy %	FY19A	FY20A	yoy %	FY20E	A/E %
	Turnover	173.7	93.5	-46.2	338.6	205.0	-39.5	254.0	-19.3
	EBITDA	11.7	-17.8	NM	33.4	-32.7	NM	-11.6	NM
	EBITDA margin %	-3.2	Neg.		9.9	Neg.		Neg.
	EBIT	13.7	-22.1	NM	25.2	-40.4	NM	-18.7	NM
	EBIT margin %	0.5	Neg.		7.5	Neg.		Neg.
	Net profit	2.4	-15.5	NM	4.5	-32.6	NM	-16.0	NM

NM: not meaningful; Neg.: negative; A: actual; E: estimates; Source: Company data

• The order backlog at 31 December 2020 was EUR 124M: 1) the Energy division order backlog amounted to EUR 77M (vs. EUR 188M at YE19); 2) the Process Plant segment was EUR 21M (EUR 29M at YE19); while 3) the shipbuilding activities amounted to EUR 26M (vs. EUR 29M at YE19).

2	Intesa Sanpaolo Research Department

Rosetti Marino	8 April 2021

Earnings Outlook

The company has purchased from Augustea Maritime Transportation Ltd the semi- submersible pontoon "AMT CARRIER", built in 2009. The barge weighs 4,500 tonnes and has a size of 91x27x6 metres; it is equipped with an autonomous ballasting, immersion and re-floating system, and has 4 stabiliser boxes, which allow it to perform the particularly long and complex operations of hauling and launching the naval units for transformation or refitting works in constant safety and control.

Thanks to this new investment, Rosetti Marino has an additional own infrastructure, which can ensure continuity in its ability to launch its own naval constructions and marine transport of offshore manufactured articles. Moreover, the new pontoon should allow it to add the refitting in the yard of superyachts weighing up to 2,000 tonnes to its design and shipbuilding activities.

With reference to the market, management stated that they see a rebound regarding the energy segment, which had stopped due to the health emergency. However, in light of the weak FY20 performance and considering the low value of order backlog, we downwards revise our estimates.

In particular:

• For 2021E, assuming a weaker than expected production in the first months, we reduce by around 19.8% our top-line assumption, now looking for a EUR 3M positive EBITDA and net loss of EUR 4.1M;
• We also revise our FY22E-23E revenues estimates (around -10%vs. previous), assuming a less robust rebound in demand.

Rosetti Marino - Estimates revision (2021E-23E)

Purchase of a new semi- submersible pontoon

Positive signs from the energy market, but a low value of order backlog

	EUR M		2021E			2022E			2023E
		Old	New	chg. %	Old	New	chg. %	Old	New	chg. %
	Revenues	358.0	287.0	-19.8	434.0	390.0	-10.1	465.0	420.0	-9.7
	EBITDA	7.1	3.0	-57.7	13.2	10.5	-20.5	23.5	21.0	-10.6
	EBITDA margin (%)	2.0	1.0		3.0	2.7		5.1	5.0
	EBIT	5.8	-5.1	NM	5.8	3.1	-46.6	16.1	13.6	-15.8
	Net profit	4.0	-4.1	NM	4.0	1.3	-67.5	10.9	8.4	-23.4
	Net debt (- cash)	-58.6	-57.1	-2.5	-58.6	-57.9	-1.2	-66.3	-64.3	-3.0

NM: not meaningful; E: estimates; Source: Intesa Sanpaolo Research estimates

Intesa Sanpaolo Research Department

3

Rosetti Marino	8 April 2021

Valuation

Given the low visibility on FY22E-23E projections, for now, we decide to base our valuation only on a DCF model, to reflect the company's specific long-term prospects.

DCF model

Our DCF model points to an equity value range of EUR 94.6M to EUR 100.7M. Our key

DCF assumptions are:

• Explicit forecasts through 2023E;
• An equity risk premium at 6.5% (7.25% prev.) and a risk-free rate at 0.75% (1% prev.);
• A gearing ratio (D/invested capital) of 0.0%;
• We derive a WACC at 7.25% (8.25% previously).

Rosetti Marino - WACC calculation

%

Gearing	0.0
Beta* relevered (x)	1.0
Risk-free rate	0.75
Equity risk premium	6.5
WACC	7.25

Source: *FactSet and Intesa Sanpaolo Research estimates

To calculate the terminal value, we use two approaches:

• We discount to perpetuity the 2023E FCFO at a WACC of 7.25% (LT1);
• We discount to perpetuity the EBIT mid-cycle2009A-23E at a WACC of 7.25% (LT2).

Rosetti Marino - DCF model

	EUR M	2021E	2022E	2023E	LT 1	LT 2
	EBIT	-5.1	3.1	13.6	13.6	12.7
	Tax	1.0	-1.3	-4.7	-4.1	-3.8
	Depreciation	8.1	7.4	7.5	0.0	0.0
	NOPAT	4.0	9.2	16.3	9.5	8.9
	WC	-2.0	2.1	0.6	0.0	0.0
	Capex	-10.0	-10.0	-10.0	-6.0	-6.0
	FCF	-8.0	1.3	6.9	3.5	2.9
	Discounted FCF	-7.4	1.1	5.6	2.6	2.2
	WACC (%)				7.25	7.25
	TV growth (%)				0.0	0.0
	Sum				-0.7	-0.7
	TV				36.3	30.3
	EV				35.6	29.5
	Debt 2020A				-65.1	-65.1
	Equity				100.7	94.6

Source: Intesa Sanpaolo Research estimates

4	Intesa Sanpaolo Research Department

Rosetti Marino	8 April 2021

Multiples comparison

As a cross check, we identify a sample of comparable companies as shown 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 - Margins comparison (2020A-23E)

	%	Mkt cap		EBIT margin				Net income margin
		(EUR M)	FY20A	FY21E	FY22E	FY23E	FY20A	FY20A	FY21E	FY22E
	Saipem SpA	2,349	0.3	1.1	2.8	3.7	-15.5	-1.5	0.4	1.2
	Tenaris SA	11,421	1.3	4.4	7.0	11.6	-0.4	4.7	6.3	9.4
	Tecnicas Reunidas	722	1.3	2.2	2.9	2.8	0.3	1.6	2.1	2.0
	Petrofac	394	3.1	4.7	5.4	4.7	1.3	2.8	4.1	2.4
	Nat'l Oilwell Varco	4,453	0.0	-2.1	2.5	5.1	-1.7	-3.2	0.6	2.7
	Average		1.2	2.1	4.1	5.6	-3.2	0.9	2.7	3.6
	Rosetti Marino*	140.8	-19.7	-1.8	1.3	3.5	-15.9	-1.4	0.9	2.3

A: actual; E: estimates; Data priced at market close on 06/04/2021; Source: FactSet and (*) Intesa Sanpaolo Research

In terms of FY22E EV/EBIT, the multiples of the selected companies are between 2.8x and 34.4x, with a median of 14x, while the FY23E EV/EBIT multiples are between 3.0x and 14.4x, with a median of 9.9x.

Regarding the FY22E P/E, the peers' multiples are within a 4.4-113.1x range, with a median of 32.9x, while the FY23E P/E multiples are between 3.2x and 26.8x, with a median of 18.9x.

Rosetti Marino - Multiples comparison (2022E-23E)

			EV/EBIT		P/E
	x	Price (EUR/share)	FY22E	FY23E	FY22E	FY23E
	Saipem	2.3	14.0	9.9	60.6	18.9
	Tenaris	19.2	29.2	14.3	32.9	19.7
	Tecnicas Reunidas	12.9	3.4	3.0	9.7	9.6
	Petrofac	1.1	2.8	4.3	4.4	3.2
	Nat'l Oilwell Varco	11.5	34.4	14.4	113.1	26.8
	Median	-	14.0	9.9	32.9	18.9
	Rosetti Marino	35.2	12.6	2.3	108.3	16.9

Data priced at market close on 06/04/2021; Source: FactSet and (*) Intesa Sanpaolo Research

Nevertheless, 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.

Intesa Sanpaolo Research Department

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