Pro-Gest - Cash vs. Momentum

All,

Further to our mail on Friday, please find our updated analysis on Pro-Gest here. 

Having modelled the vertically integrated operations by stage, we have gained a feeling for the impact of commodity prices on the business and what that does for the cash strapped summer. We estimate that on the current trajectory of wastepaper and Testliner prices the company will have to re-draw the E26m it returned to banks this Q1 as well as refinance / extend all the amortisation payments that are coming due. That certainly seems like a lot. But the company has managed so far. With the Montova licenses in place, we see the borrowing capacity of the Villa Lagarina subsidiary much improved and banks would be extraordinarily silly (have seen it before) to pull the plug now when leverage is going mostly side-ways and the ramp-up is around the corner. 

Pro-Gest - by our measure - has some E100m of liquidity in the form of cash and excess commodity inventory and Villa Lagarina has only E100m in leverage on assets of over E400m. Aside from implicitly taking a certain commodity risk in this transaction, we see the earnings capacity for the company as undiminished and including Mantova as well as lower paper spreads forecast EBITDA 2021 with E95m - disappointing, but sufficient. 

Wolfgang