Pro-Gest - time to take another look

All,

Pro-Gest had a super strong call. 

Conclusion:

We expect Pro Gest to hold on to most of their E60m of liquidity (current) and the Montova plant should fire up over the summer months. This plant is expected to be a major cash cow for Pro-Gest, who have been able to hold on to their assets throughout this period. We have thus far shied away from an investment in the bonds, due to their steep downside. But we will take an other look, also at any price move since the call and re-assess for a long position in the near future. 

1) As was increasingly likely, the company has now all but agreed the license including the doubling of output for its gigantic Montova plant. 
2) The company has been and continues to operate throughout the lock-down (producing tissues paper and delivery boxes amongst other things). 3) January and February have been strong, with March naturally down. Going forward management expects a drop in volumes of 8-10%. During that time it appears that FCF has been broadly flat. On top of that the company collected E30m via Ondulati Maranello, repaid E10m in mini bonds and other lines, paid E2.5m in fines and invested in inventory (finished goods / excess production). 4) Over the last year, as well as in a national auction in April, the company has been stocking up on waste paper at low prices, which should allow for good margins going forward - in particular when compared to other manufacturers as availability is now scarce and prices have risen. 5) At structurally sr, short term debt level, the company still has theoretical access to another E90m of undrawn lines, although management are weary of stressing those relationships. In recent months and weeks, Pro-Gest have been able to extend and otherwise postpone maturities on these lines and management are confident they will be able to do so. Wolfgang