B R E A K I N G N E W SE Q U I T Y R E S E A R C H
March 12th 2024
Reway Group
Euronext Growth Milan | Infrastructure Mainteinance | Italy
Gema is awarded orders for € 84.00 million
Rating | Target Price | Risk | RWY IM Price |
BUY | € 7,15 | ||
€ 5,00 | |||
unchanged | unchanged | Medium | |
Stock Data | Stocks performance relative to FTSE Italia Growth | |||||
Price | € 5,00 | 150 | 500 k | |||
Target price | € 7,15 | |||||
140 | 450 k | |||||
Upside/(Downside) potential | 43,0% | |||||
130 | 400 k | |||||
Ticker | RWY IM | 350 k | ||||
120 | ||||||
Market Cap (€/mln) | € 192,51 | 300 k | ||||
EV (€/mln) | € 225,85 | 110 | 250 k | |||
200 k | ||||||
Free Float | 16,75% | 100 | ||||
150 k | ||||||
90 | ||||||
Share Outstanding | 38.502.281 | 100 k | ||||
52-week high | € 5,20 | 80 | 50 k | |||
52-week low | € 3,16 | 70 | Jun-23 | Sep-23 | Dec-23 | 0 |
Average daily volumes (3 months) | 22.350 | Mar-23 | Mar-24 | |||
RWY IM Equity - Volume | RWY IM Equity | ITAIM Index | ||||
Mattia | Petracca | mattia.petracca@integraesim.it | |||||
Giuseppe Riviello | giuseppe.riviello@integraesim.it |
B R E A K I N G N E W S
Gema is awarded orders for € 84.00 million
In a press release of March 7th, 2024, Reway Group SpA - a leading Italian Company in the restoration of road and highway infrastructures, announced that its subsidiary Gema SpA, recognized as one of the leading operators in the field of maintenance of railway infrastructure and civil construction, has been awarded new work orders in the railway sector, for a total amount of approximately € 84.00 million.
The contracts obtained by Gema are mainly attributable to the awarding of four new framework contracts awarded by the Italian Railway Network (RFI), in ATI (Associazione Tem- poranea d'Imprese) with various other partners. In terms of timeframe, the start of activities is expected to take place in the second half of 2024.
Specifically, the most significant contract obtained concerns routine maintenance work on RFI stations and buildings in the regions of Abruzzo, Umbria, Tuscany, Liguria, and Marche. In this area, Gema, as the leader of the ATI, holds 51.0% of the contract, corresponding to a value of approximately € 26.00 million. The duration for such work is expected to be about three years.
In addition to this order, there is another important contract worth about € 24.50 million, which involves Gema in the routine maintenance in ATI, of a railway infrastructure and related stations in Rome. This work provides for a 49.0% participation in the ATI for Gema and will extend for approximately two years.
Gema also holds the leading role (having 64.0% participation in the ATI) in a project for acoustic improvement along RFI's rail network in Tuscany. The contract, worth about €19.00 million for Gema, will last for two years.
Finally, the fourth contract awarded to Gema concerns the design and implementation of extraordinary maintenance works on civil railway infrastructure in Lazio and Sardinia. Gema participates in this project with a 30.7% share within a consortium led by Salcef Group. These works, scheduled to last about two years, represent, for Gema, a value of about € 8.10 million.
In addition to these assignments, Gema has obtained other contracts for the maintenance of rail infrastructure with a total value of € 6.50 million. These additional agreements increase the total value of contracts awarded by Gema under the new management of Reway Group to approximately € 84.00 million.
Based on the press release regarding recently awarded contracts, it is clear that the Group is proceeding positively with its development plan, consolidating its presence in the railway sector. Positioning itself into significant investment initiatives to modernize the network nationwide, the Group demonstrates its ability to respond effectively to the needs of an ever-changing market.
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Paolo Luccini, CEO of Reway, noted, "These important new orders acquired in the field of railways, just a few months after Reway Group entered that sector, confirm the validity of a strategic choice that has allowed us to grow even in a highly dynamic and expanding market that is at the center of major investments nationwide."
Taking the press release into consideration, while waiting to meet with management and evaluate the 2023 fiscal year results, we confirm our estimates: target price € 7.15 BUY rating and risk Medium.
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Economics & Financials
TABLE 1 - ECONOMICS & FINANCIALS
CONSOLIDATED INCOME STATEMENT (€/mln) | FY21A* | FY22A* | FY23E | FY24E | FY25E |
Revenues | 91,16 | 109,86 | 137,00 | 207,00 | 230,00 |
Other Revenues | 0,60 | 0,68 | 0,75 | 0,80 | 1,00 |
Value of Production | 91,76 | 110,54 | 137,75 | 207,80 | 231,00 |
COGS | 18,99 | 28,54 | 38,55 | 57,80 | 64,00 |
Services | 27,36 | 32,22 | 37,00 | 55,30 | 61,90 |
Use of Asset owned by others | 10,48 | 10,30 | 12,50 | 17,00 | 18,00 |
Employees | 17,39 | 18,85 | 22,90 | 34,50 | 37,80 |
Other operating costs | 0,64 | 1,05 | 0,60 | 0,70 | 0,80 |
EBITDA | 16,91 | 19,59 | 26,20 | 42,50 | 48,50 |
EBITDA Margin | 18,4% | 17,7% | 19,0% | 20,5% | 21,0% |
D&A | 3,66 | 3,38 | 5,00 | 13,00 | 13,50 |
EBIT | 13,25 | 16,21 | 21,20 | 29,50 | 35,00 |
EBIT Margin | 14,4% | 14,8% | 15,5% | 14,3% | 15,2% |
Financial Management | (0,11) | (0,18) | (1,00) | (5,00) | (5,00) |
EBT | 13,14 | 16,03 | 20,20 | 24,50 | 30,00 |
Taxes | 4,53 | 6,06 | 6,05 | 8,00 | 10,00 |
Net Income | 8,60 | 9,97 | 14,15 | 16,50 | 20,00 |
Minorities Net Income | 0,00 | 0,00 | 0,40 | 4,00 | 5,00 |
CONSOLIDATED BALANCE SHEET (€/mln) | FY21A* | FY22A* | FY23E | FY24E | FY25E |
Fixed Assets | 23,62 | 22,94 | 90,00 | 83,50 | 76,50 |
Account receivable | 42,76 | 52,85 | 70,00 | 88,00 | 100,00 |
Inventories | 0,80 | 0,66 | 5,00 | 12,00 | 16,00 |
Account payable | 21,04 | 23,63 | 29,00 | 40,00 | 44,00 |
Operating Working Capital | 22,51 | 29,88 | 46,00 | 60,00 | 72,00 |
Other receivable | 2,68 | 1,09 | 45,00 | 10,00 | 12,00 |
Other payable | 6,11 | 9,76 | 13,50 | 13,50 | 13,50 |
Net Working Capital | 19,08 | 21,22 | 77,50 | 56,50 | 70,50 |
Severance Indemnities & Other Provisions | 1,62 | 1,58 | 3,30 | 4,50 | 6,00 |
NET INVESTED CAPITAL | 41,08 | 42,58 | 164,20 | 135,50 | 141,00 |
Share Capital | 0,06 | 0,06 | 0,71 | 0,71 | 0,71 |
Reserves | 23,63 | 28,68 | 58,00 | 72,15 | 88,65 |
Net Income | 8,60 | 9,97 | 14,15 | 16,50 | 20,00 |
Equity | 32,30 | 38,72 | 72,86 | 89,36 | 109,36 |
Minorities Equity | 0,00 | 0,00 | 18,00 | 22,00 | 27,00 |
Cash & Cash Equivalent | 6,09 | 11,66 | 28,66 | 41,86 | 47,86 |
Short Term Financial Debt | 9,15 | 8,83 | 9,00 | 20,00 | 16,00 |
M/L Term Financial Debt | 5,73 | 6,70 | 53,00 | 46,00 | 36,50 |
Net Financial Position Adjusted | 8,78 | 3,86 | 33,34 | 24,14 | 4,64 |
Other Debt | 0,00 | 0,00 | 40,00 | 0,00 | 0,00 |
Net Financial Position | 8,78 | 3,86 | 73,34 | 24,14 | 4,64 |
SOURCES | 41,08 | 42,58 | 164,20 | 135,50 | 141,00 |
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CONSOLIDATED CASH FLOW (€/mln) | FY22A* | FY23E | FY24E | FY25E |
EBIT | 16,21 | 21,20 | 29,50 | 35,00 |
Taxes | 6,06 | 6,05 | 8,00 | 10,00 |
NOPAT | 10,15 | 15,15 | 21,50 | 25,00 |
D&A | 3,38 | 5,00 | 13,00 | 13,50 |
Change in receivable | (10,10) | (17,15) | (18,00) | (12,00) |
Change in inventories | 0,14 | (4,34) | (7,00) | (4,00) |
Change in payable | 2,58 | 5,37 | 11,00 | 4,00 |
Change in others | 5,24 | (40,17) | 35,00 | (2,00) |
Change in NWC | (2,13) | (56,28) | 21,00 | (14,00) |
Change in provisions | (0,05) | 1,72 | 1,20 | 1,50 |
OPERATING CASH FLOW | 11,35 | (34,41) | 56,70 | 26,00 |
Capex | (2,7) | (72,1) | (6,5) | (6,5) |
FREE CASH FLOW | 8,65 | (106,47) | 50,20 | 19,50 |
Financial Management | (0,18) | (1,00) | (5,00) | (5,00) |
Change in Debt to Bank | 0,65 | 46,47 | 4,00 | (13,50) |
Other Debt (Adjustment to NFP) | 0,00 | 40,00 | (40,00) | 0,00 |
Change in Equity | (3,55) | 37,99 | 4,00 | 5,00 |
FREE CASH FLOW TO EQUITY | 5,57 | 17,00 | 13,20 | 6,00 |
Source: Reway Group and Integrae SIM estimates
*Pro-forma
Data as of last Equity Research Document (Update) of 26/10/2023
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Disclosure Pursuant to Delegated Regulation UE n. 2016/958
Analyst/s certification
The analyst(s) which has/have produced the following analyses hereby certifies/certify that the opinions expressed herein reflect their own opinions, and that no direct and/or indirect remuneration has been, nor shall be received by the analyst(s) as a result of the above opinions or shall be correlated to the success of investment banking operations. Neither the analysts nor any of their relatives hold administration, management or advising roles for the Issuer. Mattia Petracca is Integrae SIM's current Head of Research. Giuseppe Riviello, Alessandro Colombo, Edoardo Luigi Pezzella, Alessandro Elia Stringa and Alessia Di Florio are the current financial analysts.
Disclaimer
This publication was produced by INTEGRAE SIM SpA. INTEGRAE SIM SpA is licensed to provide investment services pursuant to Italian Legislative Decree n. 58/1998, released by Consob, with Resolution n. 17725 of March 29th 2011.
INTEGRAE SIM SpA performs the role of corporate broker for the financial instruments issued by the company covered in this report.
INTEGRAE SIM SpA is distributing this report in Italian and in English, starting from the date indicated on the document, to approximately 300 qualified institutional investors by post and/or via electronic media, and to non-qualified investors through the Borsa Italiana website and through the leading press agencies.
Unless otherwise indicated, the prices of the financial instruments shown in this report are the prices referring to the day prior to publication of the report. INTEGRAE SIM SpA will continue to cover this share on a continuing basis, according to a schedule which depends on the circumstances considered important (corporate events, changes in recommendations, etc.), or useful to its role as specialist.
The table below, shows INTEGRAE SIM's recommendation, target price and risk issued during the last 12 months:
Date | Price | Recommendation | Target Price | Risk | Comment |
14/03/2023 | 3,67 | Buy | 6,25 | Medium | Initiation of Coverage |
17/04/2023 | 3,38 | Buy | 6,25 | Medium | Update |
09/10/2023 | 3,75 | Buy | 6,00 | Medium | Update |
26/10/2023 | 3,84 | Buy | 7,15 | Medium | Update |
23/11/2023 | 4,12 | Buy | 7,15 | Medium | Breaking News |
15/02/2024 | 4,78 | Buy | 7,15 | Medium | Breaking News |
The list of all recommendations on any financial instrument or issuer produced by Integrae SIM Research Department and distributed during the preceding 12-month period is available on the Integrae SIM website. The information and opinions contained herein are based on sources considered reliable. INTEGRAE SIM SpA also declares that it takes all reasonable steps to ensure the correctness of the sources considered reliable; however, INTEGRAE SIM SpA shall not be directly and/or indirectly held liable for the correctness or completeness of said sources.
The most commonly used sources are the periodic publications of the company (financial statements and consolidated financial statements, interim and quarterly reports, press releases and periodic presentations). INTE- GRAE SIM SpA also makes use of instruments provided by several service companies (Bloomberg, Reuters, JCF), daily newspapers and press in general, both national and international. INTEGRAE SIM SpA generally submits a draft of the analysis to the Investor Relator Department of the company being analyzed, exclusively for the purpose of verifying the correctness of the information contained therein, not the correctness of the assessment. INTEGRAE SIM SpA has adopted internal procedures able to assure the independence of its financial analysts and that establish appropriate rules of conduct for them. Integrae SIM S.p.A. has formalised a set of principles and procedures for dealing with conflicts of interest. The Conflicts Management Policy is clearly explained in the relevant section of Integrae SIM's web site (www.integraesim.it). This document is provided for information purposes only. Therefore, it does not constitute a contractual proposal, offer and/or solicitation to purchase and/or sell financial instruments or, in general, solicitation of investment, nor does it constitute advice regarding
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financial instruments. INTEGRAE SIM SpA does not provide any guarantee that any of the forecasts and/or estimates contained herein will be reached. The information and/or opinions contained herein may change without any consequent obligation of INTEGRAE SIM SpA to communicate such changes. Therefore, neither INTEGRAE SIM SpA, nor its directors, employees or contractors, may be held liable (due to negligence or other causes) for damages deriving from the use of this document or the contents thereof. Thus, Integrae SIM does not guarantee any specific result as regards the information contained in the present publication, and accepts no responsibility or liability for the outcome of the transactions recommended therein or for the results produced by such transac- tions. Each and every investment/divestiture decision is the sole responsibility of the party receiving the advice and recommendations, who is free to decide whether or not to implement them. Therefore, Integrae SIM and/or the author of the present publication cannot in any way be held liable for any losses, damage or lower earnings that the party using the publication might suffer following execution of transactions on the basis of the information and/or recommendations contained therein.
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Rating system (long term horizon: 12 months)
The BUY, HOLD and SELL ratings are based on the expected total return (ETR - absolute performance in the 12 months following the publication of the analysis, including the ordinary dividend paid by the company), and the risk associated to the share analyzed. The degree of risk is based on the liquidity and volatility of the share, and on the rating provided by the analyst and contained in the report. Due to daily fluctuations in share prices, the expected total return may temporarily fall outside the proposed range
Equity Total Return (ETR) for different risk categories
Rating | Low Risk | Medium Risk | High Risk |
BUY | ETR >= 7.5% | ETR >= 10% | ETR >= 15% |
HOLD | -5% < ETR < 7.5% | -5% < ETR < 10% | 0% < ETR < 15% |
SELL | ETR <= -5% | ETR <= -5% | ETR <= 0% |
U.R. | Rating e/o target price Under Review | ||
N.R. | Stock Not Rated |
Valuation methodologies (long term horizon: 12 months)
The methods that INTEGRAE SIM SpA prefers to use for value the company under analysis are those which are generally used, such as the market multiples method which compares average multiples (P/E, EV/EBITDA, and other) of similar shares and/or sectors, and the traditional financial methods (RIM, DCF, DDM, EVA etc). For financial securities (banks and insurance companies) Integrae SIM SpA tends to use methods based on comparison of the ROE and the cost of capital (embedded value for insurance companies).
The estimates and opinions expressed in the publication may be subject to change without notice. Any copying and/or redistribution, in full or in part, directly or directly, of this document are prohibited, unless expressly autho- rized.
Conflict of interest
In order to disclose its possible interest conflict Integrae SIM states that:
- It operates or has operated in the past 12 months as the entity responsible for carrying out the activities of Euronext Growth Advisor of the Reway Group SpA;
- It plays, or has played in the last 12 months, role of specialist financial instruments issued by Reway Group SpA;
- In the IPO phase, Integrae SIM played the role of global coordinator.
Production date: 11/03/2024 h. 6.30 pm
Publication date: 12/03/2024 h. 8.00 am
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Reway Group S.p.A. published this content on 12 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 March 2024 10:07:54 UTC.