Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on ABB LTD-REG. We currently have 10 research reports from 1 professional analysts.
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Solid operating performance but declining orders
27 Oct 16
In Q3 16, revenues declined 3.1% to US$8.26bn (our estimate: US$8bn). Order intake dropped 14.1% to US$7.53bn and the order backlog declined 3.2% to US$24.55bn. The gross margin increased from 29.6% to 29.8% and the EBIT margin from 10.4% to 10.6%. Total EBIT remained nearly stable at around US$878m (our estimate: US$680m). Net profit declined 1.6% to US$568m. Adjusted EBITA declined 3.2% to US$1.046bn which was marginally above the consensus estimates of around US$1.4bn. The operating performance of the company was in line with market expectations but exceeded our estimates. The performance was mainly driven by the Power Grids division. Real EBIT increased 39.6% to US$222m and the EBIT margin improved from 5.7% to 8.4%. The EBIT margin of the Electrifications division increased from 16.6% to 16.9%, Discrete Automation & Motion from 11.9% to 12.5% and Process Automation from 9.6% to 11.2%.
Return on equity reduced by law
13 Oct 16
In Germany, the regulatory environment for the grid network has changed. The German Network Agency (Bundesnetzagentur) has changed the imputed return on equity which will apply for the next five years. The current regulatory periods for gas and electricity will expire in 2017 (gas) and 2018 (electricity). The new regulations for gas will apply as of January 2018 and for electricity 2019. The new return on equity for new assets will be reduced from 9.05% to 6.91% and for so-called old assets (activation prior January 2006) will decline from 7.14% to 5.12%. In each case without inflation and before corporate tax and after trade tax. According to estimates the lowered return on equity (equity ratio 40% max.) will reduce the yield by around €650m per year.
Business as usual!
05 Oct 16
The capital markets day ended as expected. The Power Grids division will not be separated from the company. The shareholder Cevian with a stake of 6.2% in the company had asked for a spin-off, IPO or joint venture. ABB’s response was quite obvious. Management will streamline the group and has initiated a share buy-back programme. Management has also started partnerships with Flour (transformation station) and the Norwegian service and maintenance company Aibel for offshore wind energy. In addition, a new EBITA margin corridor for the Power Grids division was announced. In 2018, the EBITA margin should range between 10% and 14% compared to 8-12% previously. In addition, management added some buzzwords such as relentless execution, streamlining the portfolio and digitalisation.
The communication engine has started!
22 Sep 16
Just after the supervisory board meeting another argument has arisen about not selling the Power Grids division. The Chinese company State Grid Corporation is interested in ABB’s leading-edge technology HVDC (high voltage direct current). State Grid Corporation is ABB’s largest customer but might also become its the largest competitor. The company controls more than 80% of the Chinese grid. According to recent rumours, State Grid is willing to pay up to US$20bn, which is in line with our net asset valuation.
Power Grids to remain part of the group!
21 Sep 16
ABB has sold its high-voltage cable business to the Danish company NKT Cables. The total enterprise value reached €836m, or US$934m. The high-voltage business was part of the Power Grids division and generated total revenues of around US$524m with around 900 employees. The business unit has manufacturing and R&D facilities for high-voltage submarine and underground cables in Karlskrona, Sweden. The deal will be closed in the first quarter of 2017.
Living in a different world!
21 Jul 16
The company reported disappointing second quarter results. Order intake declined 7.6% to US$8.3bn and revenues dropped 5.3% to US$8.7bn. Management experienced solid progress in profitability. Adjusted EBITA increased 4.5% to US$1.1bn and the EBITA margin increased from 11.5% to 12.7%. Real EBIT, however, plummeted 32.7% to US$647m and the EBIT margin declined from 10.5% to 7.5%. The ongoing cost-savings programme resulted in restructuring charges of US$367m. To make the unreal world perfect, management also reported operational EPS numbers which increased 16% from US$0.30 to US$0.35. Real EPS numbers dropped 28% from US$0.26 to US$0.19. Net income collapsed by 30.8% to US$407m.
07 Dec 16
Severfield’s (SFR’s) H117 results were well ahead of the previous year; margin performance and order book development cause us to raise our FY17 profit expectations. This combination has also proved to be a catalyst for share price outperformance following the results. Revenue growth and further margin development towards management’s stated aim of doubling FY16 PBT by 2020 can sustain further progress.
Focused on the long term
08 Dec 16
These are rare events but it is nice to see a management use its public listing advantageously to trade short-term dilution in EPS for the optionality of asymmetric upside in the long term. With over £10m already in the balance sheet, ABD has successfully raised £5.4m gross in a placing and expects to raise another £1m from an offer. We were not surprised to learn that the placing was over 3.5x oversubscribed. How many listed UK companies are positioned to take advantage of the digital revolution in the automotive industry? The additional investment in new people, facilities, products & services should be dilutive to FY2017-18 EPS but this is small price to pay to establish the leading supplier of integrated test, measurement and simulation solutions to the autonomous vehicle industry. Our forecasts assume that growth will accelerate from FY2019. We raise our target price to 575p based on 15x FY2019 EPS, equivalent to Ricardo, the only other UK stock which has embraced the optionalities offered by the technological changes in the automotive industry.
Exceptional trading continues
08 Nov 16
Keywords has announced that the strong trading in localisation and audio services has continued into H216. In particular, the Synthesis business acquired in April continues to benefit from exceptionally strong trading. Full-year results are now expected to be materially ahead of consensus and we upgrade our FY16e EPS by 13%. Erring on the side of caution, we have not changed our FY17 estimates significantly. Nevertheless, we believe the company does have a platform to sustain double-digit earnings growth, and hence medium-/long-term prospects for further share appreciation remain good.
08 Dec 16
Elderstreet stake acquired 02 GENERAL NEWS Globalworth premium In this issue Venture capital firm Draper Esprit has taken a 30.8% stake in venture capital trust manager Elderstreet. Both investment managers focus on the technology sector and they will be able to co-invest. Elderstreet has investments in a number of AIM-quoted companies through its VCTs. The purchase was funded by an issue of Draper Esprit shares worth just over £250,000. Simon Cook, the chief executive of Draper Esprit, is a former partner at Elderstreet so he knows the business and the people who run it, although he did leave more than 14 years ago. Cook has previously acquired portfolios from 3i and Cazenove, two other firms where he has worked. Draper Esprit has an option to acquire the remaining shares in Elderstreet, which has more than £25m under management. Adding Elderstreet to the group enables Draper Esprit to offer investors a range of EIS funds, VCTs and an ISA qualifying listed evergreen patient capital fund. The enlarged group has venture capital assets under management of more than £350m. At the end of September 2016, Draper Esprit had a net asset value of 352p a share, which is similar to the current share price. The June 2016 flotation price was 300p a share. Draper Esprit is quoted on Ireland’s Enterprise Securities Market as well as AIM.
02 Dec 16
On 30 September 2016, when the company announced its full year results, it reported that the UK business had seen a slow start to the year, with particular weakness in repair and renewal spending by the NHS as well as “reticence” in the education sector. However, with the UK only representing about a third of the business, this weakness was expected to be more than offset by the positive effect of a weakened sterling on its overseas business, given the benefits for competitiveness and margins.