Dovre - Still can resume profitability
Dovre’s losses continued over Q3, as was known thanks to the yet another negative profit warning. Dovre could still restructure profitably, but low multiples are justified now.
The high net cash position still gives a somewhat rosy picture
Dovre’s EUR 32.3m Q3 revenue was higher than we previously estimated before the latest negative profit warning, while the additional loss was EUR 8.7m in terms of EBIT. The losses, particularly due to Suvic’s Swedish wind projects, have continued to spiral since last year; Dovre says it now has a reliable visibility of Suvic’s financials, yet the EUR 36m cash pile it received from the segment sale has largely vanished because of the losses. The EUR 17.5m net cash position was still high, but it remains unclear just how much of this ultimately belongs to Dovre as part of it is due to higher trade payables.
Strategic review underway as more focus is needed
In our view Dovre’s Finnish Renewable Energy units (especially BESS but also solar energy construction) should still satisfy going-concern principles; the main questions are what to do with Suvic’s Swedish operations as well as how and at what price could non-core units Proha and eSite be divested. It’s unclear exactly how much more financing is needed towards next year, but the still high net cash position at the end of Q3 and Dovre’s comments on new project sales suggest any new capital infusion might not be needed at least in a more optimistic scenario. Dovre might thus manage to continue from here without additional damage.
Low multiples are warranted after the painful episode
One of the key questions is whether Suvic will continue its Swedish operations or focus on Finland instead as it could play safe and do more modest scale within BESS and solar projects. We make some more marginal estimate revisions for the coming years as we would expect a sustainable turnaround is possible with an annual EBIT of some EUR 1-2m. Dovre’s exact capital structure going forward remains uncertain, but the current market cap of EUR 8m would leave long-term upside in the case of a sustained turnaround from now on. The following months are crucial due to the acute liquidity issue, yet even in a positive scenario it will take longer than that to earn a significant rerating after the recent losses. Our new TP is EUR 0.08 (0.17) as we retain ACCUMULATE rating.