- New £40mn project funding banking facility
- Strong growth forecast
Technology-enabled energy services provider eEnergy (EAAS: 7.2p) has secured a £40mn project funding facility with NatWest over 12 years.
The group helps organisations achieve their net zero goals by designing, funding and implementing energy-efficient projects. The new facility will be deployed through a newly formed special purpose vehicle owned by eEnergy, which will become the operator and retain ownership in each completed project for public organisations. It gives eEnergy a unique, compliant off-balance-sheet solution for public sector customers, strengthens its competitive position in tendering for large multi-site contracts, lowers cost of capital, and delivers an attractive financial return on the retained project interests.
It’s a high-growth business. Analysts at Equity Development forecast a surge in eEnergy’s annualised revenue from £17.5mn (2023) to £30mn (2024), rising to £34mn in 2025. On this basis, expect cash profit (pre-central overheads) of £1.6mn (2023), £3.8mn (2024) and £5.1mn (2025). The transition away from ageing fluorescent light bulbs to energy-efficient LEDs is a key driver and one that is being accelerated by the 2023 ban on new fluorescent light bulbs. Analysts note that up to 20,000 schools have yet to implement the change, representing an addressable market of £1bn. The business is also benefiting from the rapid growth of eSolar projects, which account for 40 per cent of group revenue.
Last month, eEnergy sold its fast-growing energy management business to Flogas, a division of support services group DCC (DCC), and should end this year with net cash of £11.3mn. In addition, contingent deferred consideration (payable in two instalments) could add £10mn (capped at £20mn) to the cash pile within 18 months. Effectively, it means the operational business is in the price for £6.9mn as a standalone entity, or 1.8 times 2024 cash profit estimates (pre-central overheads). That’s harsh given that the energy management division was sold on a multiple of 6.5 to 8.5 times forecast 2024 cash profit to enterprise valuation.
I suggested buying the shares at the current price in my 2024 Bargain Shares Portfolio, and they continue to rate great value on a deep discount to my sum-of the-parts valuation (14.5-15p). Buy.
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