WSE: TIM – DCF VALUATION, FINALIZATION OF THE INVESTOR SEARCH PROCESS
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DCF VALUATION
Assumptions:
We rely on our own forecasts of consolidated results presented in this report,
The value of cash flows discounted as at the date of publication of the report,
Net debt as at 31/12/2022 in the amount of PLN 99 million (including lease liabilities under IFRS 16),
Long-term growth rate after the forecast period equal to 0%.
Share of equity in financing assets at the level of 80%.
Effective tax rate of 20%.
Risk-free rate of 5.9% (previously 6.8%), risk premium of 7.4% (previously 7.2%), beta of 1.0 (unchanged).
DCF VALUATION
Below we present WACC calculation:
PEERS VALUATION
FINALIZATION OF THE INVESTOR SEARCH PROCESS
In March, the company announced that it had signed an investment agreement and acquired an industry investor. After a lengthy selection process (TIM reviewed strategic options several times), the German company Würth Elektrogroßhandel was selected. The Würth Group is active in the production and sale of fastening and assembly materials. It employs over 85,000 people. employees in over 400 companies and has over 2,500 stores in 80 countries. According to the preliminary annual financial report, in 2022 the group achieved sales revenues of around EUR 20 billion. In Poland, the group operates through two subsidiaries, but these companies are quite independent in making operational decisions. It will be similar in the case of TIM, which is to be managed by the current management after ownership changes. As part of the transaction, the German partner undertook to announce a tender offer for all TIM SA shares at PLN 50.69 per share (the value of the entire TIM is approximately PLN 1.1 billion).
This price is:
- 122% of our current valuation,
- 134% of the valuation as of the date of publication of information on signing the contract with Würth Elektrogroßhandel and the tender offer price,
- 148% of the arithmetic average of the exchange rates from the period of 3 months preceding the date of signing the contract and publishing the tender offer price,
- 169% of the arithmetic average of the exchange rates from the period of 6 months preceding the date of signing the contract and publishing the tender offer price,
- 82% of the highest price achieved by TIM in the 25-year history of the stock exchange (PLN 61.3 recorded in May 2007).
In line with this commitment, Würth (through its FEGA subsidiary Schmitt Elektrogroßhandel GmbH) announced on April 26, 2023 tender offer for 100% of TIM SA shares at PLN 50.69. Subscriptions will be accepted until July 4, 2023, and the expected date of settlement of the share purchase transaction under the tender offer is July 7, 2023. In the tender offer, the investor stipulated the possibility of extending the subscription period.
The tender offer was announced under the following conditions:
a) obtaining by the investor consent to the concentration consisting in the investor taking over control over TIM SA, and consequently the TIM Capital Group,
b) in the event that during the tender offer, the GMS of TIM is held, such General Shareholders adopt a resolution according to which all profits earned in 2022 and previous years will remain in the company, except for the profit required to cover the advance payment towards the dividend in the amount of PLN 30 million paid to shareholders in December 2022,
c) at least 50% of the total number of TIM SA shares, ie 11,099,600 shares, will be covered by subscriptions under the tender offer..
The investor informed about the fulfilment of condition c) on 9 May. This was certainly influenced by the submission of subscriptions in the tender offer by TIM's main shareholders (including members of the company's management board), holding a total pool of 9,315,081 shares of the company (representing 41.96% of the capital and votes at the AGM). Nevertheless, the remaining amount (at least 1.7 million shares, 8% of capital) was collected from other shareholders.
In turn, the fulfilment of condition b) is supported by the Management Board's recommendation regarding the distribution of last year's profit, which assumes limiting the dividend payment from the 2022 profit only to the amount of the advance payment made to the shareholders in December 2022.
Fulfilment of the condition regarding consent to concentration depends on the administrative decision of the relevant antimonopoly authorities. The investor has decided to submit an application to the European Commission in this matter and expects a positive outcome until the end of the tender offer. Any delays in this regard may extend the deadline for accepting subscriptions in the tender offer (the investor has reserved such a possibility).
Michał Sztabler
Equity Analyst
michal.sztabler@noblesecurities.pl
+48 22 244 13 03
