Equity valuation of Ence Energía y Celulosa SA

Abstract

This dissertation aims to value the Spanish pulp and biomass energy producer Ence Energía y Celulosa. The main purpose is the determination of a target fair price for one common share of Ence and issue a buy, hold or sell recommendation, by comparing it to the current market price. The valuation is based on both a pulp and biomass energy industry analysis, complemented by a company analysis in order to form assumptions for the future. The valuation of Ence is computed through a Discounted Cash Flow method for each of the two businesses, followed by a sum of the parts approach. This methodology is complemented by a multiples valuation. Through the DCF methodology, Ence’s fair value is €4,21/share, supported by the multiples valuation, which implies a buy recommendation with an upside of 38%. The buy recommendation is issued with a 66% confidence level as it holds in most conservative scenarios. This recommendation is consistent with Haitong Investment Bank’s. The main differences between the valuation methodologies and assumptions are analyzed.

Date of Award	19 Jul 2016
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	José Carlos Tudela Martins (Supervisor)