Going nuclear: Assystem short notes

• Business
  • One of the leading nuclear engineering companies in the world from France
  • Operating mainly in France, UK, Central Europe, Middle-East and India to benefit from new nuclear buildup market and maintenance and decommissionings of existing nuclear fleets
  • In the past, Assystem has focused more on maintenance engineering in France and UK, as the new-nuclear build-up market has been dead for last two-or-so decades
  • Now, there seems to be new boom in the nuclear build-up market, which is complete change relative to what Assystem has experienced in the past
  • Growth in the core Energy & Infrastructure engineering segment has been 10 %+ in the past, so if the old maintenance business is not lost, the new build-up market would mean acceleration of growth (by a lot per my gut feeling)
  • Assysttem is also serving other energy transition engineering needs
    • Renewable energy, hydrogen, rail and other public transportation, electricity grid
  • In short, Assystem seems to be big beneficiary of energy transition projects in the coming decades
• Target Nuclear market situation
  • UK: One existing new-build on-going, one new announced + decommissionings and extensions of large nuclear fleet
  • France: Flamanville and ITER are existing buildups, also doing extensions and decommissionings of existing fleet, but big thing is, after two decades, rumored new nuclear buildup projects (6 units)
  • India plans to go from 7 to 63 GW by 2030s
    • If so, market would be equal to France, which is one of the biggest nuclear markets in the world
    • Assystem has subsidiary here with strategy to come the leading nuclear engineer in the market.
    • When China decided to go nuclear, it built huge amount of nuclear power plants.
    • Now Assystem has leg in to benefit from similar trend if it happens in the India market.
  • Turkey is Finishing Akkyu in 2026 and wants to build at least two more
    • Assystem has JV here so doesn’t matter who will do it, but if it will be done by EDF/FRamatome, it will mean big business for Assystem
  • Also Saudi-Arabia new nuclear buildup, UAE nuclear buildup, Egypt nuclear buildup and Utzbekistan and Czech investigating nuclear
• M&A
  • Announced selling of non-core units and JVs, proceeds say 200 meur
  • Might sell Framatome JV (“committed” to hold for 2022), proceeds at book value would be some 130 MEUR
  • Will continue nuclear engineering and other energy transition engineering roll-up: has bought something every year in the past, contributing to growth
  • Experienced in M&A gymnastics: lot of transactions and buybacks in the past
• Management
  • 50%> owner Dominique Louis “bet the farm” on nuclear engineering middle of Fukushima bear market, now seems to be paying off
• Other
  • Market mood toward nuclear changing:
    • Spike in electricity prices, energy transition urgency and bad behaving Russia (supplying most of European gas) seem to have benefitted nuclear industry
    • UK announced one new plant, France announced committing to new nuclear projes, in in immediate aftermath of the European “gas-crisis”
    • Will accelerate new-nuclear projects over the the world? (everybody wants to be energy independent, nuclear is one way to do it)
    • Post-Fukusima nuclear bear market over?
• Valuation
  • If you deduct 300 meur JVs (at book value) from 525 MEUR EV, the core operating EV/EBITA is 6, which is pretty cheap
  • If you calculate normalized “look through earnings” we are at around 10-11 P/E ratio, but JV interest makes the look through earnings little bit hairy to calculate

Disclosure: Long 4,6 % position. Note that this research is just random googling, I’m not expert in the energy industry. Do your own DD.