EXECUTIVE SUMMARY
Recommendation AGR : Subscribe
Managem Group, a leading mining player, is launching a new capital increase operation for a total amount of MAD 3.0 Bn. The main aim is to accelerate the deployment of its 2023-2025E investment program while ensuring the solidity of its balance sheet.
At the end of our analysis of Managem Group, the impact of its development strategy by 2025 and the international outlook of metals, we recommend subscribing to this operation.
Our argument revolves around the following points:
- This capital increase marks the strong involvement and firm commitment of the Reference Shareholder Al Mada in Managem's growth project through a 83% subscription to this operation. This constitutes a confidence signal both towards minority shareholders and stock market inves-tors;
- Managem's new development strategy would allow it to overcome a major constraint. This is a portfolio of “fragmented” projects of relatively “small” size, not allowing to reach a new profita-bility level. From 2025E, we will witness the start of large-scale projects with very competitive “cash costs” and EBITDA margins +5 pts higher than historical projects;
- This change in dimension of Managem Group should take place on the ST and not on LT horizons. We forecast a doubling of EBITDA, going from an average of MAD 2.5 Bn over 2020-2023 to MAD 5.0 Bn from 2025E. At the same time, the recurring profit capacity would reach a new level, from MAD 0.8 Bn to MAD 1.5 Bn during the same period;
- The Group's net debt, which is expected to exceed MAD 10.0 Bn by 2025E, should be put into per-spective for 3 reasons: (1) A target operating cash flow of MAD 4.2 Bn, i.e. a net debt recovery capacity of 2.3 years, (2) A target earning power of MAD 1.5 Bn allowing to further strengthen Equity through a Gearing which would settle at 70% from 2026E and finally, (3) Financial expens-es which should be below 10% of EBITDA at the end of the same period.
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