BioAmber BUY Target Price $16

BIOA : NYSE :
US$10.10 BUY 
Target: US$16.00

COMPANY DESCRIPTION:
BioAmber is pursuing renewable chemicals (bio-based
“drop-in” alternatives to petroleum-based products) with
its proprietary industrial technology platform (microorganisms,
catalysts, purification).
All amounts in US$ unless otherwise noted.

Sustainability — Bioresources
PROVING OUT THE PROCESS IS PARAMOUNT MAINTAIN BUY, $16 TARGET
Investment recommendation
BioAmber is pursuing renewable chemicals (bio-based “drop-in”
alternatives to petroleum-based products) with its proprietary industrial
technology platform (micro-organisms, catalysts, purification).
Investment highlights
 Aseries of investor meetings with BioAmber’s
CEO (JF Huc) and EVP Mike Hartmann. Our favorable view
gets reinforced for this industrial biotech platform, as the move to commercial production at Sarnia stays on track to ahead of schedule (’15 completion) by all metrics (and on budget).
 While investor skepticism rightly persists across this sector given the
risks associated with plant commercialization (and unsuccessful
attempts by other technology developers) we find BioAmber’s
technology and process well positioned (low cost sugar inputs, only
3x scale-up) to help change this perception (clearly the outcome is
binary in nature, as investors rightly focus on handicapping risks).
 As a reminder, management anticipates ~5 months for Sarnia
commissioning (post mechanical completion in early ’15), with a
gradual ramp expected in H2/15. Current cash supports the process
(~$79M exiting Q3, vs. burn <$2M/month), while the company also
continues to quietly make progress on preliminary work for a
potential plant 2 (bolstered by Vinmar take-or-pay).
Valuation
Our target of $16 equates to an EV/sales multiple of ~6x our F2016 sales
estimate of $56M and ~6x EV/EBITDA based on our probability-adjusted
EBITDA contribution of ~$55M for Sarnia (75%) and plant 2 (25%).
Risks
Development-stage company and scale-up, commodity exposure,

 

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