SPANISH WIND-MAKER A HOT PROPERTY

Gamesa Becomes Most Expensive Wind-Turbine Maker on Takeover Speculation
Ben Sills, February 23, 2011 (Bloomberg News)

"Gamesa Corp. Tecnologica SA is the most expensive wind-turbine maker based on price-earnings ratios after [speculation about either a bid for Gamesa from a Chinese competitor or a huge conglomerate] boosted its shares 22 percent since October, creating a risk for investors should no offer appear…Julien Desmaretz, an analyst at Bryan, Garnier & Co. in Paris…recommends selling the stock because a takeover…[the company] will underperform competitors.

"The Spanish company…trades at 27 times estimated profit…Investors are paying 16 times estimated earnings for Vestas Wind Systems A/S of Denmark, the world’s largest wind-turbine maker, and multiples of 26 for Sinovel Wind Group and 12 for Xinjiang Goldwind Science & Technology Co., both based in China."

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"Gamesa surged after UBS AG analyst Daniel Stillit identified it as a potential target for Shanghai Electric Group Co. in an October research note. Wind-turbine makers are braced for consolidation after installations slipped last year just as companies ramped up investment in new factories.

"Global turbine demand slid for the first time in six years in 2010, falling 5 percent to 35.9 gigawatts, as banks curbed loans to developers…Turbine manufacturing capacity exceeded demand by 37 percent and next year will overshoot by 58 percent, even as installations gain…[C]onsolidation in the turbine-supply industry [is anticipated]…"

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"…Gamesa may report 2010 net income of 50.1 million euros ($68.9 million), the median of eight analyst estimates…That’s the least profit compared with market capitalization among its six closest publicly traded rivals…Gamesa was ranked the No. 6 turbine maker with a market share of 6.7 percent in 2009…The company’s current enterprise value of 1.8 billion euros, a measure of a buyout value, is about 5.9 times its estimated earnings before interest, tax, depreciation and amortization. That compares with ratio of 6 for Vestas.

"Gamesa aims to boost sales to 4 gigawatts a year by 2013 from about 2.4 gigawatts last year by selling a new range of turbines to the U.S., China and Brazil…The generators will cost 900 million euros to develop over four years and will depress its operating margin to about 4.5 percent next year…Iberdrola SA, the company’s biggest shareholder, has increased its stake to about 20 percent from 15 percent since the plan was announced. The move should be interpreted [according to Iberdrola] as a vote of confidence in Gamesa’s strategy…"