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Markets only seem to be going up, and yet the risks, macro and micro, are still here, as highlighted by more competitive developments on Dufry''s upcoming rebid in Spain (AENA). Our preferred way of playing the travel retail recovery? The announced cash-or-shares bid makes Autogrill (+) a cheap option on Dufry (=), with all of the upside if Dufry continues to rally, and a floor at EUR6.33 if things go sour. Negative developments on competition for the AENA contracts, in our view Industry press reported on 25 January that AENA received ''interest in presenting bids'' for its upcoming July contract award from 10 global travel retailers, of which 4 are major Asia-based conglomerates. This compares to only 6 confirmed bids at the latest renewal in 2014, and challenges the view of COVID having sanitized the competitive environment for large airport contracts. Spain is not a material contributor to Dufry''s profits, but the sentiment impact from losing one of its largest contracts, as well as procurement inefficiencies, could be significant. But still a lot to like on recovery and on China reopening Travel Retail is still far behind other Leisure sub-sectors in terms of recovery, with most operators still trending c. -10% below 2019 at end Q3, one last leg which we expect to come with significant operating leverage. Dufry''s Asia-Pacific division in particular represented c. 14% of group revenue in 2019 and is currently still -69% below 2019 revenue levels, while recovering China outbound volumes will also help spend per pax into the UK and other global hubs. How to play it? The Autogrill bid structure makes it a cheap option with downside protection Following Dufry''s bid for Autogrill announced on 13 July, Autogrill shareholders will have, by Q2, to elect between EUR6.33 in cash, or 0.158 DUFN shares per AGL share. If we exclude a meltdown scenario where the bid is called off, this means that buying AGL today offers one-for-one upside if DUFN shares...
AGL AVOL AGL
Autogrill’s market-beating H1, upgraded FY22 outlook and maintenance of its mid-term targets pleased the market, but the share price upturn might be limited by Dufry’s takeover price with negligible upside. An increase in the transaction price should not be ruled out, considering Autogrill’s rosier future. We will adjust our FY22 estimates upward but do not expect a major change to our target price.
Autogrill ANGLE plc
The buy-out of Autogrill by Dufry is expected to be completed in Q1 23. We reiterate our upbeat sentiment on the joint efforts and would recommend the stock conversion option for free-float shareholders.
Dufry has agreed to buy out Autogrill and the latter’s controlling family will maintain a considerable influence on the board of the combined group. The offer price is below Autogrill’s last closing price, while we re-confirm our upbeat stance on this deal for the potential synergies.
Autogrill and Dufry confirmed yesterday that a potential merger is under discussion. We hold an upbeat stance on this deal, which might benefit from meaningful economics of scale and appealing expansion opportunities.
After four consecutive guidance upgrades, Autogrill again published market-beating FY21 results. We expect stronger FY22 estimates in consensus and our estimates.
Yesterday’s share price rose by over 10% due to the group’s above-market FY21 revenue and upgraded guidance for the fourth time.
The share price goes up as Autogrill upgraded its FY21 guidance (for a second time, since July’s) after seeing an encouraging summer performance.
On top of enjoying softening market conditions, Autogrill demonstrated better-than-expected cost efficiency and improving FCF generation in its H1 earnings release. The upgraded FY21 guidance rebuilds the market’s confidence further.
Autogrill’s quarterly earnings release and trading update showed improved cost efficiency and softening market conditions. The recently-revised guidance for FY21 and mid-term (FY24) was reiterated.
Autogrill has announced the sale of its US motorways business for $375m and revised its FY21 guidance and mid-term targets to reflect the impact of the deal. The group also re-confirmed its plan of a capital increase with pre-emptive rights of up to €600m by the end of H1 21.
Autogrill’s FY20 net result missed analysts’ expectations by 5% and its FY21 forecast disappointed the market, due to a revenue target that was 20-30% below consensus. Shares dropped by over 7% this morning.
Autogrill’s FY20 revenue missed the market’s expectations by c.5%. The cash position remains comfortable while the latest trading update reminds of tougher market conditions.
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