Sacyr published a good set of 9m results with revenues up by 5.6% and EBITDA by 7.2%. However, net profit was down due to the €85m in provisions for the Panama decision. It expects about half of the related cash out in FY21 and the rest over the next 3-4 years. Nevertheless, Sacyr and GUPC will continue pursuing their claims against ACP and Panama Estate in various international instances (ICC, UNCITRAL).
Companies: Sacyr S.A.
Unlike other concessionaires, Sacyr has posted a good set of results with revenues up by 3.5% and EBITDA up by 10% despite being affected by COVID-19. It has also reiterated that its position is well hedged in Repsol and Repsol’s plummeting share prices will have no impact on Sacyr’s cash flow. The only red flag we would like to raise is its increasing gearing ratio even if management is reducing the recourse debt.
Sacyr reported a good set of Q1 results, with the net income secured against Repsol’s contribution but squeezed by negative FX and provisions. While it was expected that the Services division would perform well, Concessions also managed to perform well due to the non-dependence on traffic. We will update our model but will stick to our Buy recommendation.
Another good year for Sacyr. It has managed to show double-digit top-line growth and significant bottom-line growth (ex Repsol). Its EBITDA exposure to Concession assets has increased to 80% and the EBITDA margin has improved by 200bp. The company’s backlog is at the same level as last year and management is positive about double-digit growth in 2020 as well. We will incorporate the Repsol impact and upgrade our outlook for 2020 based on 2019’s results.
The Chilean concessions asset have been partly sold with very good timing but also resulting in a new layer of complexity added to an already complex company.
Following these results, we expect to increase our EBITDA, decrease our net profit and increase net debt and capex. Overall, we expect a positive impact on our target price in the vicinity of 5-10%.
Some investors may ask why there was little stock market reaction when the numbers were so good. The reason is pretty clear: the 10%+ increase in net debt compared to end of December 2018.
Following this earnings release, we expect to increase our target price by some 5% and to maintain our Buy recommendation.
The concession division was at the heart of this CMD. Note that, in our NAV, excluding the Repsol stake, which is hedged by a complex collar, the concession division represents some 65% of our gross assets.
Key takeaways are:
Starting in 2021, Sacyr Concesiones’ equity investments are expected to be fully funded with the portfolio’s annual cash flows.
Current portfolio valuation of concession assets is €1.8bn and should reach its maximum value of €2.7bn in 12 years.
The company registered an over-proportional increase in EBITDA compared to net debt growth, which is a positive and the key fact underlying our investment thesis.
Following the good earnings release, we will review our model. In an initial assessment, we expect to keep our Buy recommendation with a higher target price.
Sacyr has improved its net profit for four consecutive years and its operating cash flow for two consecutive years. Now, more than 75% of EBITDA stems from concessions (€414m in 2018 vs €100m in 2014). On top of this, management has reduced the net indebtedness by some 80% (€1.1bn in 2018 vs €5.1bn in 2014) thanks to a focus on cash management (€412m in 2018 vs €43m in 2014).
Bottom line: Sacyr deserves its Buy recommendation and remains currently undervalued.
Sacyr has been awarded its first three infrastructure projects in the US, thereby meeting one of the targets of its 2015-20 strategic programme.
In our opinion, the absence of a cash flow statement disclosure continues to be a yellow flag.
Following this earnings release, we will rework our model. We expect to increase our EBITDA forecast significantly as well as our EBIT one. But we will keep our adjusted net income forecast mostly unchanged. The Buy recommendation will remain unchanged.
What is noteworthy is the performance of the Engineering and Infrastructure division, whose revenues are up by 27% thanks to a more than 60% increase in revenue from international projects, and whose EBITDA is up 184% to €61m. The performance of the division has been driven by the rate of execution of several major projects in backlog and the contribution from the Pedemontana-Veneta motorway.
Following this earnings release, we will revise our forecasts. We don’t expect a change in recommendation.
The company posted an outstanding Q1 performance but a disappointing performance in the concession business.
Following this earnings release, we will revise our model. We expect no change in our recommendation.
On a lfl basis, that is excluding the extraordinary results obtained in 2016 (€21m in 2016), the increase in net income is 32%, which is outstanding.
The backlog increased by 58%, which testifies that Sacyr has a strong future ahead.
In November 2017, Sacyr successfully secured financing for the Pedemontana-Veneta motorway.
• Revenue up by 4%.
• EBITDA increased by 4% (Construction -35%, Concessions +10%, Services +13%, Industrial +17%).
• EBITDA margin stable at 12.1%.
• EBIT increased by 11%.
• Net profit up by 8% and lfl by 41%.
• Backlog increased by 14%. International backlog up by 35%.
• Rotation of mature concession assets.
• Exposure to variations of the Repsol share price totally covered through derivative transactions, retaining the potential upside in Repsol’s share price and access to dividends.
• Net debt decreased by 14% compared to end 2016.
• Decrease in financial costs by -9%.
• Average cost of debt 4.0%.
Key information (H1 figures):
• Sales up by 8%, 57% of which was generated outside Spain.
• EBITDA up by 16%.
• EBITDA margin at 12.5% up by 80bp.
• EBIT up by 17%.
• Decrease in financial costs by 17%.
• Net profit at €60m, -6% on a reported basis, +36% on a lfl basis without extraordinary items in 2016.
• Net debt down by 20% thanks to the full early repayment of the loan associated with the stake in Repsol, for €769m.
• Backlog up by 16%, of which 61% was international.
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Companies: Directa Plus Plc
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Companies: Volex plc
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