Vinci had a good summer, with Q3 contracting activities and autoroute traffic almost back to last year’s level. Management continues to believe that there will be a significant reduction in the full-year results but has not downgraded its guidance, which was last updated in July, except for airports where it now assumes a traffic reduction of 70%. Post the trading update, we have made minor tweaks to our model which had no impact on our recommendation.
Companies: VINCI SA
Vinci underperformed in H1 20 due to its significant exposure to concessions (especially airports) as well as to France which faced one of the strictest lockdowns in Europe. However, it continues to have a good order book in its contracting business and remains positive that it may even come up with 2021 margins better than last year’s in its construction activities. The group continues to have a strong balance sheet but the board has decided not to pay an interim dividend.
Continuing the trend from 2019, Vinci saw a good start to the year, until the activities were drastically hit by the lockdown, especially in France. While the contracting activities have started regaining momentum gradually, the concessions will be hit for a long time. Q1 results were in line with our expectations but we are revising our Q2 and Q3 projections downwards.
FY19 was a good year for Vinci with top line growth of 10% to €48.1bn (with growth being observed along all the divisions and geographies of operations). NI went up by 9% to €3.3bn. Overall, the company fared better than the consensus and expects single digit growth in 2020. The company will pay a dividend of €3.05/share. We believe that we have already priced in the current and expected performance in our target price.
Vinci posted a good trading update.
However, risks are mounting in real estate, in our opinion. Hopefully, a crash will not take place without a sharp increase in interest rates and on top of that Vinci Immobilier is only a small share of the group’s revenue contribution.
Following this earnings release, we expect no change in our Add recommendation.
The main driver over the following quarters will be the integration of Gatwick into the Airports portfolio and the potential impact of Brexit on the number of passengers.
Management confirmed its rather vague guidance of higher revenue and net income for FY19.
Following this earnings release, we expect to keep our Buy recommendation unchanged with a somewhat higher target price, namely a 5-10% increase.
Concessions’ revenue was up 7.9%, mainly thanks to Airports and contracting’s sales were up 10.3% thanks to strong organic growth in each business line.
The key message in the 2019 outlook is that management expects further growth in its revenue and net income.
Overall, we expect to increase our revenue assumption with a proportional increase in EBITDA, meaning that our target price will increase by 2-5%.
Vinci published a set of figures which were a bit disappointing, especially concerning toll roads traffic, mainly because of the “Yellow Vests” unrest.
The big question is what will be the impact of the 30% discount for the 10 round-trip per month subscription. Note that French toll roads account for 55% of gross assets in our NAV, so this will be key to forecast next year’s EBITDA contribution from toll roads. Overall, we guestimate an impact of less than 5% on EBITDA.
Here, we discuss what the market will look like in the next FY18 earnings release and the main topic that could be dwelt upon during the conference call.
Note that we haven’t had contact with management since we are in the quiet period.
The Airports division accounts, after the integration of Gatwick Airport, for some 25% of gross assets in our NAV.
There was 6.8% passenger traffic growth in FY18 on a lfl network base excluding Gatwick, as well as 7.2% growth in Q4, which is really good.
We are currently reworking our model to integrate the Gatwick acquisition and the deal with the Portuguese government as well as this solid set of traffic figures. For now, we don’t expect a significant impact.
Vinci recently reinforced its position in airports thanks to the acquisition of a controlling stake in Gatwick and the decision to expand Lisbon’s airport capacity.
Overall, this helps the company’s position as the favourite player in the bidding for ADP.
Management confirmed its full-year rather vague guidance, namely that Vinci expects to see growth in revenue, operating income and net income.
Overall, we don’t expect a change in our recommendation and our adjustments to our model will have little impact on the overall valuation.
In the UK, there is a deliberate effort to reduce the order intake, in our opinion as a consequence of Brexit and Carillion bankruptcy, and in order to focus on margin quality.
Concerning real estate and property development, management spoke of a most likely peak in activity in 2018 and expects to reach a plateau or even that it will begin trending downwards.
Following this earnings result, we will revise our model. We don’t expect a change in recommendation.
Business indicators in Q1 18, despite adverse weather conditions in Europe, confirmed the positive trends seen in 2017 and support the group’s forecasts of higher revenue and income for the FY.
Following this earnings release, we will revise our model. We expect no change in our recommendation.
Vinci released a robust set of FY figures which were slightly above street expectations and translating the continued momentum of Concessions in Q4 as well as improved Contracting margins. The dividend has been raised to €2.45, higher than we had anticipated (AV: €2.30), while the group gave a positive albeit unsurprising 2018 guidance.
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Although 2020 will probably go down in history as one of the most challenging years experienced during our lifetime, it will also likely be chronicled as one of the best years for the recognition and appreciation of science. As we entered 2020, the COVID-19 pandemic was in its infancy. However, it rapidly evolved through the exponential rise in infections and mortality globally. Much has been achieved during the past 12 months in the fight against COVID-19, but, as we enter 2021, there are considerable concerns about the emergence of a mutant version of the virus and the second wave that we are now facing.
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Capital Limited has released its Q4 and FY2020 trading statement this morning. Overall it shows 2020 was a strong year for the company with revenue growing 18% and most other operating metrics growing positively with it – see Fig 1. We have adjusted our forecasts accordingly and also to take into account the mining services contract for the Sukari Mine which the company won late last year. The latter is a game changer for Capital and its investment case in our view; turbo charging revenue growth, enhancing margins and diversifying cashflow all of which should lead to materially higher valuation multiples. We raise our PT to 127p.
Companies: Capital Limited
2020 ended with two positive moves for carbon capture and storage (CCS) which should benefit Velocys clients. In the US, the signing of the COVID 19 stimulus bill extends and adds support for CCS in the US where the Bayou project is working with CO2 offtaker Occidental to deliver a negative emissions project. The UK government has also published guidance on CCS funding making this option an additional opportunity for the Altalto project. Velocys remains one of the very few opportunities for investors to play negative emission technology. We see both these moves improving the operating environment for the company’s clients and their projects, stimulating demand for the Velocys technology.
Companies: Velocys plc
XP reported a strong finish to 2020, with Q4 revenues up 24% y-o-y and 4% ahead of our forecast, driving FY20 profitability ahead of expectations. Order intake has normalised to pre-COVID-19 levels, reflecting continued strong demand from the semiconductor sector. We have revised our estimates to reflect strong Q420 performance and the weaker dollar, driving a 3.0% increase in FY20 EPS and a 2.3% cut to our FY21 EPS.
Companies: XP Power Ltd.
Avingtrans has announced that it has continued to perform well in H1 FY2021 and is trading in line with market expectations. Our cautiously framed forecasts anticipate adjusted EPS growth of 17% in FY2021E and 10% in FY2022E, including the benefit of cost reduction measures. The Group confirmed high levels of order cover for FY2021E at 85% at the end of September and orders taken since then will have provided further comfort. The shares have given ground YTD and now trade on a forward EV/sales multiple of 0.9x and prospective PERs of 13.8x and 12.7x for FY2021E and FY2022E respectively which are well below sector metrics. Management is also making great progress within the medical division where the potential for its small scale MRI is substantial.
Companies: Avingtrans plc
Like many awful dreams, the Covid19 nightmare hasn’t quite finished, recently mutating into an ultracontagious super-bug. The risk being global transmission and infection rates spiral out of control, swamping healthcare systems again. However this time there is an answer. Hunker down for a few months, and inoculate as many vulnerable people as possible to reduce fatalities/hospitalisations. Plus, the Oxford/AstraZeneca vaccine is relatively simple to distribute (re 2°C to 8°C). Making rapid nationwide rollouts feasible, alongside ultimately bringing the curtain down on this dreadful virus.
Companies: Mpac Group PLC
Initiating with a Buy rating. We initiate our coverage of Proton Motor Power Systems (“Proton Motor”) with a BUY rating and a target price of 201p. Our valuation equates to a market capitalisation of £1.47bn, compared to a current share price of 65.5p and a market cap of £479m.
Companies: Proton Motor Power Systems Plc
Seeing Machines has announced that it has licensed its Occula® Neural Processing Unit to OmniVision Technologies Inc. This advances the relationship from the MOU announced in September 2020 and builds on a relationship that is over five years old, with the two organisations having worked on multiple automotive programmes with a number of Tier 1 customers.
Companies: Seeing Machines Limited
Directa Plus has released a trading update guiding to revenue for FY20 of approximately €6.5m. This is 9% ahead of the €6.0m in the trading update from 3 December and 18% ahead of our expectations of €5.5m which were set on 24 September 2020. The strong trading performance has been primarily driven by the sales of G+ enhanced face masks, including Co-Masks, and the strengthening performance of Setcar in the Environmental Division.
Companies: Directa Plus Plc
A £10m fundraising expedites the Protos project and opens the way for the £10.2m Peel warrant exercise in the current year. The funding will also give the company additional resources to pursue international opportunities. Adjusting for the raise and some timing differences, our UK only base valuation rises from 5.0p to the raise price of 5.5p and we see existing international opportunities taking this to 7.5p (from 6.9p) and including opportunities in Europe this could rise to 12.1p (from 11.2p).
Companies: Powerhouse Energy Group PLC
AFC Energy (AFC) – Corporate – Strategic Partnership with Ricardo
Companies: AFC Energy plc
Volex has reported interim results that are in-line with expectations following a strong trading update in mid-October. Of far greater significance is today’s announcement of the proposed acquisition of DEKA for a consideration of up to €61.8m on a debt free basis. DEKA is a leading and highly profitable power cord manufacturer, strategically located in Turkey, that serves leading European white goods manufacturers. The acquisition should close in early CY2021, subject to expected Turkish Competition Authority approval. We foresee 15% earnings enhancement in FY2022E with further opportunities for revenue synergies with Volex in the Far East as its operations also vertically integrate, production efficiencies increase and the cost of production falls. The statement highlights that pro forma net debt/EBITDA remains under 0.4x and this provides scope for further bolt-on acquisitions alongside a new $70m RCF and $30m accordion, also announced with the interims.
Companies: Volex plc
Directa Plus has released a positive trading update, prompting an increase in FY20 revenue forecasts after a strong conclusion to the year. The outperformance has come from Setcar and, again, from better than expected sales of G+ enhanced face masks (one of the drivers of revenue upgrades in early December). The Group enters FY21 with momentum and, in our view, attractive medium term growth potential, having responded very well to the challenges of the COVID pandemic.
Further media reports that Dr Martens, the British Boot brand is planning an IPO on the LSE. It is currently owned by PE group, Permira who is expected to sell down its stake at the IPO. March 2020 YE the group had revenues of £672m and EBITDA of £184m. Deal size TBC. Upon Admission to AIM, Nightcap will acquire The London Cocktail Club Limited (the "London Cocktail Club"), which is an award winning independent operator of ten individually themed cocktail bars in nine London locations and one location in Bristol. Offer TBC Due mid Jan. HSS Hire Group, HSS.L transfer from Main to Aim. Mkt Cap c. £70m. Recently raised £52.6m. Leading supplier of tool and equipment for hire in the United Kingdom and Ireland and has provided equipment hire services in the United Kingdom for more than 60 years, primarily focusing on the B2B market. Due 14 Jan. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb.
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AFC Energy has announced a strategic engineering collaboration with Ricardo (RCDO). It will focus on global opportunities for AFC’s fuel cell technology in marine, rail and stationary power sectors. The agreement should open sizeable new markets for AFC which are not yet reflected in our long-term projections or the market capitalisation. Our valuation is under review for a significant upgrade given recent positive developments.