29/11/2011

ACTIONS SOUS EVALUEES (de ING )...Nyrstar...

BENELUX BUZZER: Benelux bottom fishing; the Wavin scenario

Last week plastic pipe producer Wavin out of the blue received a €8.5 per share cash bid from a Mexican industry player, ie, a 114% take-out premium. Due to the high financial leverage, the distressed share price resulted in the shares being vulnerable to a bid, although it was hard to see the obvious buyer. With this in mind we have looked at Benelux names with share prices that include some financial distress while offering attractive underlying operations and/or cash flows, which also makes them vulnerable to a potential take-out: BAM, Grontmij, Nyrstar, TomTom and USG People.

BAM: With a weak construction outlook, pending austerity measures, further decline in housing market, land write-downs, damaged track record (rights issue/profit warnings), still considerable debt (incl. non-recourse) causing the stock to trade at 4.6x BAM’s own guided for €120m net profit. Strabag, the Austrian contractor, with revenue of €12.4bn, EBITDA of €687m and net cash of €49m (ex non-recourse), a market leader in Germany, Austria and Poland has earmarked, believe it or not, Benelux as a strategic growth area. Assume Strabag would bid €4.0 per BAM share, a 65% premium, it would in one blow transform into a €20bn revenue company, top 3 in EU and would become a market leader in Belgium and the Netherlands. Strabag’s recourse debt position would rise to €893m and the combined EBITDA to c.€875m, pointing to a sound 1.0x leverage ratio. Strabag then still has the option to sell the 21.5% stake BAM has in dredger Van Oord (BV of €163m). So now we wait for somewhat better times in construction. BAM trades at 2.3x EV/EBITDA and Strabag trades at 3.0x performing the same recourse debt adjustments.

Grontmij: Distressed firm, debt laden, management changes and unclear strategy, but interesting market positions in different countries and segments in Europe that can be seen as a platform for expansion. Grontmij has become a target in our view with an EV/sales of below 0.3x. Take-outs in this consolidating industry with several US players active are usually at 40-45% EV/sales or 6.5-7.0x EV/EBITDA. This results in a share price range between €9 and €13. Grontmij’s share price closed at €4.66 on 28 Nov.

Nyrstar shares are currently trading at 12M lows, driven by macro concerns which could impact the zinc price/volumes and relatively high gearing. In reality however, the zinc price holds up pretty well at c.US$1,900 p/t and we do not believe the balance sheet is at risk at all (the company has actively bought its own shares in the recent period). Management recently stated its ambition to generate c.€750m in EBITDA by 2016, based on the company’s current assets. Assuming a leverage of 1.0x net debt/EBITDA, and valuing the company at 5.0x EV/EBITDA, this would translate into a fair value of €18.4. Hence, the share price could triple in the medium term, in our view. Glencore (currently holds a 7.8% stake in Nyrstar) could seize this opportunity to take out Nyrstar and take a big step in consolidating the zinc market. Let us not forget that Glencore is Xstrata’s largest shareholder (34.1% stake). A combination of Glencore’s, Nyrstar’s and Xstrata’s zinc assets would create by far the dominant zinc smelter and miner with a +20% market share (Hindustan Zinc has c.7% market share). Let us also not forget that Nyrstar’s current CEO managed Arcelor into being an attractive take-over target for Mr Mittal.

TomTom: Following a 3Q11 release which signalled that the sky is not falling down on TomTom, the share price is back to its low set on 23 Sep. Worries/little visibility as to how PND sales will hold up under current weak conditions seems to be the main explanation for this. At the same time, the balance sheet looks safe based on FY11 guidance and deleveraging will continue. This could be a trigger for either a strategic buyer in the electronics or automotive sector or a financial buyer, willing to take a longer-term view, to step in. In such a case, we would not be surprised if management would participate. TomTom’s founders still hold 47% of the shares, evenly split between the four of them, among which include CEO Goddijn and head of the Consumer division Corinne Vigreux. LT shareholder Flevo owns another 8.4%. In order to persuade minority shareholders to participate, we would see our current TP of €4.2 as a minimum. Assuming the same 2.2x trough-to-offer multiple seen at Wavin, TomTom would be valued at €5.6 per share

USG People: The share price has lost 69% from recent highs, and now trade around 2009’s distressed low of €4.96 (including a 10% share issue) and at an EV/Sales of 0.18x, ie, below the 2009 low of 0.25x. What could happen? (1) we acknowledge that USG’s general staffing profile and high exposure to the mature Benelux market does not match the strategic agenda of the two most logical acquirers, ie, Adecco (CHF36.88, HOLD, TP: CHF41.0) and Manpower (NR, US$34.26), however, we see considerations that might trigger a bid as investment rationale could overtake pure strategic discipline for Adecco and Manpower, ie, strong synergies possible, filling in the rather white spot of the Benelux, and even including a high premium a deal would be strongly value creative, (2) private equity might team-up with large shareholder Mr Alex Mulder (20% stake) and (3) Brunel might even be interested to team-up and turn around USG into a professional player, especially as balances of power are changing in favour of Brunel. The historical hurdle, Mr Mulder, might well settle for a much less ambitious bid given the limited strategic options and bleaker economic outlook.

Benelux Team, Amsterdam +31 20 563 8789, Brussels+ 32 2 547 60 97

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12:17 Écrit par swingteam-cc | Lien permanent | Commentaires (0) |  Facebook |

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