Sacyr Is Worth Half Of Valuation They Have Of Its Concessions Subsidiary

More visibility. That has been the late motive of the Investor Day that Sacyr celebrated last week. Among the headlines they left are, in the first place, the assessment they make of their current and future concessions business , the low demand risk that underlies them and the firm objectives of reducing debt with recourse (the one that is not linked to projects) and profit growth.

This visibility is based on the assessment that the company itself makes of its concessions business, which for years has become the pillar of growth and profitability of the group (replacing real estate with pure construction). Sacyr estimates that the value of its concessions stands at 2,811 million euros. Capitalizing just over 1,400 million, it represents a potential up to that level of almost 100%. Likewise, they foresee that this valuation will be close to 3,700 million in 2025 (including future investments).

“They confirmed the great differences between the internal valuation of the assets by the company with respect to the market and we also believe that its infrastructure portfolio is deeply undervalued”, they point out from Société Générale.

Along the same lines, CaixaBank experts point out that they see “an abnormally high valuation differential both in the current market context and in the nature of Sacyr’s concessions portfolio”. “Looking at comparable operations in the market in other sectors with similar Cash Flow profiles, we cannot rule out that this opportunity may be, at least, on the table of many investment banks, infrastructure funds and, possibly, other players in the sector. sector “, they warn.

Good reception in the market
The Investor Day was very well received both by investors and analysts. Since the close of Wednesday, their securities have risen by almost 9.5% , reaching almost 19% profitability in the year and reaching their maximums for the month of May, around 2.3 euros.

The experts have also positively valued the brushstrokes shown at the event. In fact, of the 12 investment firms that Bloomberg includes , all have ratified its purchase recommendations except one , Alantra, which it advises to maintain but has raised its target price. On average, the consensus places it at 2.95 euros per share for the next 12 months, which is equivalent to a rebound of almost 29% from current levels.

The aforementioned visibility is also supported by the low demand risk of its concessions, as was already evident during the worst months of the pandemic. In fact, as they explained, only 4% of their portfolio assumes this demand risk . “We reiterate our positive stance on the stock, whose price does not reflect the low risk profile of its main division and corporate structure,” they comment from Mirabaud.

Less debt and more ebitda
The other big leg of this Investor Day was occupied by the confirmation of the prospects that already existed for profit growth and reduction of recourse debt. In this sense, the company’s objective is to reach an EBITDA of 1,200 million in 2025 , which implies an increase of 65% compared to what was reported in 2020 and 30% compared to what the consensus expects for 2023 .

As for corporate debt, which currently stands at 836 million (end of 2020), the goal is to leave it at 100 million by 2025 . “Leverage continues to be high, and this leaves Sacyr financially vulnerable for at least the next 12/18 months until the flow of dividends from the concessions increases,” they warn from Alantra. “This debt reduction seems vital to us in order to reduce the company’s risk,” they add from GVC Gaesco. The company expects to receive more than 1,000 million of its concessions between 2021 and 2025 to reduce this number.

A derivative contract on your shares
Last Friday, as reported by the CNMV, Sacyr formalized a derivatives contract on two tranches of 5 million shares. The first one, consisting of a futures contract with an initial price of 2.20 euros, adjustable depending on the final price and with a maturity of one year. The second of them is the same, but with a maturity of two years.

This derivative means that if, at the time of expiration, the market price is above the adjusted reference, Sacyr will enter the difference, and vice versa. It should be remembered that in July 2020 it already carried out a similar operation, but with a reference price of 1.8 euros. In essence, it is one more example of the confidence they have for the future .

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