The Italian temptation – Autostrada / SIAS – revisited
In my previous posts I have always concentrated on Autostarda as a way to invest at a discount into SIAS, the operating company whioch owns all the Italian concessions.
However, after the IGLI deal and the drop in Autostrada’s share price, SIAS itself became cheaper.
Based on year end numbers, SIAS is valued as follows:
Market Cap: 1.2 bn
Debt : 1,9 bn
EV 3.1 bn
• Sale agreement to transfer 45.8% stake in Chilean assets to Autostrade per l’Italia for €565mln cash consideration along with a discharge of debt guarantees of about €180mln. Sale price in line with the preliminary IPO evaluation of Sale of Chilean assets
• Unlock significant value from an investment asset, well above book value
• The transaction gives rise to a capital gain of €382mln (overall price of €565mln vs. a book value of €183mln)
• Sale will be finalized by 30 June 2012. €100mln advance cash payment have already been collected on 8 March 2012
• Cash proceeds from the sale of Chilean assets to be used for:
Potential use of proceeds
• Call option on 99.98% of Autostrada Torino – Savona” (valued at 223mln) expiring on September 2012
• Extraordinary dividend (increased pay-out for 5yrs)
• Additional resources for “green field” projects / other strategic uses
• Minorities acquisition of existing concessionaries
So what does that mean ? For sure we know now, that dividends will most likely increase, i.e. a dividend over 10% for the next 5 years is likely
From a valuation point of view, if we assume the purchase of the “Torino Savona” motorway goes through, we can assume the follwoing effects:
1. EV decreases by (745-223)= 522 mn EUR
2. EBITDA will increase by 32 mn EUR
So we will have an EV of ~2.6 bn and an EBITDA of around 588+32 = 620 mn. So EV/EBITDA will be reduced to 4.2 all other things equal because the minority share did not contribute to EBITDA.
If we look at other motorway operators, we see the following EV/EBITDAs:
Soc. Paris 8.7
So we can see that the cheapest comparable company in the universe is valued at least 50% higher than SIAS. Interestingly, the most expensive comapny, Brisa from Portugal actually received a takeover offer at the current 11x EV/EBITDA valuation.
A few more remarks:SIAS Bonds:
SIAS has a senior bond outstanding with maturity 2020 (XS0552569005). Interestingly this bond performed really strong after the announcement of the sale of the Chilean minority stake.
This is something to explore further, but in my opinion SIAS as the holder of concessions is regulated to a certain extent. That is also the reason why the Gavio family seems to use Autostrada as vehicle for its transactions instead of SIAS.
Normally it would have been much easier to just use the sale proceeds at SIAS to purchase the IGLI stake but it seems that they cannot access it directly but have to upstream this via dividends.
So as a minority shareholder, interests are better aligned at the OpCo than at HoldCo (Autostarda).
Summary: SIAS really looks attractive right now, so I will start to establish a half position (2.5%) for the portfolio. 50% of this I will hedge with the FTSE MIB ETF short position