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:

P/E 8.2
P/B 0.9
EV/EBITDA 5.6
Dividend 9,1%

Market Cap: 1.2 bn
Debt : 1,9 bn
EV 3.1 bn

Relatively cheap, but as I mentioned before, SIAS basically had a “catalyst” event, the sale of its Chilean minority particpation. here is the section from the investor presentation:

• 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:

Brisa 11.2
Abertis 10.1
Atlantia 7.6
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.

Corporate Governance:

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

12 comments

  • Time to revisit italian infrastructure stocks (SIAS, ASTM, Atlantis) ?

  • profit made with IGLI deal

  • Autostrada performed. New name ASTM. Update unavoidable.

  • hallo cktest,

    danke für diesen fundierten beitrag. So macht das Blog richtig Spass 😉

    Mein erstes Verständnis war auch, dass das nicht die großen Forscher sind, sondern eher eine Vertriebsbude.

    Die Zahlen sehen allerdings sehr sehr sehr gut aus….

    Ein Vertriebskonzept würde mir persönlcih auch besser gefallen als ein “Blockbuster – Pipeline” Play.

    MMI

  • Hi mmi,
    ever looked at REC.MI? A good family-owned pharmaceutical company with relatively small amount of debt, increasing EPS, decent dividend..
    what are you thoughts?

    • andrew,

      thanks for the comment. Company looks very interesting from the numbers, but I am not an expert in Pharmaceuticals. Nevertheless somehting i will definitley have a look at.

      Cheers,

      mmi

      • Lercanidipin (das “flagship product”) ist meiner Ansicht nach ein reines me-too-Präparat, was allerdings nicht bedeutet, dass man es nicht gut verkaufen kann. Die Verordnungszahlen sind in Deutschland bis 2007 angestiegen und liegen seitdem etwa konstant. Vermutlich bekommen das bloß Privatpatienten, weil der gemeine Kassenpatient stattdessen generisches Amlodipin erhält, das pro Dosis ca. nur zwei Drittel von Lercanidipin kostet.
        Pitavastatin könnte sich evtl. als Umsatzbringer herausstellen. Das ist auch nur ein me-too-Präparat, aber vielleicht kann man sich vom großen Statin-Kuchen noch ein Scheibchen abschneiden. Das Präparat wird von Recordati in Europa vermarktet.
        Das Antiallergikum Rupatadin ist erst 2009 auf den Markt gekommen, ich habe keine Umsatzzahlen für 2010 und 2011 vorliegen. Es ist im Vergleich zu den zwei am häufigsten Antihistaminika Cetirizin und Loratadin etwa doppelt so teuer. Ob im Vergleich zu diesen Substanzen tatsächlich ein klinischer Zusatznutzen besteht (wie die Firma und der Wikipedia-Artikel behaupten), ist lt. Arzneiverordnungsreport nicht gesichert.
        Silodosin ist eine neue Substanz zur Behandlung der gutartigen Prostatavergrößerung, die erst seit 2010 zugelassen ist. Auch hier handelt es sich um ein me-too-Präparat.
        Da die Wirkstoffzulassung für seltene Krankheiten einfacher ist, hat auch Recordati eine entsprechend Arbeitsgruppe, “Orphan Europe”. Was die als “orphan drugs” verkaufen, überzeugt mich nicht so: intravenöses Ibuprofen, Vitamin E-Augentropfen oder Zinkazetat sehen für mich nicht wie typische “orphan drugs” aus.
        Fazit: Recordati produziert bisher keine innovativen Arzneimittel, so dass eine Erstattungsfähigkeit neuer Substanzen durch die gesetzlichen Krankenkassen unwahrscheinlich erscheint. Die Firma verkauft relativ hochpreisige me-too-Arzneistoffe für häufig auftretende Krankheiten (Bluthochdruck, Prostatahyperplasie, Allergie), so dass dort bestimmt ein einigermaßen solider, dauerhafter Umsatz erwirtschaftet werden kann.

  • Hi OptiValue,

    Autostrada ist still on the radar, but based on the experience with EMAK and Unicredit, I would wait for the announced capital increase.

    mmi

  • Hi MMi,
    Currently, the price of Autostrada is at 4.5€. Would it not be a consideration to build a position of 2.5% in both SIAS and Autostrada shares?
    Nils

  • Sorry, just doublechekced. I wrongly took the number from bloomberg. The 42 cent on 5,40 EUR for 2012 would be a 7.8% dividend.

    I guess the 9.1% from Bloomberg already implies the proposed further increases.

    mmi

  • Hi Andrew, SIAS will pay a 25 cent dividend on April 23rd and an additional dividend of 17 cent is forecasted for oct/nov.

    mmi

  • Hi, how did you calculate dividend yield of 9.1%? Average dividend payment over the last 8 years has been around 0.14cents twice a year..

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