The company carries out an update of its Business Plan this April that will be followed with great interest
- The sale of its subsidiary of Concessions will allow a clear economic recovery and return to the dividend payment, but also generates doubts
- Experts say that OHL will have to “explain well that it is capable of generating business in a recurring and sustainable manner”
April is being an important month for OHL . The construction company has closed the sale of its Concessions business to the Australian fund IFM Global Infrastructure Fund in an operation that has reported 2,235 million euros . This milestone is the change, ‘de facto’, of the nature of OHL, which today more than ever can be defined as a construction company. Now, the company faces the challenge of convincing its ability to continue growing precisely by building and ending the doubts that this operation has generated … that there are also.
OHL will try to win the favor of the market with the presentation of the update of its Business Plan scheduled for this month. The construction company has not yet specified the date on which it will make public its ‘new’ Business Plan because, according to company sources, until now it was necessary to focus on closing the sale of its subsidiary of Concessions. Once closed , it seems that the announcement will be imminent, although it will be necessary to see if they coincide in time with the communication about the dividend (which is expected also in the next days) or if it is done before or after it.
It is speculated that the dividend of OHL will amount to 1 euro, but Ángel Pérez, Renta4 analyst, recognizes that they estimate that it could reach 2 euros
The sale of the Concessions business will allow OHL to resume the payment of the dividend suspended two years ago by means of an extraordinary dividend, on which much is being speculated and whose details will be known shortly. There is talk that it will amount to 1 euro, but Ángel Pérez, Renta4 analyst, acknowledges that they estimate that it could reach 2 euros . “We believe that it is going to be an attractive dividend due to Grupo Villar Mir’s financial situation and because it is going to take advantage of the dividend payment to heal,” says this expert. Of the money received from the sale, and after facing the debt, there are over 1,400 million, explains this analyst. “If we divide that money by 300 million shares, 4 euros come out, if half is destined to Capex and the other half to a dividend, 2 euros will come out,” he concludes.
TO CONVINCE AFTER SELLING THE “MOST IMPORTANT” DIVISION …
The sale, therefore, can be considered ’round’, meaning that it will significantly improve the group’s financial situation (all corporate debt will be liquidated, amounting to 943 million at the end of 2017) and also for what it contributes. to the shareholders -including the Villar Mir Group- with this distribution of the dividend. “It’s very positive because the price they pay you is very good,” says Javier Mielgo, an analyst at Mirabaud. However, Mielgo warns of the fact that OHL now has to “resize”, since it goes from being a group with several lines of business “to a mere construction company” . In this regard, as soon as the operation was confirmed last October, Banco Sabadell experts stressed the attractive sales price but at the same time warned: ” OHL sells its main source of income and growth and is now focused on developing its construction, industrial, development and services businesses “.
Therefore, the updating of the Business Plan should not focus so much on the benefits obtained with the sale of Concessions but on how the group will rethink its future without that division, even if its financial situation has benefited. “They will have to explain well that they are able to generate business on a recurring and sustainable basis with large margins: the balance sheet position, the net cash position that they want to keep and the construction business, once the problem businesses are over, will be able to generate recurring results, “explains Javier Mielgo. “At the end we will try to see how the company is after the sale of Concessions, it remains a bit empty, a lot of its value was in the Concessions”, emphasizes Ángel Pérez.
“It is also a matter of whether or not the market creates the OHL forecasts, and has presented strategic plans in recent years that are very optimistic and has not complied,” Pérez points out.
All in all, OHL continues to be favored by analysts today. It is true that ‘only’ 27% advise ‘buy’, but the percentage of those who recommend ‘maintain’ is significantly high (64%) and only 9% advise ‘sell’. In addition, they give a target price well above the current price of quotation (5.23 euros, 28% above), although we must take into account that OHL is left 17% in 2018.
“We recommend ‘buy’ OHL for how the net cash position is with the closing of the operation (with IFM) and for its participation in developments, valuing zero construction”, indicate from Mirabaud. Making this calculation, they specify, “you would go to 5.3 euros, without adding anything for construction,” they stress. On the other hand, from Renta4 they have an advice of ‘overweight’ for OHL and a target price of 5.6 euros, although they warn that they only recommend it “for tolerant profiles”.
… AND THAT THE MARKET CREATES YOU
Experts expect concrete data to be updated in the Business Plan, Pérez and Mielgo continue to explain ‘Bolsamania’. OHL will have to detail the evolution it expects for the portfolio projects, especially those it has in the United States and Latin America. Also specify if it will return to the path of building concrete concessions, make them grow and, at the moment they reach their maturity phase, sell them. Likewise, OHL is expected to explain how well it is positioned in the United States to take advantage of the infrastructure plan and to provide forecasts on profitability and the level of margins , which is where the construction companies have been most pressured.
In this sense, Pérez explains that one thing will be that their forecasts will convince and another that investors will believe that, really, OHL will comply with them. ” OHL has presented some strategic plans in recent years that are very optimistic and has not complied, and will have to demonstrate, quarter by quarter, that it is capable of generating cash and shareholder value,” he concludes.