(BFM Bourse) – The industrial laundry specialist announced that Brazilian asset manager BWGI would acquire the 6% of its capital currently held by Crédit Agricole Assurances. Furthermore, Deutsche Bank raised its price target and reiterated its buy advice on the value.
It happens that a title is carried by two pieces of information that have little to do with each other. This is the case this Tuesday for the industrial laundry group Elis which gained 4.2% around 10:30 a.m. to 16.96 euros.
First, the company announced Monday evening a small shareholder restructuring. Brazilian investment company BW Gestao de Investimentos Ltda (“BWGI”) has signed an agreement to take over the 6% stake held by Crédit Agricole Assurances. The finalization of this transaction is expected on Wednesday and the Brazilian company should have two members on the Elis supervisory board.
BWGI is a subsidiary of Brasil Warrant Administraçao de Bens e Empresas SA, a holding company which has stakes in numerous companies including the French glass packaging specialist Verallia.
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An internationalization of shareholders
The entry of this new shareholder makes it possible to improve Elis’ appeal on the stock market. “The group is very well established in Brazil (since 2010, Editor’s note) and the entry of this new shareholder can be an opportunity to strengthen its position in Latin America. In addition, new international profiles are joining the supervisory board which is diversifying , it is consistent with the change in dimension of Elis”, underlines an analyst.
“We consider this to be positive news for the stock. Crédit Agricole Assurances is replaced by a new long-term reference shareholder familiar with international European industrial stocks (BWGI being invested in Verallia). This transaction internationalizes the “shareholding of the group which is consistent with the multinational stature of Elis. Finally, this transaction negotiated in good intelligence eliminates the ‘overhang’ (a threat, a sword of Damocles on a share, Editor’s note) linked to the exit of Crédit Agricole Assurances du capital d’Elis”, explains Julien Thomas, of TP ICAP Midcap.
Second positive information for Elis shares: Deutsche Bank, already buying on the file, confirmed its advice this Tuesday and raised its price target to 23 euros from 20.65 euros.
In its note, the German bank highlights the geographic opportunities that await the group. She explains that the company, which found itself with relatively high debt leverage following the acquisition of the British Berendsen in 2017, is now close to having achieved its objective of regaining an investment category credit rating. grade” (investment as opposed to “junk”, the speculative category).
Heading towards the United States?
As it expects cash generation to improve in 2023 and 2024, Deutsche Bank therefore considers that Elis has room to continue its geographic expansion, estimating that more than €400 million could be mobilized next year to enter new regions.
“With strong positions in Europe, South America and Central America, the absence of Elis on the North American market constitutes the greatest opportunity,” underlines the German bank.
“The market is large, fragmented and high growth, which presents significant opportunities for the best operators,” she continues. Deutsche Bank estimates this market at around $48-49 billion. This opportunity should now focus the attention of investors, she considers.
Apart from these promising external growth opportunities, the establishment believes that the potential for appreciation of the group’s margins and cash flow remains underestimated by the market. The bank revised upwards its gross operating margin (Ebitda) forecast for 2024 to 34.9% compared to 34.7% previously. This while the “valuation of the company remains undemanding”, he notes.
“The company is generating strong earnings growth, is rapidly approaching a threshold for accelerating M&A or shareholder returns, and has relatively defensive characteristics,” summarizes Deutsche Bank.
Julien Marion – ©2023 BFM Bourse
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