(BFM Bourse) – The title of the retirement home operator has lost nearly two-thirds of its course in five sessions. But given the more than 99% dilution that awaits holders, is this correction really enough?
The (seemingly) endless fall in Orpea shares continues. The title of the operator of retirement homes still drops 10% on Monday around 11:30 a.m., after losing 26% on Friday and 33% on Thursday, as well as 66% over all of the last five sessions.
Dizzying, this plunge is no less logical in view of the heavy financial restructuring that awaits the group. The agreement reached last week should result in a massive injection of new capital: 1.55 billion euros through capital increases and 3.8 billion euros in unsecured debt converted into capital up to around 30% (i.e. around 1.1 billion euros). An ocean compared to the current market capitalization of Orpea (barely 180 million euros).
Protection against costly dilution
The group has never hidden that its financial restructuring, made necessary by a balance sheet weakened by soaring inflation, would be painful for its shareholders. From mid-November, when the strategic plan of the new CEO, Laurent Guillot, was announced, the company had warned that a massive dilution awaited its holders.
But even by retaining the closing price of Orpea which preceded this announcement (8.21 euros) the fall only reaches 70%. We can also go back to October 21, which preceded the announcement of the conciliation procedure with its creditors, the date on which Orpea announced the beginnings of its financial restructuring. This time the fall reaches 83%.
However, these variations remain lower than the dilution that awaits holders. The company had explained last week that a shareholder owning 1% of the capital before all the operations necessary for its financial restructuring and not participating in these same operations, would see this share fall to… 0.004% or 99.6% of dilution.
Shareholders who would use their preferential subscription rights, within the framework of the capital increases provided for in the restructuring, can limit the loss to 51% of the dilution. But Orpea explained that this corresponded to an additional investment for its shareholders of… 61.24 euros per share, for a title that is worth less than 2.5 euros…
Margins under pressure?
How low can the Orpea share fall? The answer is not obvious. In his latest research note, published Friday morning, the analyst from the independent research office AlphaValue, Yi Zhong, confirmed his opinion to “sell” with a price target of 2.73 euros below which the title is already evolving. Oddo BHF, meanwhile, had violently slashed its target last week, dropping from 16 euros to… 0.5 euros, or around 80% down from the current price.
Oddo BHF also believes that the financial targets for 2023 or even 2025 are at risk. In 2023, Orpea is aiming for a turnover of 5.33 billion euros and an Ebitdar (gross operating result excluding rent) of 911 million euros (i.e. less than the 1.07 billion in 2021), figure which should increase in 2025 to 6.1 billion and 1.25 billion euros respectively.
With the takeover of Caisse des Dépôts, which will hold the majority of the group’s capital alongside CNP Assurances, Maif and MACSF, margins and therefore the generation of Ebitdar could find themselves under pressure.
The injection of the rescue plan and the takeover by Caisse des Dépôts, the French public body, brings fresh cash “but, above all, leaves no hope of returning to the high profitability of before the scandal [du livre Les Fossoyeur, NDLR] and the resumption of any shareholder remuneration, at least in the medium term”, explains Yi Zhong in his note. “With a clear priority for the public interest, the new Orpea will be the new benchmark for the reasonable use of resources. services (most of the costs are borne by Social Security) and for the decent treatment of these elderly and frail residents/patients. A much higher ratio of staff to dependent elderly people is needed to ensure the quality of services, which completely changes the economics of the sector and the balance of competition,” she continues.
It should also be noted that creditors who have converted their debts into equity could very well want to sell their securities on the market within a relatively short time frame. This could create additional pressure on the action, once the financial restructuring is completed, with the fear of a return of paper on the market. “Holders of converted debt should quickly discard their shares,” Yi Zhong said.
Julien Marion – ©2023 BFM Bourse
Are you following this action?
Receive all the information about ORPEA in real time: