(BFM Bourse) – While two major sporting events will mark France and Germany in a few weeks, Oddo BHF has drawn up a list of six European groups to favor to take advantage of these two major events.
As the 2024 Olympic and Paralympic Games on the one hand, and Euro 2024 football on the other, approach at high speed, what values should we prioritize to take advantage of these two events?
The Franco-German broker Oddo BHF looked into this question in a large cross-sectional study for its clients. No less than 17 analysts and economists worked on this file, with 43 stocks scrutinized. Ultimately, the broker has selected six values to favor on which he also has an “outperformance” opinion, equivalent to advice to buy in his terminology.
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JCDecaux, gold medal in the media
In the media, the outdoor advertising specialist JCDecaux was selected. “They are overexposed to the French market (18% of revenues), to the Parisian market, and who says traffic (due to the Olympics, Editor’s note) says audiences, who says audience means advertising turnover on an activity which is particularly favorable to them, namely street furniture (advertising in city centers, Editor’s note) If there is one value in the media world that will benefit from the Olympics, it is JCDecaux”, summarized Jérôme Bodin, sector analyst. led the cross-sectional study, during a press conference.
Especially since JCDecaux’s exposure to Germany and therefore to Euro 2024 is not insignificant, with Jérôme Bodin estimating it at 7% of total revenues. To the extent that street furniture is the division of the group which has the greatest operational leverage, that is to say an ability to increase profits more than turnover, Oddo BHF considers that “the impact on the margin” of the company will be “particularly positive” in view of the surplus activity.
The broker estimated the surplus in gross operating income (Ebitda) due to the Olympics and Euro 2024 at 15 million euros, or 2% of the 2023 total. As for turnover, the impact is would amount to 30 million euros for the Olympics in the third quarter and 10 million euros for the Euro. The Olympics alone would provide an appreciable boost to growth on a comparable basis, of 3.5 percentage points during the summer and 1 point over the whole of 2024.
Accor and Sodexo in leisure
In the hotel and leisure sectors, two values are preferred by the broker. Without too much surprise, the first company is Accor, a hotel group exposed to 20% of its revenues in France – around 10% for the Paris region alone – and 7%-8% in Germany, according to Oddo BHF.
The Olympics should help Accor meet its revenue per available room growth target, a major indicator for the hotel sector. Oddo BHF expects this indicator to increase by 4.3% in 2024 with a boost from the Games estimated at 0.4 percentage points. Even if it is not linked to the Olympics, the broker points out that the stock is trading at a 30% discount compared to its American rivals, much more than the historical discount of 12%. One more argument, therefore, to position yourself on the title.
The second group in this sector is Sodexo, the most attractive action in collective catering to play the theme of the Olympic Games, according to Oddo BHF. The group will provide catering for athletes – 40,000 meals per day for around 15,000 athletes – and visiting fans. Oddo BHF expects comparable growth for the company of 8% for the 2023-2024 financial year which will end next August, with an impact of the Olympics of 0.3 percentage point. The company itself has quantified this impact at around 80 million euros, at the rate of 60 million euros for the 2023-2024 financial year, ending next August, and 20 million for the following one.
Easyjet rather than Air France-KLM
In air transport, let us first specify how the broker estimates that the effect of the two sporting events will materialize for the airlines.
“The impact on volumes (the number of passengers transported, editor’s note) will be relatively limited because generally in the summer the planes are already full, and in addition this year we have a particular situation with little available capacity”, due to the difficulties of aircraft manufacturers Boeing and Airbus in terms of ramping up aircraft production, explains Yan Derocles, in charge of the sector.
Technical problems with the GTF engines of the American group Pratt&Whitney have also grounded part of the Airbus A320 neo fleet, with around a third being grounded, according to the analyst.
“We are rather counting on an additional price effect, as was the case during the previous Olympics, and with the current scarcity of capacities. We have quantified this price effect for Easyjet and Air France, the two groups most exposed, between 0 .5 and 1 percentage point on the ‘yield’, the average price over the year. This means that in the third quarter alone, this impact can be between 3% and 6%, which is quite significant. develops the analyst.
Oddo BHF, however, preferred Easyjet to Air France-KLM. Firstly because, even if the Franco-Dutch group should benefit a little more from the benefits of the Olympics, Oddo is to be “underweighted” on the company led by Ben Smith. Yan Derocles explained to us, in a previous article, that the company was the only one in its coverage which will not generate free cash flow in 2024 and 2025, due to the reimbursement of Covid aid.
For Easyjet, a value on which Oddo BHF is “outperforming”, the company “has the capacity to capture the two events since they have a fairly strong exposure to Paris (8% market share in Charles de Gaulle and 11% in Orly) and are quite well positioned in Germany in most of the cities which will organize matches, in particular Berlin”, continues Yan Derocles. “Easyjet also has the capacity to have a little more aircraft, it is one of the rare companies which does not have too many aircraft problems available. The company will be able to modify its network a little to look for the ‘ yield’,” he adds.
Adidas will be able to count on football fans
In consumer goods, Oddo BHF favors the German Adidas, more for Euro 2024 than for the Olympic Games. The German group is sponsor of six national teams participating in the competition compared to nine for Nike (excluded from the scope of the study) and four for Puma. The design office considers that the sporting event will boost the sale of jerseys. He expects a positive impact on Adidas sales of 2% to 3%.
Even if it is difficult to know if the stock price will be influenced by the competition. “In the event that a sponsor has several teams in the playoffs, that company could see higher revenues as football fans could buy more jerseys, which could then slightly benefit the stock price,” Oddo points out. BHF.
URW will have more rental income
Last selected value and perhaps the least obvious: the shopping center specialist Unibail-Rodamco-Westfied (URW). The Olympic and Paralympic Games are expected to have a positive impact of 1%, or 10 cents, on adjusted recurring net income per share, the property company’s most important profit indicator.
“URW will benefit with the Olympics from the occupation of the four Viparis sites (a 50% joint venture with the CCI Île-de-France) with in particular a press center set up at the Palais des Congrès in Paris, Porte Maillot, elimination events at the Porte de Versailles exhibition center, and the media broadcast center at Paris-Le Bourget These sites will therefore be occupied during periods when they are rather empty, which will create additional rental income for Viparis, to compare with. less busy years”, explains Florent Laroche-Joubert, in charge of the real estate sector.
To a lesser extent, “eight URW shopping centers will be major shopping places with the sale of official Olympic products, which will normally benefit from increased attendance and therefore turnover for traders, like the centers of the Halles or La Défense”, he continues.
Already in the stock market?
Remains a valid question for all the values mentioned. Has the market already priced in these benefits linked to the Olympics? Are they already in the stock market?
Jérôme Bodin believes that it is impossible to answer the question at this stage, in particular because the consensus (the average forecasts of analysts following the stocks in question) are not very precise for the summer period. “It’s even more difficult to isolate the impact of the Olympics and the Euro,” he adds.
“That being said, there is also the ‘momentum’ effect”, that is to say the dynamics and perception of the market, continues the expert. The two sporting events “should have an effect on the perception of European actions, particularly French ones, by the market, this is generally what we see”, develops Jérôme Bodin.
“This is why we chose these six stocks” exposed to this “good momentum, a psychological effect on the stock market which is not always mathematical and which makes us think that these stocks should outperform around the summer,” he concludes.
Julien Marion – ©2024 BFM Bourse