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07 August 2014 Reinitiation of coverage
Salini Impregilo
Italy | Construction & materials
Buy (Not rated) Target price EUR4.20
Current price EUR 2.98
Matteo Bonizzoni, CFA [email protected] +39 02 80 62 83 43
Solid growth ahead on more realistic targets
Reuters SALI.MI Bloomberg SAL IM Index DJ Stoxx 600
Market data
Market cap (EURm) 1,586
Free float 38%
No. of shares outstanding (m) 494
Avg. daily trading volume('000) 1,854
YTD abs performance -39.0%
52-week high (EUR) 5.14
52-week low (EUR) 2.98
FY to 31/12 (EUR) 2014E 2015E 2016E
Sales (m) 4,417.6 4,799.7 5,269.0
EBITDA adj (m) 418.2 506.4 603.6
EBIT adj (m) 233.0 296.1 372.8
Net profit adj (m) 62.3 144.4 199.7
Net fin. debt (m) 145.1 81.5 -12.1
FCF (m) 57.9 88.4 124.2
EPS adj. and fully dil. 0.13 0.29 0.41
Consensus EPS 0.21 0.31 0.45
Net dividend 0.05 0.06 0.09
FY to 31/12 (EUR) 2014E 2015E 2016E
P/E (x) adj and ful. dil. 23.6 10.2 7.3
EV/EBITDA (x) 3.9 3.1 2.4
EV/EBIT (x) 7.0 5.3 3.9
FCF yield 3.7% 5.7% 8.0%
Dividend yield 1.7% 2.1% 2.9%
Net debt/EBITDA (x) 0.4 0.2 0.0
Gearing 11.6% 5.9% -0.8%
ROIC 14.0% 14.1% 16.8%
EV/IC (x) 1.2 1.1 1.0
We resume coverage of Salini Impregilo with a Buy rating and a TP of EUR4.2. With the merger complete, the company is focusing on its core construction business, diversifying geographically. The 2014-17 business plan includes revenue and EBIT CAGRs of 15% and 20% respectively. The new targets have been significantly scaled back versus the previous 2013-16 plan, to what we see as more reasonable levels. While in our view the underlying drivers are quite convincing, we still see the 2017 targets as aggressive: we are 13% below on EBIT and significantly below on NFP.
2014-17 business plan: strategic drivers quite convincing According to the 2014-17 business plan presented on 20 March, Salini Impregilo’s strategy will focus on construction (low integration with concessions), bidding for large and complex projects with a majority interest. Greater diversification could lead to the increasing weight of North America, Asia and Oceania, at the expense of Africa, Italy and LatAm. Higher efficiencies (procurement, G&A, capex) after the merger could lead to a EUR100m synergy run-rate (2017), which has been confirmed. We have a positive view of the strategic pillars, but see the 2017 targets as aggressive.
Attractive growth on scaled-down targets The new 2017 P&L targets are sustainably below those set in the previous 2013-16 business plan (June 2013). In particular, 2017 EBITDA and EBIT are seen 20% and 25% below the old 2016 target. After a relatively uninspiring 2014 (margin-wise), the plan envisages a significant acceleration in 2015-17, leading to 2013-17 sales and EBIT CAGRs of 15% and 20% respectively. The FCF generation projections have been improved, driven by a much healthier NWC trend, with EUR500m in net cash expected in 2017 (EUR110m in 2016), which already includes the capital increase (cash-in: EUR165m).
Our estimates more conservative than 2017 targets We estimate EUR437m in EBIT in FY 2017 (EBIT CAGR 2013-17E: 17%), 13% below the EUR500m EBIT target. We also project a less benign NWC trend, as we believe the target of negative NWC in 2017 (from 6.7% NWC/revenues on 2013) is overly ambitious. Hence, we project EUR102m net cash at end-2017, significantly below the plan’s EUR500m target.
We resume coverage with a Buy rating and TP of EUR4.2 We do not consider the current valuation to be demanding, as the stock is trading at a >20% discount versus peers despite its solid growth outlook and balance sheet. We reinitiate coverage with a Buy rating and TP of EUR4.2. Our TP is an average derived from absolute (DCF) and relative (peer P/E, EV/EBITDA and EV/EBIT) methods.
IMPORTANT. Please refer to the last page of this report for “Important disclosures” and analyst certification(s)
keplercheuvreux.com
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Salini Impregilo Reinitiation of coverage
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Summary
Company profile The reverse merger of Salini into Impregilo (effective as of 1/1/2014) createed a geographically diversified Italian general contractor with strong sector specialisation in transport infrastructures and hydro dams and sizeable positions in Italy, LatAm, Africa and the Middle East. After the merger, Salini Impregilo is controlled by Salini Costruttori with a 61.8% stake.
Management structure
Claudio Costamagna Chairman
Pietro Salini CEO
Key shareholders
Salini Costruttori 61.8%
EPS and P/E FCF and Gearing Balance sheet structure, 2014E
Valuation
Base case We derive our EUR4.2 TP based on the average of several valuation methods, including DCF and peers PE, EV/EBITDA and EV/EBIT.
Best case In our best-case scenario (the full delivery of the business plan targets), we derive a EUR6.8 fair value.
Worst case Assuming no delivery on synergies, we would derive a EUR3.4 fair value of EUR3.4
Target price
Risk to our rating The main risks could stem from: 1) the backlog developing below expectations, 2) margins below
expectations, 3) working capital issues.
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Contents
Solid growth ahead, more realistic targets 4
2014-17 business plan - underlying drivers 4
Attractive growth on scaled-down targets 7
We project sound growth, but are below 2017 targets 9
2013 results benefited greatly from Todini deconsolidation 10
H1 2014 results: on course to achieve FY 2014 guidance 12
We derive a TP of EUR4.2 per share: Buy 14
Appendix: merger of Salini into Impregilo. Key steps 17
Sound rationale: well geo-diversified Italian contractor 19
Research ratings and important disclosures 26
Legal and disclosure information 28
Salini Impregilo Reinitiation of coverage
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Solid growth ahead, more realistic targets We resume coverage on Salini Impregilo with a Buy rating and a TP of EUR4.2.
With the merger complete, the company is focusing on its core construction
business, diversifying geographically. The 2014-17 business plan includes
revenue and EBIT CAGRs of 15% and 20%, respectively. The new targets have
been significantly scaled back versus the previous 2013-16 plan to what we see
as more reasonable levels. While in our view the underlying drivers are quite
convincing, we still see the 2017 targets as aggressive: we are 13% below on
EBIT and significantly below on NFP.
2014-17 business plan - underlying drivers
Strategic pillars On 20 March, management presented the company’s new 2014-17 business plan, based on
the following strategic pillars:
Focus on construction. Different to diversified contractors, the focus will be on the
construction and engineering of civil works, with the exclusion of concessions,
water & waste treatment, plants & engineering. This strategic approach has been
reflected in the successful and timely disposal over 2012-14 of non-core assets
worth over EUR1.3bn.
Table 1: Salini Impregilo – a successful non-core asset disposal track record
Asset Value (EURm)
Ecorodovias (2012/13) 937 Shangai Pucheng (2013) 65 TEM (2013) 67 Fibe (2013) 200 Fisia Babcock (2014) 55 Total 1324
Source: Salini Impregilo, Kepler Cheuvreux
Focus on large projects. Large-scale and complex civil works typically enjoy higher
margins (due to higher execution risks), as they require superior technical,
engineering and managerial skills and enjoy higher entry barriers.
Focus on projects with majority interest. Greater control over the project under
execution is of key importance, as it improves sales predictability and can mitigate
counterparty risk.
Increasing geo diversification. Among key markets in which the group currently
has low penetration, as highlighted above, the focus will be on the development the
US, Australia and the Middle East, all areas whose contribution to the backlog is
likely to grow faster than the average over the period of the plan at the expense of
Africa, Italy and part of LatAm. In general, a more diversified geographical presence
is clearly seen as beneficial, as it can mitigate the effects of potential economic
slowdowns in specific areas.
Focus on construction (concession: residual) Non-core assets successfully disposed of Focus on large, complex projects… …with majority interest… …and broader geo diversification
Salini Impregilo Reinitiation of coverage
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Higher efficiencies, capitalising on post-merger synergies. The combination of
Salini into Impregilo (merger effective for accounting and fiscal purposes as of 1
January 2014) is expected to generate synergies of EUR100m (2017 run-rate), of
which EUR75m in cost synergies above EBITDA (EUR55m in procurement,
EUR20m G&A cost reduction), plus EUR25m related to capex and equipment
machinery utilisation.
Table 2: Salini Impregilo – synergy target EUR100m, of which EUR75m above EBITDA
Area EURm
EBITDA synergies Procurement 55 Overheads <20 Total above EBITDA c75 Other synergies Equipment/machinery >25 Total 100
Source: Salini Impregilo, Kepler Cheuvreux
Diversification of funding sources. In addition to increased competitiveness in
bidding for bigger and more complex projects, we see greater access to capital
markets and bank guarantees coupled with solid balance sheets and effective risk
management as key positives.
Reference market assumptions The plan assumes that over 2014-17 (four years), worldwide spending on construction will
total EUR35.2trn, implying a 4% CAGR 2013-17. Out of this, infrastructure could amount to
EUR12.3trn, while the hydro, road and railway segments (the group’s reference areas) could
total EUR8.5trn. The group is only targeting large projects, which are expected to amount to
EUR1.1trn, out of which EUR550bn only in the group’s geographical reference markets.
Chart 1: Reference market assumptions - 2014-17 cumulated job awards (EURtrn)
Source: Salini Impregilo, Kepler Cheuvreux
35.2
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Global Construction Infrastructure Hydro, Roads, Rail Large Projects inReference mkts
Selected market tenders pro quota: EUR550bn
EUR100m synergy target (2017 run-rate) confirmed Better access to funding, solid balance sheet Reference market worth EUR550bn in 2014/17
Salini Impregilo Reinitiation of coverage
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The plan assumes a 5% win rate on the EUR550bn reference market over the period, worth
EUR28bn (average order intake: EUR7bn a year). Out of these, EUR19bn (67%) have
already been identified. Bids for EUR7bn have already been presented, with a further
EUR10bn under preparation and EUR25bn in pre-qualification phase.
Chart 2: New order coverage over the plan’s period (2014-17)
Source: Salini Impregilo, Kepler Cheuvreux
By region, Africa is set to account for 18% of new orders, well below the 31% weight on the
2013 starting construction backlog. Conversely, Europe should account for a material 21%
on new orders, well above the 10% weight on starting backlog. In Italy, the outlook for
infrastructures is expected to remain subdued, with just 6% of new orders to be collected in
this country over the plan, significantly below the 32% weight on starting construction
backlog. On the contrary, several opportunities are seen in North America, with new orders
in this region accounting for 7% of total orders (2% of 2013 pro-forma construction
backlog). Following the company’s recent entry into Australia, further intake opportunities
are seen in Asia and Oceania, a new market for the group. As such, these regions are
expected to account for 13% of new orders, considerably higher than the 2% proportion of
the 2013 construction backlog.
By business segment, rails and subways should take the lion’s share (41% of new order),
followed by roads and highways (30%), with hydro and dams accounting for 24%.
Chart 3: New orders by region Chart 4: New orders by business segment
Source: Salini Impregilo, Kepler Cheuvreux Source: Salini Impregilo, Kepler Cheuvreux
550
28 19
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Selected Markets 2014/17 biz plan (5% win rate) Already identified (67%)
Italy 6.0%
CIS 6.0%
Europe 21.0%
LatAm 13.0%
North America
7.0%
Africa 18.0%
Middle East 16.0%
Asia/Oceania 13.0%
Rails/ Subways
41%
Hydro/Dams 24.0%
Roads/ Highways
30%
Other 5.0%
The EUR28bn cumulated order intake assumption (construction) is based on a 5% win rate
Africa, Italy, LatAm: decreasing weight North America, Europe ex Italy, Asia/Oceania: increasing weight
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As such, the geographical mix on ending construction backlog is set to change considerably
versus 2013, with material growth in Asia & Oceania, North America and Europe set to be
offset by a decline in Africa and Italy.
Chart 5: 2013 construction backlog: geographical mix Chart 6: 2017E construction backlog: geographical mix
Source: Salini Impregilo, Kepler Cheuvreux Source: Salini Impregilo, Kepler Cheuvreux
Attractive growth on scaled-down targets
The new 2017 targets are well below the ones in the 2013-16 business plan presented in
June 2013. In particular, 2017 revenues are projected to be 5% below old 2016 ones, while
EBITDA and EBIT are considerably (20-25%) below. After a relatively uninspiring 2014
(broadly stable EBIT), the plan envisages a significant acceleration in 2015-17, leading to a
2013-17 CAGRs of 15% for sales, 18% for EBITDA, 20% for EBIT. We believe the new 7%
EBITDA margin target (2017) is more feasible versus the old 9% one (2016). Free cash flow
generation projections have been improved, driven by a healthier NWC trend, with
EUR500m in net cash expected in 2017 (previously: EUR110m in 2016), which already
includes the upcoming capital increase (c. EUR200m).
Table 3: Salini Impregilo – 2014-17 business plan targets versus old 2013-16 targets
EURm 2013 Pro Forma
2014 Plan 2017 Plan CAGR 13-17 implied CAGR 14/17
2016 Old plan 2017 new vs 2016 old
Backlog (construction) 21bn 27bn 6% 26bn 4% Intake (construction) 5.7bn in line with
2013 7bn avg 14/17 7.5bn avg
13/16
Revenues 3,975 c 4400 7,000 15% 17% 7400 -5% EBITDA 413 >440 800 18% 22% 1000 -20% Margin 10.4% >10% 11.4% 13.5% EBIT 238 >220 500 20% 31% 670 -25% Margin 5.9% >5% 7.0% 9.0% Net profit 89 n.a. Net debt (cash) 332 0 (500) (110) Net debt/EBITDA 0.78 0.00 -0.63 -0.16 Capex ∑14-17=1600 ∑13-16=1300 NWC 267 <0
Source: Kepler Cheuvreux
Asia&Oceania 2.0%
Africa 31.0%
Middle East 9.0%
LatAm 14.0%
North America
2.0%
Europe 10.0%
Italy 32.0%
Asia&Oceania 7.9%
Africa 18.8%
Middle East 10.9%
LatAm 10.9%
North America
5.9%
Europe 19.8%
Italy 25.7%
New 2014-17 plan: P&L targets scaled back versus the old 2013-16 plan. Better FCF generation
Salini Impregilo Reinitiation of coverage
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In more detail:
Order intake in construction is expected at c. EUR7bn a year over 2014-17, with
an acceleration in 2015-17, as 2014 orders are projected to be in line with 2013
(EUR5.8bn). This compares with a slightly more aggressive target of c. EUR7.5bn a
year in 2013-16 included in the plan presented in June 2013.
Revenues are projected to post a 15% CAGR from EUR3.97bn (Salini Impregilo
pro-forma) in 2013 to EUR7bn in 2017. This compares to the previous 16% CAGR
from EUR4.1bn pro-forma in 2012 to EUR7.4bn in 2016. As such, the new 2017
revenue target is positioned 5% below the old 2016 one. We highlight that the 15%
revenues CAGR is well above the 6% CAGR foreseen for the construction backlog,
which implies an acceleration in the conversion of the backlog into revenues over
the period.
Margins: This is the area in which targets have been significantly scaled back, as
project margin contribution (pre G&A costs allocation) from the new projects won
in 2014-17 is seen at 8%, lower than 10% from new orders in the old business plan.
As a result, the new plan envisages EBITDA of EUR800m in 2017, 20% below the
previous 2016 target (EUR1bn). EBITDA is expected to increase at a sound 17%
CAGR versus EUR426m 2013 pro-forma, including EUR100m synergies at run rate
(confirmed). The plan envisages a EUR500m EBIT for 2017, 25% below the
EUR670m target previously projected for 2016. As such, the EBIT margin is now
projected at a more realistic level of c. 7% in 2017 versus the aggressive 9%
previously seen in 2016.
FCF/net debt: despite lower margin assumptions, the targets here have been
improved, largely thanks to more benign projections for net working capital.
Starting from EUR332m net debt pro-forma 2013 (as the sum of EUR422m net
cash at Impregilo and EUR754m net debt at Salini), the plan is now targeting zero
debt in 2014 and EUR500m net cash in 2017, significantly better than the
EUR110m previously seen in 2016 and already including the capital increase
implemented in June (cash in: EUR165m).
Capex intensity is projected to remain high, with EUR400m a year in 2014-17,
predominantly in rails, subways and hydro, which is above the previous level of
EUR325m a year seen in 2013-16. The main driver of the projected healthier FCF
generation is based on much more benign NWC capital assumptions. In fact,
starting from EUR266m pro-forma NWC in 2013 (6.7% of revenues), the new plan
points to slightly negative NWC in 2017, despite lower cash advances
(Europe/Africa: 10%, Italy: zero, ROW: 7%) versus the 13% historical average.
The net debt target, which includes a 20% dividend payout, is probably the most
challenging one included in the plan. As a reference point, the old 2013-16 plan
targeted EUR300m positive cash before dividends in 2016 (EUR110m post
dividends), with NFP already approaching breakeven as of 2014. Clearly, the old
targets were assuming less benign NWC assumptions.
Slightly lower order intake projections
2017 EBITDA and EBIT: 20-25% below old 2016 ones EUR500m net cash expected in 2017 —significantly better than the old EUR110m target for 2016 Main driver: better NWC We see the targeted cash generation profile as challenging
2017 revenues: 5% below old 2016 ones
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We project sound growth, but are below 2017 targets
We are projecting solid growth, with CAGRs 2013-17 of 10% for revenues, 17% for EBIT
and 29% for adj. net profit. While we are broadly aligned with 2014 targets, which
following H1 14 results we believe are achievable, we remain more cautious on 2017,
where we are positioned 13-17% below on key P&L metrics and considerably more
cautious on the net financial position. In more detail:
Construction Backlog: we project a 6% CAGR, in line with the 6% foreseen by the
plan, with an end-2017 construction backlog of EUR26.4bn (plan: c. EUR27bn).
Revenues: we project an acceleration in the conversion of the backlog into sales,
turning into a 10% CAGR. Still, in light of the “slow moving” backlog in Italy (the
EUR3.1n Milan-Genoa high-speed railway) and Libya (EUR1bn Lidco), which overall
account for 19% of the 2013 construction backlog and whose execution timing
remains uncertain at this stage, we believe the 15% revenues CAGR in the plan (vs.
the 6% backlog CAGR) might prove aggressive. As such, while we are bang in line
with the 2014 target (c. EUR4.4bn), at EUR5.8bn in 2017 we are 17% below the plan.
EBIT: on the margin side, 2014 is seen as all but exciting, with a c. 5% EBIT margin
pointing to a slight EBIT decline to c. EUR220m (from EUR238m pro-forma 2013).
While there is not much detail on this, we believe it might be due to synergies not
having been fully achieved yet, plus unexciting margins for some contracts in the
backlog and restructuring costs. At EUR233m (EBIT margin: 5.3%), we are quite in
line with targets. In H1 2014, the EBIT margin came in at 5.4%, substantially in line
with our FY 2014 projection. For 2017, we estimate EBIT of EUR437m, 13% below
the plan’s EUR500m target.
Net profit: we project a sound 29% net profit CAGR 2013-17, with a EUR246m net
profit in 2017 starting from EUR89m pro-forma in 2013. No targets have been
provided at this level. We assume a 33% average tax rate, in line with the plan’s
assumption. For 2014, we expect adj. net profit to decline significantly by 30% to
EUR62m (excluding discontinued operations), due to higher financial charges and a
EUR55m negative impact from write-offs in Venezuela, accounted in H1. As such,
growth is back-end loaded into 2015-17.
Net debt: this is the area in which we are definitely more cautious versus the plan’s
assumptions. We project net debt to decline to EUR145m in 2014, compared to an
official target of zero debt. We underline that in the recent analyst meeting
following H1 results (5 August 2014), CEO Pietro Salini said that net debt at year-
end 2014 might be closer to EUR100m. While we project EUR1,435m in cumulated
capex in 2014-17 (10% below the plan), we are not ready to incorporate the
massive NWC improvement foreseen by the plan, turning into slightly negative
NWC in 2017 (from +EUR266m pro-forma 2013). This is also because the plan
includes lower advance payments on new jobs versus the 13% historical average
(see above). We assume a 6% NWC/Sales ratio in 2017, improving slightly versus
2013 pro-forma (6.7%). As such, we project net cash at EUR102m in 2017.
EBIT: flattish 2014 in sight. For 2017, we are 13% below the plan
Net profit: we project EUR246m in 2017, from EUR89m 2013 PF.
Net debt: we are more cautious based on a less aggressive NWC improvement
We project CAGRS 2013-17 of 10% for sales, 17% for EBIT, and 29% for net profit We are 17% below the 2017 revenue target (slower backlog conversion into sales)
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Table 4: Salini Impregilo - KECH estimates versus the 2014-17 business plan targets
EURm 2013 Pro Forma
2014 Plan
2017 Plan
CAGR 13-17
implied CAGR 14/17
2014 KECH
2014 KECH
vs plan
2017 KECH
2017 KECH
vs plan
KECH CAGR 13-17
Backlog (construction) 21bn 27bn 6% 23.8bn 26.2bn -2% 6% Intake (construction) 5.8bn in line
with 2013 7bn avg
2014/17
Revenues 3970 c 4400 7000 15% 17% 4,418 -1% 5,801 -17% 10% Book to bill 144% 1.3x. n.a. 143% 109% EBITDA 413 >440 800 18% 22% 418 -5% 684 -15% 13% Margin 10.4% >10% 11.4% 10% 11.8% EBIT 238 >220 500 20% 31% 233 +6% 437 -13% 17% Margin 5.9% >5% 7.1% 5.3% 7.5% Net profit adj 89 n.a. n.a. 62 n.a. 246 n.a. 29% Net debt (cash) 332 zero (500) 145 worse (102) materially
worse
Net debt/EBITDA 0.78 -0.63 0.11 Capex 0 ∑14-
17=1600 320 405 ∑14-
17=1435 (-10%)
NWC 267 <0 508 348 6% of 2017
revenues
Source: Kepler Cheuvreux. 2013 pro-forma: net of PPA adjustments
According to our estimates, Salini Impregilo is set to generate EUR401m cumulated FCF
pre dividends (payout assumed at 20% as per the business plan), disposals and delta
perimeter over 2014-17, or cEUR100m a year (>6% of the current market cap).
Table 5: Salini Impregilo - FCF generation
EURm 2014E 2015E 2016E 2017E
Net profit+minorities 123 152 210 258 D&A 185 210 231 247 Other (40) 10 10 10 Working capital 69 76 63 21 Capex (280) (360) (390) (405) FCF 57 88 124 132 Disposals 55 0 0 0 Capital increase 165 0 0 0 Dividends (0) (25) (31) (42) Other (includes delta perimeter) (844) (18) (30) (43) Change of net debt (567) 64 94 89 Starting net debt (cash) (422) 145 82 (12) Ending net debt (cash) 145 82 (12) (102)
Source: Kepler Cheuvreux
2013 results benefited greatly from Todini deconsolidation
The 2013 accounts benefited significantly from the deconsolidation of Todini Costruzioni
Generali, which was accounted as an asset up for disposal. Todini suffered a severe
downturn in 2013, mostly driven by 1) the stopping of the “Alat-Masalli Highway” project in
Azerbaijan, with legal proceedings leading to the termination of this contract at end-2013
(negative impact: EUR40.9m), 2) low margins on a job in Dubai, 3) low margins on other
newly started jobs. As such, Todini posted a EUR59.5m EBITDA loss and a EUR68.1m net
loss in 2013. Management is no longer considering Todini as strategic, as its activity is no
longer seen to be in line with the group, which is set to focus on large, complex jobs.
We project cumulated EUR401m FCF over 2014-17
Todini: huge losses in 2013, deconsolidated and up for disposal
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Table 6: Todini Costruzioni Generali– P&L - main data
EURm 2013 2012
Revenues 338.5 623.6 EBITDA (59.5) 55.1 Margin -17.6% 8.8% EBIT (83.8) 32.1 Margin -24.8% 5.1% Pre tax profit (96.9) 20.3 Net profit (68.1) 13.1
Source: Salini Impregilo, Kepler Cheuvreux
In the 2013 accounts, Todini was included among assets for disposal, with a valuation of
EUR230m, broadly in line with its net worth.
Table 7: Todini Costruzioni Generali– balance sheet - main data
EURm 2013
Fixed assets 85.6 Net working capital 203.4 Provisions -7.4 Capital employed 281.6 financed by Net financial position 53.9 Net worth 227.8
Source: Salini Impregilo 2013 accounts, Kepler Cheuvreux
At end-2013, Salini Impregilo had EUR235m financial credits versus Todini.
In 2012, Salini Impregilo posted pro-forma EBIT of EUR39m, after costs of EUR184m
related to the Panama Canal, several hydro contracts in Colombia and Chile and Salerno
Reggio Calabria in Italy. Pro-forma EBIT was EUR238m.
The inclusion of Todini would have boosted pro-forma revenues by 9%, while EBIT and net
income would have suffered a 35% and 69% negative impact.
Table 8: 2013 pro-forma P&L with and without Todini
EURm 2012 pro forma 2013 pro forma 2013 pro forma with Todini
Delta 2013 Impregilo 2013 Salini Consolidated
Revenues 3496 3970 4308 9% 2,323 3426 EBITDA 210 413 354 -14% 251 316 6.0% 10.4% 8.2% 10.8% 9.2% EBIT 39 238 154 -35% 158 148 1.1% 5.9% 3.6% 6.8% 4.3% Net Income -117 99 31 -69% 188 166
Source: Kepler Cheuvreux
In H1, Todini posted a further net loss of EUR26m. At the end of H1 2014, Todini was
included in assets held for sale at EUR188m (vs. EUR235m at year-end 2013).
Todini deconsolidation gave a big boost to 2013 pro-forma P&L
Todini: net loss of EUR26m in H1 2014
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H1 2014 results: on course to achieve FY 2014 guidance
P&L: acceleration in Q2 Salini Impregilo posted the following results for H1 2014:
Revenues increased by 13% YOY versus H1 2013 pro-forma, with a strong
acceleration in Q2 (+18% YOY) versus a weaker Q1 (+6% YOY).
EBITDA was flat YOY, while the EBITDA margin declined by 120bps to 9.1%.
EBIT declined by 3% YOY, with the EBIT margin down by 80bps to 5.4% (guidance
FY 2014: >5%).
Net profit after minorities was down by 28% YOY to EUR79.2m, penalised by a
declining contribution from discontinued activities.
Net profit adjusted: stripping out discontinued activities, we calculate adjusted net
profit of EUR24m, -33% YOY. This was also impacted by a EUR55m impairment of
Venezuelan assets, due to the application of the SICAD 2 regime.
Table 9: Salini Impregilo – H1 1 results review - P&L
H1 2014 H1 2013 pro forma YOY on pro forma
Revenues 2109.0 1868.8 13% Operating costs -1916.3 -1676.7 14% EBITDA 192.7 192.2 0% Margin 9.1% 10.3% -120bps D&A -78.8 -76.0 4% EBIT 113.9 116.2 -2% margin 5.4% 6.2% -80bps Net financial charges -81.8 -38.4 113% Pre tax profit 32.1 77.8 -59% Taxes -12.2 -41.7 -71% Discontined activities 55.3 74.7 n.m. Net profit pre minorities 75.2 110.7 -32% Minorities 4.1 -0.2 n.m. Net Profit post minorities 79.3 110.5 -28% Net Profit adj for discountinued 24.0 35.9 -33%
Source: Salini Impregilo, Kepler Cheuvreux
Order intake and backlog: 1.38x book-to-bill in H1 2014 New orders amounted to EUR3.5bn in the quarter, of which EUR2.8bn in construction with
a 1.38x book-to-bill.
The key awards were: the Metro line in Peru, totalling EUR1.1bn (EUR0.5bn construction
plus EUR0.6bn concession), EUR0.3bn related to the Brennero Tunnel (two lots), and the
Lietavska Lucka highway in Slovakia (EUR0.3bn). Also, change orders totalling EUR1.5bn
were included in the H1 backlog, of which EUR0.6bn for the Verona-Padova high-speed
railway in Italy (IRICAV2) and EUR0.3bn for the Puerto Cabello-La Encrujada railway in
Venezuela. The order backlog grew to EUR28.6bn (o/w EUR21.4bn in construction and
EUR7.2bn in concessions) from EUR27.7bn at end-2013 (o/w EUR21.2bn in construction
and EUR6.5bn in concessions).
H1 2014: revenues growth and EBIT margin exceeded FY 2014 targets Net profit impacted by write-offs (Venezuela)
Construction: 1.38x book-to-bill in H1 2014
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Table 10: Salini Impregilo – order intake in H1 2014
Project Country EURbn
Metro Lima construction Peru 0.5 Metro Lima concession Peru 0.6 Lietavska Lucka highway Slovakia 0.3 Brennero Tunnel Italy-austria 0.3 IRICAV 2 Italy-austria 0.6 Puerto Cabello La Encrujada Venezuela 0.3 Other 0.9 Total intake 3.5 Intake construction 2.8 Book-to-bill construction 1.38x
Source: Salini Impregilo Kepler Cheuvreux
Balance sheet: NWC still high After worsening substantially to EUR634m at the end of Q1 (vs. EUR332m at end-2013),
largely due to seasonal working capital build-up (more receivables and work-in-progress),
net debt declined to EUR418m at the end of Q2. The reduction was chiefly due to
EUR165m of proceeds from the capital increase (44.7m new shares issued at EUR3.7 per
share) plus the EUR55m net cash-in related to the disposal of Fisia Babcock.
We expect net debt to decline to EUR145m at the end of 2014, with most of the
improvement to come in Q4. During the H1 2014 results presentation, CEO Pietro Salini
declared that NFP at year-end 2014 might be closer to EUR100m than to the target of
breakeven, but this might also be affected by a variety of issues, notably the net working
capital evolution in the last part of the year.
No reduction of NWC was observed in Q2, as it increased to EUR625m from EUR480m at
the end of Q1 and EUR266m at year-end 2013 pro-forma.
Table 11: Salini Impregilo – H1 2014 results review – balance sheet
30/06/2014 31/03/2014 31/12/2013
Tangibles 749.0 827.7 746.9 Assets held for sale 188.4 246.6 235.5 Provisons (103.1) (105.0) (102.2) Severance (18.2) (18.9) (20.5) Other fixed (15.0) 7.7 16.5 Tax assets 80.1 104.3 81.2 Total fixed assets 881.1 1,062.4 957.3 Inventories 235.9 223.9 215.3 WIP 1,358.5 1,240.8 1,105.2 Advance payments (1,560.6) (1,524.1) (1,630.8) Receivables 1,825.9 1,698.3 1,886.5 Payables (1,353.9) (1,285.8) (1,382.7) Other current assets 119.2 127.2 73.1 Net working capital 625.0 480.4 266.5 Capital employed 1,506.1 1,542.8 1,223.9 Equity - parent 1,088.4 870.1 699.6 Equity - minorities 30.8 38.7 192.5 Total equity 1,119.3 908.8 892.1 Net debt 417.7 634.1 331.7
Source: Kepler Cheuvreux
Net debt improved, thanks to capital increase and disposal. Now seen closer to EUR100m at year-end 2014 NWC still high
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At the end of Q1, gross debt was cut to EUR1.47bn from EUR1.84bn at the end of Q1, with
net cash and other assets included in the NFP worth EUR1.05bn. The large mismatch
between gross and net debt explains the high financial charges (ex forex), which we expect
to top EUR93m in 2014 and to considerably depress the bottom line. As such, a further
reduction of gross financial debt should remain a key priority, in our view.
Table 12: Salini Impregilo – net debt composition
31/12/2013 31/03/2014 30/06/2014
Cash 1,132.4 986.9 981.5 Other assets 272.1 220.5 67.5 Total assets 1,404.5 1,207.4 1,049.0 Bank debts 1,025.0 1,130.9 739.3 Other financial debt 158.7 155.3 148.0 Bonds 552.5 555.2 579.4 Total liabilities (gross debt) 1,736.2 1,841.4 1,466.7 Net Debt 331.7 634.0 417.7
Source: Salini Impregilo, Kepler Cheuvreux
We derive a TP of EUR4.2 per share: Buy
DCF Our ten-year free cash flow estimates are based on our P&L for the period being analysed
(2014-17). As for the 2018-23 calculation, we assume the following:
Top-line growth of 4%, which we believe is coherent with the reference market.
A 6.5% terminal EBIT margin, which we believe is coherent with Salini Impregilo’s
profitability across the cycle.
Capex/sales gradually fading to 4.5%, in line with D&A/Sales.
NWC/revenues falling to 6% in 2017 (from 8.5% in 2013) and then stable at this
level.
A 33% tax rate.
Table 13: Free cash flow calculation
EURm 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E Terminal value
Sales 4,418 4,800 5,269 5,801 6,265 6,641 6,906 7,183 7,470 7,769 YOY 8.6% 9.8% 10.1% 8.0% 6.0% 4.0% 4.0% 4.0% 4.0% EBIT 233.0 296.1 372.8 436.5 469.9 491.4 497.3 502.8 508.0 505.0 505.0 EBIT margin 5.3% 6.2% 7.1% 7.5% 7.5% 7.4% 7.2% 7.0% 6.8% 6.5% Taxes on EBIT (76.9) (97.7) (123.0) (144.0) (155.1) (162.2) (164.1) (165.9) (167.6) (166.6) (166.6) NOPAT 156.1 198.4 249.8 292.5 314.8 329.2 333.2 336.9 340.3 338.3 338.3 D&A 185.2 210.3 230.8 247.4 275.7 298.8 310.8 323.2 336.1 349.6 D&A/sales 4.2% 4.4% 4.4% 4.3% 4.4% 4.5% 4.5% 4.5% 4.5% 4.5% Capex (280.0) (360.0) (390.0) (405.0) (375.9) (365.2) (345.3) (323.2) (336.1) (349.6) Capex/sales -7.2% -7.5% -7.4% -7.0% -6.0% -5.5% -5.0% -4.5% -4.5% -4.5% NWC 69.2 76.1 63.1 20.8 (32.5) (26.3) (18.6) (19.3) (20.1) (20.9) FCF 130.5 124.7 153.8 155.7 182.1 236.5 280.0 317.5 320.2 317.4 3,888.9 year 1 2 3 4 5 6 7 8 9 10
Source: Kepler Cheuvreux
Gross financial debt still high at end-Q1: EUR1.47bn
Free cash flow: main assumptions
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Our 9.2% WACC calculation is based on a 3.8% risk-free rate, a 4.5% market risk premium,
and beta of 1.2, assuming a totally unlevered financial structure.
Our TG (terminal growth) assumption is 1%.
Table 14: WACC calculation
Risk free rate 3.8% Equity risk premium 4.5% Beta 1.2 Cost of equity 9.2% Gross cost of debt 6.0% Cost of debt 4.0% tax rate 33% leverage 0.0% WACC 9.2% Long term growth 1.0%
Source: Kepler Cheuvreux
Our terminal value of EUR4.43bn implies 4.6x EV/EBITDA and 7.7x EV/EBIT in the
terminal year, in line with the current sector trading multiples on 2016 (see table in the Peer
section). We derive a EUR2.42bn equity value or EUR4.9 per share.
Table 15: Salini Impregilo - DCF valuation
EURm
PV of cash flows 2014-23E 1,293 PV of terminal value 1,484 Implied EV/EBITDA terminal 4.6x Implied EV/EBIT terminal 7.7x Enterprise value 2,784 Net debt 2013 pro forma (332) Severance funds (22) Equity value 2,424 Number of shares (m) 494 Fair value (EUR per share) 4.9
Source: Kepler Cheuvreux
In our DCF, we do not adjust the 2013 pro-forma NFP (EUR332m) by the delta between
work in progress and advance payments. In fact, advance payments from clients
outstripped WIP by a considerable amount at year-end 2013 (EUR526m), which declined
to EUR202m at the end of H1 2014, but which we expect to widen again at year-end 2014
due to further advance payments to be cashed in Q3. We believe this delta might be
considered largely structural, in light of the expected advance payments cycle, even if the
amount might be subject to high volatility, depending on projects awarded and the regional
mix from quarter to quarter.
WACC: 9.2%. TG: 1%
Our DCF points to EUR2.43bn equity value
We do not adjust NFP for advance payments much higher than WIP (delta: EUR526m at year-end 2013)
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Table 16: Salini Impregilo: advance payments from clients outstrip WIP
EURm 30/06/2014 31/03/2014 31/12/2013
Inventories 236 224 215 WIP - advances (202) (283) (526) Receivables 1,826 1,698 1,886 Payables (1,354) (1,286) (1,383) Other 119 127 73 Net working capital 625 480 267
Source: Salini Impregilo, Kepler Cheuvreux
Finally, we provide a sensitivity analysis of equity value to WACC and to terminal EBIT
margin assumptions. A high 10.2% WACC and low 5% terminal EBIT margin would indicate
a fair equity value of EUR3.4 per share, while a low 8.2% WACC and high terminal 8% EBIT
margin would point to EUR7.1 per share.
Table 17: DCF – equity value sensitivity to WACC (horizontal) and terminal EBIT mgn. (vertical)
8.2% 8.7% 9.2% 9.8% 10.2%
5.0% 5.1 4.5 4.1 3.7 3.4 5.5% 5.4 4.8 4.4 3.9 3.6 6.0% 5.7 5.1 4.6 4.1 3.8 6.5% 5.9 5.4 4.9 4.4 4.0 7.0% 6.4 5.7 5.2 4.6 4.3 7.5% 6.7 6.1 5.5 4.8 4.5 8.0% 7.1 6.4 5.7 5.1 4.7
Source: Kepler Cheuvreux
Peer multiples We have derived a valuation based on the most similar European peers, based on P/E,
EV/EBITDA and EV/EBIT ratios over 2014-16.
We derive a EUR3 per share equity value based on P/E, EUR4.5 per share on EV/EBITDA
and EUR4.4 per share on EV/EBIT. The valuation in terms of P/E is more depressed, as it
suffers from financial charges, which are high in relation to the size of the company’s net
debt, particularly in 2014.
Table 18: Salini Impregilo - Valuation based on peer multiples
X, EURm PE EV/EBITDA EV/EBIT 14E 15E 16E 14E 15E 16E 14E 15E 16E
Astaldi 7.1 6.6 5.2 4.8 4.7 4.4 5.9 5.9 5.5 Strabag 15.1 13.5 10.6 3.7 3.4 3.0 8.9 7.9 6.3 Hochtief 17.6 14.1 11.4 4.2 4.0 3.8 8.2 7.5 6.8 Vinci 12.8 12 11.2 6.6 6.1 5.7 9.9 9.1 8.4 Average 13.2 11.6 9.6 4.8 4.6 4.2 8.2 7.6 6.8 Salini Impregilo adj net profit 62 144 200 Equity value 819 1668 1917 Equity value per share 1.7 3.4 3.0 Average equity value (PE) 3.0 Salini Impregilo EBITDA/EBIT 418 506 604 233 296 373 EV 2018 2304 2550 1916 2250 2517 Salini Impregilo net debt (145) (82) 12 (145) (82) 12 Equity value 1873 2223 2563 1771 2169 2529 Equity value per share 3.8 4.5 5.2 3.6 4.4 5.1 Average equity value (EV/EBITDA) 4.5 Average equity value (EV/EBIT) 4.4
Source: Bloomberg, Kepler Cheuvreux
DCF sensitivity to WACC and terminal EBIT margin
Relative valuation based on peers’ multiples
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We derive a TP of EUR4.2 per share We derive a EUR4.2 per share target price based on the average of a DCF, P/E, EV/EBITDA
and EV/EBIT valuation.
Table 19: Salini Impregilo – target price
EUR per share
DCF 4.9 PE 3.0 EV/EBITDA 4.5 EV/EBIT 4.4 Average 4.2
Source: Kepler Cheuvreux
Appendix: merger of Salini into Impregilo. Key steps
The boards of Salini and Impregilo approved the reverse merger of Salini SpA into Impregilo
on 24 June 2013, setting a swap ratio of 6.45 Impregilo shares for each Salini share. The
merger was then approved at the Salini and Impregilo EGM in September 2013. The new
entity is called Salini Impregilo.
Following the reverse merger, Salini Costruttori owned an 89.9% stake in the new Salini
Impregilo.
Table 20: Shareholder structure pre (Impregilo) and post Salini Impregilo merger (1 January 2014)
Shareholders PRE % m. of shares Shareholders POST % m. of shares
Ordinary shares Ordinary shares Salini S.p.A. 88.83% 357.5 Salini Costruttori 89.95% 402.5 Minorities 11.17% 45.0 Minorities 10.05% 45.0 Total ordinary 100.00% 402.5 Total ordinary 100.00% 447.4 Savings shares 1.6 Savings 1.6
Source: Salini Impregilo, Kepler Cheuvreux
Chart 7: Impregilo: pre-merger shareholders Chart 8: New Salini Impregilo: post-merger shareholders
Source: Salini Impregilo, Kepler Cheuvreux Source: Salini Impregilo, Kepler Cheuvreux
We derive a TP of EUR4.2 per share
Reverse merger of Salini into Impregilo Salini Costruttori owns 89.9% of Salini Impregilo
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Management said that it aims to increase the free float to over 25% via a capital increase
and placement of existing shares. On 25 June, a share placement with institutional
investors was completed, including: 1) 44.74m of new shares (9.96% of existing shares)
issued at EUR3.7 with proceeds of EUR165.5m: 2) disposal of 94m existing shares; 3)
4.05m additional shares disposed of in the context of the overallotment option. Following
the shares placement, the free float has significantly increased to 38.1%.
Table 21: Salini Impregilo – shareholders structure pre and post shares placement (25 June 2014)
Shareholders PRE PLACEMENT % m. of shares Shareholders POST PLACEMENT % m. of shares
Ordinary shares Ordinary shares Salini Costruttori 89.95% 402.5 Salini Costruttori 61.85% 304.45 Minorities 10.05% 45 Minorities 38.15% 187.75 Total ordinary 100.00% 447.4 Total ordinary 100.00% 492.2 Savings 1.6 Savings 1.6
Source: Kepler Cheuvreux
The merger took place on 1 January 2014.
The reverse merger of Salini into Impregilo is the logical conclusion after Salini took control
of Impregilo. The main steps were the entry of Salini into Impregilo (H2 2011), Salini’s
successful battle with Gavio for control of the company, which culminated in a PTO
announced on 6 February 2013 and executed in April, and finally the EUR1.49 per share
jumbo dividend distribution (May 2013).
Table 22: The Salini/Impregilo merger comes after a longstanding fight for control
When Event
H2 2011 Salini buys a 15% stake in Impregilo March 2012 Salini increases its stake in Impregilo to 25.3% April 2012 Salini presents its first Salini-impregilo business plan July 2012 Salini, which has meanwhile increased its stake in Impregilo to 29.7%, takes control of Impregilo's board in the
AGM, winning against Gavio September 2012 Commercial strategic agreement Salini-Impregilo January 2013 Disposal of the last 6.5% stake in listed Brazilian highway Ecorodovias. Total cash-in for the entire 29.2% stake:
EUR0.9bn February 2013 Salini launches PTO on Impregilo at EUR4 per share April 2013 Following the PTO, Salini reaches a total 92.1% stake in Impregilo. Gavio decides to tender its 29.9% stake in
Impregilo to the PTO. May 2013 Impregilo distributes a EUR1.49 jumbo divi (EUR0.6bn), paid through the proceeds of the Ecorodovias disposal Jun 2013 Salini reduces its stake in impregilo to 88.8% to restore minimum legal free float. Merger project Salini-Impregilo
approved by BOD September 2013 Merger approved by the EGM January 2014 Merger effective as of 1 January 2014 June 2014 Free float increase through share placement and capital increase
Source: Salini Impregilo, Kepler Cheuvreux
Merger effective on 1 January 2014
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Sound rationale: well geo-diversified Italian contractor
Management’s main objective is to increase the company’s competitive edge, as having a
larger scale should allow it to generate synergies and partly improve its access to capital
markets.
Salini and Impregilo have a high degree of complementarity, both in terms of geographical
exposure and specialisation.
In fact, Salini has significant exposure to Africa (58% of the FY 2012 backlog), particularly
to Ethiopia and Nigeria. In terms of job specialisation, Salini retains a strong positioning in
hydro dams (51% of the FY 2012 backlog).
Chart 9: Salini very exposed to Africa… Chart 10: ...with strong specialisation in hydro dams
Source: Salini Impregilo, Kepler Cheuvreux, % on end-2012 backlog Source: Salini Impregilo, Kepler Cheuvreux, % on end-2012 backlog
Conversely, Impregilo has large exposure to Italy (44% of the FY 2012 construction
backlog), while LatAm overall accounts for more than 35% of its backlog. In terms of sector
specialisation, Impregilo is mostly focused on the transport infrastructures segment, which
represents 81% of its FY 2012 construction backlog.
Chart 11: Impregilo stronger in Italy and LatAm Chart 12 … specialisation in transport infrastructures
Source: Salini Impregilo, Kepler Cheuvreux, % on end-2012 backlog Source: Salini Impregilo, Kepler Cheuvreux, % on end-2012 backlog
Africa 58%
Italy 17%
Other Europe
18%
Asia 7%
Dams/Hydro (HEP)
51%
Railways/ metro 32%
Highways/ road 10%
Civil 7%
Italy 44%
Greece 4% Rumenia
0% Switzerland
1%
Panama 6%
Venezuela 19%
Colombia 7%
Other LatAm 6%
Middle East 2%
Africa 11%
Highways/ roads/ bridges
36%
Railways/ metro 45%
Dams/hydro/channels
10%
Civil 9%
High complementarity Salini stronger in Africa/hydro dams
Impregilo exposed to Italy/LatAm; stronger in transport infrastructures
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We think the reverse merger of Salini into Impregilo makes particular strategic sense in the
following key areas:
Increases chances of winning large projects, which are on average more
profitable. This is because the overall revenues size of the bidding companies
generally represents a barrier to entry. In addition, bidding costs (eg: performance
bonds) become more manageable.
Improved risk-reward profile. The merger will create more balanced geographical
exposure, thus helping to minimise risks compared with the two separate entities
Salini and Impregilo, with their strong exposure to specific areas. This could also
allow better allocation of human capital to different projects across various
execution phases.
Cost synergies potential. The key areas in which synergies can be achieved thanks
to greater scale are: G&A, purchasing, and capex synergies thanks to the better
utilisation of fixed assets across different construction sites worldwide.
Commercial synergies. This aspect, which could be better exploited following a full
merger, was already included in the commercial strategic agreement Salini-
Impregilo approved in September 2012, aimed at sharing commercial best
practices and targeting EUR6.4bn in additional new orders over 2013-17.
Better geographic balancing reduces risks
Costs…
…and commercial synergy potential
Larger scale implies higher probability of winning larger and on average more profitable jobs
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Valuation
FY to 31/12 (EUR) 2009 2010 2011 2012 2013 2014E 2015E 2016E
Per share data EPS adjusted 0.19 0.13 0.23 -0.28 0.27 0.13 0.29 0.41 % Change -30.6% -32.4% 75.8% na na -52.4% 131.9% 38.3% EPS adjusted and fully diluted 0.19 0.13 0.23 -0.28 0.27 0.13 0.29 0.41 % Change -30.6% -32.4% 75.8% na na -52.4% 131.9% 38.3% EPS reported 0.19 0.32 0.44 1.50 0.47 0.24 0.29 0.41 % Change -53.8% 65.5% 38.3% 239.3% -68.9% -48.9% 23.1% 38.3% EPS Consensus 0.21 0.31 0.45 Cash flow per share -0.14 -0.09 0.05 0.02 0.22 0.69 0.91 1.04 Book value per share 2.23 2.78 3.12 4.47 3.44 2.49 2.73 3.08
DPS 0.00 0.06 0.09 1.49 0.00 0.05 0.06 0.09 Number of shares, YE (m) 402.5 402.5 402.5 402.5 402.5 492.2 492.2 492.2 Number of shares, fully diluted, YE (m) 402.5 402.5 402.5 402.5 402.5 492.2 492.2 492.2 Share price Latest price / year end 2.5 2.1 2.4 3.5 4.9 3.0 3.0 3.0 52 week high (Year high) 3.1 2.6 2.5 3.6 5.1 5.0 52 week low (Year low) 1.7 1.8 1.5 2.4 2.7 3.0 Average price (Year) 2.4 2.2 2.1 3.0 3.8 3.0 Enterprise value (EURm)
Market capitalisation 973.0 899.8 857.9 1,239.2 1,568.3 1,484.0 1,484.0 1,466.7 Net financial debt 274.5 313.4 527.1 -566.7 -421.5 145.1 81.5 -12.1 Pension provisions 33.8 24.7 19.1 20.2 18.1 33.5 35.9 38.4 Market value of minorities -19.5 -18.0 -17.2 -24.8 -31.4 -32.0 -32.0 -31.6 Market value of equity affiliates (net of tax)
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Enterprise value 1,261.8 1,219.9 1,386.9 668.0 1,133.6 1,630.5 1,569.4 1,461.4 Valuation P/E adjusted 12.4 16.9 9.2 na 14.5 23.6 10.2 7.3 P/E adjusted and fully diluted 12.4 16.9 9.2 na 14.5 23.6 10.2 7.3 P/E consensus 14.2 9.6 6.6
P/BV 1.1 0.8 0.7 0.7 1.1 1.2 1.1 1.0 P/CF na na 46.0 na 17.8 4.3 3.3 2.9 Dividend yield (%) 0.0% 2.7% 4.3% 49.2% 0.0% 1.7% 2.1% 2.9% FCF yield (%) -30.7% -24.5% -22.4% -5.1% 2.9% 3.7% 5.7% 8.0% ROE (%) 9.0% 5.2% 7.7% -7.5% 6.7% 4.7% 11.0% 13.7% ROIC (%) 38.5% 27.5% 14.3% -1.9% 12.7% 14.0% 14.1% 16.8% EV/Sales 0.47 0.59 0.66 0.29 0.49 0.37 0.33 0.28 EV/EBITDA 6.3 4.3 5.3 7.9 4.5 3.9 3.1 2.4 EV/EBIT 8.9 5.5 7.9 na 7.2 7.0 5.3 3.9
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Income statement
FY to 31/12 (EURm) 2009 2010 2011 2012 2013 2014E 2015E 2016E
Sales 2,705.7 2,062.3 2,107.9 2,281.0 2,323.3 4,417.6 4,799.7 5,269.0 % Change -8.5% -23.8% 2.2% 8.2% 1.9% 90.1% 8.6% 9.8% EBITDA reported 199.4 282.3 259.4 84.3 250.9 418.2 506.4 603.6 % Change -20.4% 41.6% -8.1% -67.5% 197.7% 66.7% 21.1% 19.2% Depreciation and amortisation -57.8 -58.4 -83.5 -109.7 -93.0 -185.2 -210.3 -230.8 Goodwill impairment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other financial result and associates 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EBIT reported 141.6 223.9 175.9 -25.4 157.9 233.0 296.1 372.8
% Change -25.1% 58.1% -21.4% na na 47.5% 27.1% 25.9% Net financial items -17.5 -55.8 -80.1 -34.1 -50.2 -92.7 -72.2 -62.1 Associates 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Others -15.6 25.0 54.1 4.8 53.3 -35.0 3.0 3.0 Earnings before tax 108.5 193.0 149.9 -54.7 161.1 105.3 226.9 313.8 % Change -41.2% 77.9% -22.3% na na -34.6% 115.5% 38.3% Tax -25.1 -60.1 -40.2 -59.3 -53.7 -36.9 -74.9 -103.5 Net profit from continuing operations 83.3 132.9 109.6 -114.0 107.3 68.4 152.0 210.2
% Change -36.8% 59.4% -17.5% na na -36.2% 122.1% 38.3% Net profit from discontinuing activities -3.7 -2.1 70.4 717.0 80.6 55.0 0.0 0.0 Net profit before minorities 79.6 130.8 180.0 603.0 188.0 123.4 152.0 210.2 Minorities -2.0 -2.3 -2.4 -0.3 -0.3 -6.2 -7.6 -10.5 Net profit reported 77.6 128.4 177.7 602.7 187.6 117.3 144.4 199.7 % Change -53.7% 65.5% 38.3% 239.3% -68.9% -37.5% 23.1% 38.3% Adjustments 0.0 -76.0 -85.4 -717.0 -80.6 -55.0 0.0 0.0 Net profit adjusted 77.6 52.5 92.3 -114.3 107.0 62.3 144.4 199.7 % Change -30.6% -32.4% 75.8% na na -41.8% 131.9% 38.3%
Gross profit 545.2 586.0 633.5 479.5 645.5 1,174.0 1,307.5 1,421.9 EBITDA adjusted 199.4 282.3 259.4 84.3 250.9 418.2 506.4 603.6 EBIT adjusted 141.6 223.8 175.9 -25.4 157.9 233.0 296.1 372.8 Gross profit margin (%) 20.1% 28.4% 30.1% 21.0% 27.8% 26.6% 27.2% 27.0% EBITDA margin (%) 7.4% 13.7% 12.3% 3.7% 10.8% 9.5% 10.6% 11.5% EBIT margin (%) 5.2% 10.9% 8.3% -1.1% 6.8% 5.3% 6.2% 7.1% Net profit margin (%) 2.9% 2.5% 4.4% -5.0% 4.6% 1.4% 3.0% 3.8% Tax rate (%) 23.2% 31.1% 26.9% -108.3% 33.4% 35.0% 33.0% 33.0% Payout ratio (%) 20.0% 0.0% 18.9% 20.5% 100.3% 0.0% 21.1% 21.1%
EPS reported (EUR) 0.19 0.32 0.44 1.50 0.47 0.24 0.29 0.41 % change -53.8% 65.5% 38.3% 239.3% -68.9% -48.9% 23.1% 38.3% EPS adjusted (EUR) 0.19 0.13 0.23 -0.28 0.27 0.13 0.29 0.41 % change -30.6% -32.4% 75.8% na na -52.4% 131.9% 38.3% EPS adj and fully diluted(EUR) 0.19 0.13 0.23 -0.28 0.27 0.13 0.29 0.41 % change -30.6% -32.4% 75.8% na na -52.4% 131.9% 38.3% DPS (EUR) 0.00 0.06 0.09 1.49 0.00 0.05 0.06 0.09 % change na na 50.0% 1555.6% na na 23.1% 38.3% Consensus Sales (EURm) 4,390.0 5,013.8 5,721.4 Consensus EBITDA (EURm) 447.3 526.4 629.6
Consensus EBIT (EURm) 244.1 297.4 375.5 Consensus EPS (EUR) 0.21 0.31 0.45 Consensus DPS (EUR) 0.05 0.07 0.09
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Cash flow statement
FY to 31/12 (EURm) 2009 2010 2011 2012 2013 2014E 2015E 2016E
Net profit before minorities 79.6 130.8 180.0 603.0 188.0 123.4 152.0 210.2 Depreciation and amortisation 57.8 58.4 83.5 109.7 93.0 185.2 210.3 230.8 Goodwill impairment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Change in working capital -237.8 -153.8 -175.5 -12.3 -154.4 69.2 76.1 63.1 Others 46.0 -69.7 -69.7 -692.2 -39.6 -40.0 10.0 10.0 Cash Flow from operating activities -54.4 -34.3 18.4 8.3 86.9 337.9 448.4 514.2 % Change na na na -55.1% 952.2% 288.8% 32.7% 14.7% Capex -252.0 -189.9 -213.0 -71.2 -41.2 -280.0 -360.0 -390.0
Free cash flow -306.4 -224.2 -194.6 -62.9 45.7 57.9 88.4 124.2 % Change na na na na na 26.5% 52.7% 40.5% Acquisitions 0.0 -15.5 0.0 0.0 0.0 0.0 0.0 0.0 Divestments 9.0 102.5 20.0 1,193.0 414.0 55.0 0.0 0.0 Dividend paid -33.5 0.0 -24.2 -36.4 -604.6 0.0 -24.8 -30.5 Share buy back 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Capital increases 0.0 0.0 0.0 0.0 0.0 165.0 0.0 0.0 Others 13.9 98.2 -14.8 0.0 0.0 -844.4 0.0 0.0 Change in net financial debt -317.1 -38.9 -213.7 1,093.7 -144.9 -566.6 63.6 93.6 Change in cash and cash equivalents -172.9 63.7 -195.9 850.0 -600.0 0.0 0.0 0.0
Attributable FCF -298.7 -220.2 -192.0 -62.9 45.7 55.0 83.9 118.0 Cash flow per share (EUR) -0.14 -0.09 0.05 0.02 0.22 0.69 0.91 1.04 % Change na na na -55.1% 952.3% 217.9% 32.7% 14.7% FCF per share (EUR) -0.74 -0.55 -0.48 -0.16 0.11 0.11 0.17 0.24 % Change na na na na na -1.6% 52.7% 40.5% Capex / Sales (%) 9.3% 9.2% 10.1% 3.1% 1.8% 6.3% 7.5% 7.4% Capex / D&A (%) 436.1% 324.9% 255.1% 64.9% 44.3% 151.2% 171.2% 169.0% Cash flow / Sales (%) -2.0% -1.7% 0.9% 0.4% 3.7% 7.6% 9.3% 9.8%
FCF / Sales (%) -11.3% -10.9% -9.2% -2.8% 2.0% 1.3% 1.8% 2.4% FCF Yield (%) -30.7% -24.5% -22.4% -5.1% 2.9% 3.7% 5.7% 8.0% Unlevered FCF Yield (%) -22.6% -14.9% -9.6% 1.2% 7.0% 7.1% 8.4% 10.9%
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Balance sheet
FY to 31/12 (EURm) 2009 2010 2011 2012 2013 2014E 2015E 2016E
Cash and cash equivalents 819.2 882.9 687.0 1,537.0 937.0 937.0 937.0 937.0 Inventories 56.6 71.9 93.9 95.4 83.5 73.5 62.5 53.4 Accounts receivable 1,013.0 928.6 1,011.1 809.2 926.5 815.4 693.4 592.0 Other current assets 528.5 755.7 784.1 1,094.1 1,085.5 955.4 812.3 693.6 Current assets 2,417.3 2,639.1 2,576.1 3,535.7 3,032.4 2,781.3 2,505.2 2,276.0 Tangible assets 189.6 295.8 381.6 298.8 199.9 657.6 807.3 966.5 Goodwill 58.9 94.1 76.7 30.4 11.9 11.9 11.9 11.9 Other Intangible assets 49.4 54.2 51.7 34.0 46.0 146.0 146.0 146.0 Financial assets 322.7 325.3 309.7 12.8 53.3 53.3 53.3 53.3
Other non-current assets 659.0 553.9 644.1 493.7 204.9 189.9 179.9 169.9 Non-current assets 1,279.4 1,323.3 1,463.7 869.7 516.0 1,058.7 1,198.4 1,347.6 Short term debt 592.0 508.4 667.7 667.7 667.7 667.7 667.7 667.7 Accounts payable 989.8 820.4 727.9 731.5 676.1 595.1 506.0 432.0 Other short term liabilities 527.1 700.8 750.7 844.4 842.1 741.2 630.2 538.1 Current liabilities 2,109.0 2,029.6 2,146.3 2,243.6 2,185.9 2,004.0 1,803.9 1,637.9 Long term debt 501.7 687.9 546.4 302.6 -152.2 414.4 350.8 257.2 Pension provisions 33.8 24.7 19.1 20.2 18.1 33.5 35.9 38.4 Other long term provisions 167.7 190.1 137.3 98.3 94.2 161.5 246.2 319.2 Other long term liabilities -17.3 -96.9 -71.7 -65.1 3.3 -19.2 -106.4 -181.9 Non-current liabilities 685.9 805.8 631.1 355.9 -36.6 590.1 526.6 432.9
Shareholders' equity 896.3 1,119.6 1,255.6 1,801.0 1,384.7 1,225.4 1,345.0 1,514.2 Minority interests 5.7 7.4 6.9 4.9 14.3 20.5 28.1 38.6 Total equity 902.0 1,127.0 1,262.5 1,805.8 1,399.0 1,245.9 1,373.1 1,552.8 Balance sheet total 3,696.8 3,962.4 4,039.9 4,405.4 3,548.4 3,840.0 3,703.6 3,623.5 % Change -4.5% 7.2% 2.0% 9.0% -19.5% 8.2% -3.6% -2.2% Book value per share (EUR) 2.23 2.78 3.12 4.47 3.44 2.49 2.73 3.08 % Change 9.1% 24.9% 12.1% 43.4% -23.1% -27.6% 9.8% 12.6% Net debt 308.3 338.1 546.2 -546.5 -403.4 178.6 117.4 26.3
Net financial debt 274.5 313.4 527.1 -566.7 -421.5 145.1 81.5 -12.1 Trade working capital 79.8 180.1 377.1 173.1 333.9 293.8 249.9 213.3 Working capital 81.2 235.0 410.5 422.8 577.2 508.0 432.0 368.8 Inventories/sales 2.1% 3.5% 4.5% 4.2% 3.6% 1.7% 1.3% 1.0% Invested capital 379.0 679.1 920.5 786.0 835.0 1,323.5 1,397.1 1,493.2 Net debt / EBITDA (x) 1.5 1.2 2.1 -6.5 -1.6 0.4 0.2 0.0 Net debt / FCF (x) -1.0 -1.5 -2.8 8.7 -8.8 3.1 1.3 0.2 Gearing (%) 30.4% 27.8% 41.8% -31.4% -30.1% 11.6% 5.9% -0.8% Goodwill / Equity (%) 6.5% 8.3% 6.1% 1.7% 0.8% 1.0% 0.9% 0.8%
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Divisions and regions
FY to 31/12 (EUR) 2009 2010 2011 2012 2013 2014E 2015E 2016E
Key assumptions EUR-USD 1.4 1.3 1.4 1.3 1.3 1.3 1.3 1.3
Sales by division Construction 1,807.0 1,475.7 1,618.1 2,044.0 2,155.4 4,339.0 4,731.8 5,208.5 Engineering: Fisia 734.0 309.9 246.3 222.0 149.2 59.7 47.8 39.1 Concessions 155.0 280.5 246.2 18.4 20.8 21.9 23.1 24.5 Other 19.0 -3.8 -2.7 -3.4 -2.1 -3.0 -3.0 -3.0 by division Construction 160.8 106.4 125.3 -43.7 165.3 234.9 297.0 374.4 Engineering: Fisia -76.1 -37.0 -40.0 20.8 0.3 -1.8 -1.4 -1.2 Concessions 57.0 154.4 90.6 -2.5 -7.8 -0.1 0.5 -0.4 Other -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Construction (%) 8.9% 7.2% 7.7% -2.1% 7.7% 5.4% 6.3% 7.2% Engineering: Fisia (%) -10.4% -11.9% -16.2% 9.4% 0.2% -3.0% -3.0% -3.0% Concessions (%) 36.8% 55.0% 36.8% -13.3% -37.3% -0.5% 2.2% -1.7% Geographic breakdown of sales, adjusted (%) Eurozone 44.6% 31.7% 37.0% 33.0% 33.0% 39.0% 39.0% 39.0% of which Austria 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% of which Benelux 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% of which Benelux 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% of which Finland 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% of which France 3.3% 2.0% 1.2% 1.9% 1.9% 1.7% 1.7% 1.7%
of which Germany 7.8% 4.6% 2.9% 4.3% 4.3% 3.0% 3.0% 3.0% of which Italy 33.5% 25.2% 32.8% 26.8% 26.8% 21.8% 21.8% 21.8% of which Spain 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% of which Portugal 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% of which Others 0.0% 0.0% 0.0% 0.0% 0.0% 12.5% 12.5% 12.5% Europe ex Eurozone 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% of which Russia 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% North America 5.1% 5.9% 4.8% 4.8% 4.8% 4.8% 4.8% 4.8% Latam 28.6% 33.2% 33.0% 39.0% 39.0% 21.0% 21.0% 21.0% of which Brazil 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Asia 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% of which China 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
of which India 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% of which Japan 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Middle East 17.3% 23.8% 20.5% 18.5% 18.5% 15.5% 15.5% 15.5% Currency exposure of sales (%) EUR 52.6% 39.7% 45.0% 41.0% 33.0% 46.0% 44.0% 44.0% CHF 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% DKK 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% NOK 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% SEK 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% USD 25.1% 29.1% 27.9% 32.1% 32.1% 19.5% 19.5% 19.5% GBP 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
JPY 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Hedging policy The company does not hedge currency exposure (translation impact is open)
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Research ratings and important disclosures Disclosure checklist - Potential conflict of interests
Stock ISIN Disclosure (See Below) Currency Price
Astaldi IT0003261069 nothing to disclose EUR 6.56
HOCHTIEF DE0006070006 nothing to disclose EUR 58.39
Salini Impregilo IT0003865570 14, 16, 18 EUR 2.98
Skanska SE0000113250 nothing to disclose SEK 139.10
STRABAG AT000000STR1 nothing to disclose EUR 19.98
Vinci FR0000125486 nothing to disclose EUR 47.51
Source: Factset closing prices of 06/08/2014 Stock prices: Prices are taken as of the previous day’s close (to the date of this report) on the home market unless otherwise stated.
Key:
Kepler Capital Markets SA (KCM) holds or owns or controls 100% of the issued shares of Crédit Agricole Cheuvreux SA (CA Cheuvreux), collectively hereafter KEPLER CHEUVREUX .
1. KEPLER CHEUVREUX holds or owns or controls 5% or more of the issued share capital of this company; 2. The company holds or owns or controls 5% or more of the issued share capital of Kepler Capital Markets SA; 3. KEPLER CHEUVREUX is or may be regularly carrying out proprietary trading in equity securities of this company; 4. KEPLER CHEUVREUX has been lead manager or co-lead manager in a public offering of the issuer’s financial instruments during the last twelve months; 5. KEPLER CHEUVREUX is a market maker in the issuer’s financial instruments; 6. KEPLER CHEUVREUX is a liqu idity provider in relation to price stabilisation activities for the issuer to provide liquidity in such instruments; 7. KEPLER CHEUVREUX acts as a corporate broker or a sponsor or a sponsor specialist (in accordance with the local regulations) to this company; 8. KEPLER CHEUVREUX and the issuer have agreed that KEPLER CHEUVREUX will produce and disseminate investment research on the said issuer as a service to the issuer; 9. KEPLER CHEUVREUX has received compensation from this company for the provision of investment banking or financial advisory services within the previous twelve months; 10. KEPLER CHEUVREUX may expect to receive or intend to seek compensation for investment banking services from this company in the next three months; 11. The author of, or an individual who assisted in the preparation of, this report (or a member of his/her household), or a person who although not involved in the preparation of the report had or could reasonably be expected to have access to the substance of the report prior to its dissemination has a direct ownership position in securities issued by this company; 12. An employee of KEPLER CHEUVREUX serves on the board of directors of this company; 13. As at the end of the month immediately preceding the date of publication of the research report Kepler Capital Markets, Inc. beneficially owned 1% or more of a class of common equity securities of the subject company; 14. KEPLER CHEUVREUX and UniCredit Bank AG have entered into a Co-operation Agreement to form a strategic alliance in connection with certain services including services connected to investment banking transactions. UniCredit Bank AG provides investment banking services to this issuer in return for which UniCredit Bank AG received consideration or a promise of consideration. Separately, through the Co-operation Agreement with UniCredit Bank AG for services provided by KEPLER CHEUVREUX in connection with such activities, KEPLER CHEUVREUX also received consideration or a promise of a consideration in accordance with the general terms of the Co-operation Agreement; 15. KEPLER CHEUVREUX and Crédit Agricole Corporate & Investment Bank (“CACIB”) have entered into a Co-operation Agreement to form a strategic alliance in connection with certain services including services connected to investment banking transactions. CACIB provides investment banking services to this issuer in return for which CACIB received consideration or a promise of consideration. Separately, through the Co-operation Agreement with CACIB for services provided by KEPLER CHEUVREUX in connection with such activities, KEPLER CHEUVREUX also received consideration or a promise of a consideration in accordance with the general terms of the Co-operation Agreement; 16. UniCredit Bank AG holds or owns or controls 5% or more of the issued share capital of KEPLER CAPITAL MARKETS SA. UniCredit Bank AG provides investment banking services to this issuer in return for which UniCredit Bank AG received consideration or a promise of consideration; 17. CACIB holds or owns or controls 15% of more of the issued share capital of KEPLER CAPITAL MARKETS SA. CACIB provides investment banking services to this issuer in return for which CACIB received consideration or a promise of consideration; 18. An employee of UniCredit Bank AG serves on the board of directors of KEPLER CAPITAL MARKETS SA; 19. Two employees of CACIB serve on the board of directors of KEPLER CAPITAL MARKETS SA. CACIB provides investment banking services to this issuer in return for which CACIB received consideration or a p romise of consideration; 20. The services provided by KEPLER CHEUVREUX are provided by Kepler Equities S.A.S., a wholly-owned subsidiary of KEPLER CAPITAL MARKETS SA.
Rating history:
KEPLER CHEUVREUX current rating for Salini Impregilo is Buy and was issued on 07/08/2014. (Reinitiation of coverage)
We did not disclose the rating to the issuer before publication and dissemination of this document.
Rating ratio Kepler Cheuvreux Q1 2014 Rating breakdown A B Buy 43.0% 0.0% Hold 32.0% 0.0% Reduce 21.0% 0.0% Not Rated/Under Review/Accept Offer 4.0% 0.0% Total 100.0% 0.0% Source: Kepler Cheuvreux A: % of all research recommendations B: % of issuers to which Investment Banking Services are supplied
From 9 May 2006, KEPLER CHEUVREUX’s rating system consists of three ratings: Buy, Hold and Reduce. For a Buy rating, the minimum expected upside is 10% in absolute terms over 12 months. For a Hold rating the expected upside is below 10% in absolute terms. A Reduce rating is applied when there is expected downside on the stock. Target prices are set on all stocks under coverage, based on a 12-month view. Equity ratings and valuations are issued in absolute terms, not relative to any given benchmark.
Analyst disclosures The functional job title of the person(s) responsible for the recommendations contained in this report is Equity Research Analyst unless otherwise stated on the cover.
Name of the Equity Research Analyst(s): Matteo Bonizzoni, CFA
Regulation AC - Analyst Certification: Each Equity Research Analyst(s) listed on the front-page of this report, principally responsible for the preparation and content of all or any identified portion of this research report hereby certifies that, with respect to each issuer or security or any identified portion of the report with respect to an issuer or security that the equity research analyst covers in this research report, all of the views expressed in this research report accurately reflect their personal views about those issuer(s) or securities. Each Equity Research Analyst(s) also certifies that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation(s) or view(s) expressed by that equity research analyst in this research report.
Each Equity Research Analyst certifies that he is acting independently and impartially from KEPLER CHEUVREUX shareholders, directors and is not affected by any current or potential conflict of interest that may arise from any KEPLER CHEUVREUX activities.
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Analyst Compensation: The research analyst(s) primarily responsible for the preparation of the content of the research report attest that no part of the analyst’s(s’) compensation was, is or will be, directly or indirectly, related to the specific recommendations expressed by the research analyst(s) in the research report. The research analyst’s(s’) compensation is, however, determined by the overall economic performance of KEPLER CHEUVREUX.
Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of KEPLER CHEUVREUX, which is a non-US affiliate and parent company of Kepler Capital Markets, Inc. a SEC registered and FINRA member broker-dealer. Equity Research Analysts employed by KEPLER CHEUVREUX, are not registered/qualified as research analysts under FINRA/NYSE rules, may not be associated persons of Kepler Capital Markets, Inc. and may not be subject to NASD Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.
Please refer to www.keplercheuvreux.com for further information relating to research and conflict of interest management.
Regulators Location Regulator Abbreviation
Kepler Capital Markets S.A - France Autorité des Marchés Financiers AMF
Kepler Capital Markets, Sucursal en España Comisión Nacional del Mercado de Valores CNMV
Kepler Capital Markets, Frankfurt branch Bundesanstalt für Finanzdienstleistungsaufsicht BaFin
Kepler Capital Markets, Milan branch Commissione Nazionale per le Società e la Borsa CONSOB
Kepler Capital Markets, Amsterdam branch Autoriteit Financiële Markten AFM
Kepler Capital Markets, Zurich branch Swiss Financial Market Supervisory Authority FINMA
Kepler Capital Markets, Inc. Financial Industry Regulatory Authority FINRA
Kepler Capital Markets, London branch Financial Conduct Authority FCA
Kepler Capital Markets, Vienna branch Austrian Financial Services Authority FMA
Crédit Agricole Cheuvreux, SA - France Autorité des Marchés Financiers AMF
Crédit Agricole Cheuvreux España S.V Comisión Nacional del Mercado de Valores CNMV
Crédit Agricole Cheuvreux Niederlassung Deutschland Bundesanstalt für Finanzdienstleistungsaufsicht BaFin
Crédit Agricole Cheuvreux S.A., branch di Milano Commissione Nazionale per le Società e la Borsa CONSOB
Crédit Agricole Cheuvreux Amsterdam Autoriteit Financiële Markten AFM
Crédit Agricole Cheuvreux Zurich Branch Swiss Financial Market Supervisory Authority FINMA
Crédit Agricole Cheuvreux North America, Inc. Financial Industry Regulatory Authority FINRA
Crédit Agricole Cheuvreux International Limited Financial Conduct Authority FCA
Crédit Agricole Cheuvreux Nordic AB Finansinspektionen FI
Kepler Capital Markets S.A and Crédit Agricole Cheuvreux SA, are authorised and regulated by both Autorité de Contrôle Prudentiel and Autorité des Marchés Financiers.
For further information relating to research recommendations and conflict of interest management please refer to www.keplercheuvreux.com..
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Legal and disclosure information Other disclosures
This product is not for retail clients or private individuals.
The information contained in this publication was obtained from various publicly available sources believed to be reliable, but has not been independently verified by KEPLER CHEUVREUX. KEPLER CHEUVREUX does not warrant the completeness or accuracy of such information and does not accept any liability with respect to the accuracy or completeness of such information, except to the extent required by applicable law.
This publication is a brief summary and does not purport to contain all available information on the subjects covered. Further information may be available on request. This report may not be reproduced for further publication unless the source is quoted.
This publication is for information purposes only and shall not be construed as an offer or solicitation for the subscription or purchase or sale of any securities, or as an invitation, inducement or intermediation for the sale, subscription or purchase of any securities, or for engaging in any other transaction. This publication is not for private individuals.
Any opinions, projections, forecasts or estimates in this report are those of the author only, who has acted with a high degree of expertise. They reflect only the current views of the author at the date of this report and are subject to change without notice. KEPLER CHEUVREUX has no obligation to update, modify or amend this publication or to otherwise notify a reader or recipient of this publication in the event that any matter, opinion, projection, forecast or estimate contained herein, changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn. The analysis, opinions, projections, forecasts and estimates expressed in this report were in no way affected or influenced by the issuer. The author of this publication benefits financially from the overall success of KEPLER CHEUVREUX.
The investments referred to in this publication may not be suitable for all recipients. Recipients are urged to base their investment decisions upon their own appropriate investigations that they deem necessary. Any loss or other consequence arising from the use of the material contained in this publication shall be the sole and exclusive responsibility of the investor and KEPLER CHEUVREUX accepts no liability for any such loss or consequence. In the event of any doubt about any investment, recipients should contact their own investment, legal and/or tax advisers to seek advice regarding the appropriateness of investing. Some of the investments mentioned in this publication may not be readily liquid investments. Consequently it may be difficult to sell or realise such investments. The past is not necessarily a guide to future performance of an investment. The value of investments and the income derived from them may fall as well as rise and investors may not get back the amount invested. Some investments discussed in this publication may have a high level of volatility. High volatility investments may experience sudden and large falls in their value which may cause losses. International investing includes risks related to political and economic uncertainties of foreign countries, as well as currency risk.
To the extent permitted by applicable law, no liability whatsoever is accepted for any direct or consequential loss, damages, costs or prejudices whatsoever arising from the use of this publication or its contents.
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Country and region disclosures
United Kingdom: This document is for persons who are Eligible Counterparties or Professional Clients only and is exempt from the general restriction in section 21 of the Financial Services and Markets Act 2000 on the communication of invitations or inducements to engage in investment activity on the grounds that it is being distributed in the United Kingdom only to persons of a kind described in Articles 19(5) (Investment professionals) and 49(2) (High net worth companies, unincorporated associations, etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended). It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. Any investment to which this document relates is available only to such persons, and other classes of person should not rely on this document.
United States: This communication is only intended for, and will only be distributed to, persons residing in any jurisdictions where such distribution or availability would not be contrary to local law or regulation. This communication must not be acted upon or relied on by persons in any jurisdiction other than in accordance with local law or regulation and where such person is an investment professional with the requisite sophistication to understand an investment in such securities of the type communicated and assume the risks associated therewith.
This communication is confidential and is intended solely for the addressee. It is not to be forwarded to any other person or copied without the permission of the sender. This communication is provided for information only. It is not a personal recommendation or an offer to sell or a solicitation to buy the securities mentioned. Investors should obtain independent professional advice before making an investment.
Notice to U.S. Investors: This material is not for distribution in the United States, except to “major US institutional investors” as defined in SEC Rule 15a-6 ("Rule 15a-6"). Kepler Cheuvreux refers to Kepler Capital Markets, Société anonyme (S.A.) (“Kepler Capital Markets SA”) and its affiliates, including CA Cheuvreux, Société Anonyme (S.A.). Kepler Capital Markets SA has entered into a 15a-6 Agreement with Kepler Capital Markets, Inc. ("KCM, Inc.”) which enables this report to be furnished to certain U.S. recipients in reliance on Rule 15a-6 through KCM, Inc.
Each U.S. recipient of this report represents and agrees, by virtue of its acceptance thereof, that it is a "major U.S. institutional investor" (as such term is defined in Rule 15a-6) and that it understands the risks involved in executing transactions in such securities. Any U.S. recipient of this report that wishes to discuss or receive additional information regarding any security or issuer mentioned herein, or engage in any transaction to purchase or sell or solicit or offer the purchase or sale of such securities, should contact a registered representative of KCM, Inc.
KCM, Inc. is a broker-dealer registered with the Securities and Exchange Commission (“SEC”) under the U.S. Securities Exchange Act of 1934, as amen ded, Member of the Financial Industry Regulatory Authority (“FINRA”) and Member of the Securities Investor Protection Corporation (“SIPC”). Pursuant to SEC Rule 15a-6, you must contact a Registered Representative of KCM, Inc. if you are seeking to execute a transaction in the securities discussed in this report. You can reach KCM, Inc. at 600 Lexington Avenue, New York, NY 10022, Compliance Department (212) 710-7625; Operations Department (212) 710-7606; Trading Desk (212) 710-7602. Further information is also available at www.keplercapitalmarkets.com. You may obtain information about SIPC, including the SIPC brochure, by contacting SIPC directly at 202-371-8300; website: http://www.sipc.org/
KCM, Inc. is a wholly owned subsidiary of Kepler Capital Markets SA. Kepler Capital Markets SA, registered on the Paris Register of Companies with the number 413 064 841 (1997 B 10253), whose registered office is located at 112 avenue Kléber, 75016 Paris, is authorised and regulated by both Autorité de Contrôle Prudentiel (ACP) and Autorité des Marchés Financiers (AMF).
Nothing herein excludes or restricts any duty or liability to a customer that KCM, Inc. may have under applicable law. Investment products provided by or through KCM, Inc. are not insured by the Federal Deposit Insurance Corporation and are not deposits or other obligations of any insured depository institution, may lose value and are not guaranteed by the entity that published the research as disclosed on the front page and are not guaranteed by KCM, Inc.
Investing in non-U.S. Securities may entail certain risks. The securities referred to in this report and non-U.S. issuers may not be registered under the U.S. Securities Act of 1933, as amended, and the issuer of such securities may not be subject to U.S. reporting and/or other requirements. Rule 144A securities may be offered or sold only to persons in the U.S. who are Qualified Institutional Buyers within the meaning of Rule 144A under the Securities Act. The information
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available about non-U.S. companies may be limited, and non-U.S. companies are generally not subject to the same uniform auditing and reporting standards as U.S. companies. Securities of some non-U.S. companies may not be as liquid as securities of comparable U.S. companies. Securities discussed herein may be rated below investment grade and should therefore only be considered for inclusion in accounts qualified for speculative investment.
Analysts employed by Kepler Capital Markets SA, a non-U.S. broker-dealer, are not required to take the FINRA analyst exam. The information contained in this report is intended solely for certain "major U.S. institutional investors" and may not be used or relied upon by any other person for any purpose. Such information is provided for informational purposes only and does not constitute a solicitation to buy or an offer to sell any securities under the Securities Act of 1933, as amended, or under any other U.S. federal or state securities laws, rules or regulations. The investment opportunities discussed in this report may be unsuitable for certain investors depending on their specific investment objectives, risk tolerance and financial position.
In jurisdictions where KCM, Inc. is not registered or licensed to trade in securities, or other financial products, transactions may be executed only in accordance with applicable law and legislation, which may vary from jurisdiction to jurisdiction and which may require that a transaction be made in accordance with applicable exemptions from registration or licensing requirements.
The information in this publication is based on sources believed to be reliable, but KCM, Inc. does not make any representation with respect to its completeness or accuracy. All opinions expressed herein reflect the author's judgment at the original time of publication, without regard to the date on which you may receive such information, and are subject to change without notice.
KCM, Inc. and/or its affiliates may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. These publications reflect the different assumptions, views and analytical methods of the analysts who prepared them. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is provided in relation to future performance.
KCM, Inc. and any company affiliated with it may, with respect to any securities discussed herein: (a) take a long or short position and buy or sell such securities; (b) act as investment and/or commercial bankers for issuers of such securities; (c) act as market makers for such securities; (d) serve on the board of any issuer of such securities; and (e) act as paid consultant or advisor to any issuer. The information contained herein may include forward-looking statements within the meaning of U.S. federal securities laws that are subject to risks and uncertainties. Factors that could cause a company's actual results and financial condition to differ from expectations include, without limitation: political uncertainty, changes in general economic conditions that adversely affect the level of demand for the company's products or services, changes in foreign exchange markets, changes in international and domestic financial markets and in the competitive environment, and other factors relating to the foregoing. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement.
France: This publication is issued and distributed in accordance with Articles L.544-1 and seq and R. 621-30-1 of the Code Monétaire et Financier and with Articles 313-25 to 313-27 and 315-1 and seq of the General Regulation of the Autorité des Marchés Financiers (AMF).
Germany: This report must not be distributed to persons who are retail clients in the meaning of Sec. 31a para. 3 of the German Securities Trading Act (Wertpapierhandelsgesetz – “WpHG”). This report may be amended, supplemented or updated in such manner and as frequently as the author deems.
Italy: This document is issued by Kepler Capital Markets, Milan branch and Crédit Agricole Cheuvreux S.A., branch di Milano, authorised in France by the Autorité des Marchés Financiers (AMF) and the Autorité de Contrôle Prudentiel (ACP) and registered in Italy by the Commissione Nazionale per le Società e la Borsa (CONSOB) and is distributed by Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.), authorised in France by the AMF and the ACP and registered in Italy by CONSOB. This document is for Eligible Counterparties or Professional Clients only as defined by the CONSOB Regulation 16190/2007 (art. 26 and art. 58).Other classes of persons should not rely on this document. Reports on issuers of financial instruments listed by Article 180, paragraph 1, letter a) of the Italian Consolidated Act on Financial Services (Legislative Decree No. 58 of 24/2/1998, as am ended from time to time) must comply with the requirements envisaged by articles 69 to 69-novies of CONSOB Regulation 11971/1999. According to these provisions Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.)warns on the significant interests of Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.)indicated in Annex 1 hereof, confirms that there are not significant financial interests of Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.)in relation to the securities object of this report as well as other circumstance or relationship with the issuer of the securities object of this report (including but not limited to conflict of interest, significant shareholdings held in or by the issuer and other significant interests held by Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.)or other entities controlling or subject to control by Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.)in relation to the issuer which may affect the impartiality of this document]. Equities discussed herein are covered on a continuous basis with regular reports at results release. Reports are released on the date shown on cover and distributed via print and email. Kepler Capital Markets, Milan branch and Crédit Agricole Cheuvreux S.A., branch di Milano analysts are not affiliated with any professional groups or organisations. All estimates are by Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.) unless otherwise stated.
Spain: This document is only intended for persons who are Eligible Counterparties or Professional Clients within the meaning of Article 78bis and Article 78ter of the Spanish Securities Market Act. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. This report has been issued by Kepler Capital Markets, Sucursal en España and Crédit Agricole Cheuvreux España S.V, registered in Spain by the Comisión Nacional del Mercado de Valores (CNMV) in the foreign investments firms registry and it has been distributed in Spain by it or by Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.) authorised and regulated by both Autorité de Contrôle Prudentiel and Autorité des Marchés Financiers. There is no obligation to either register or file any report or any supplemental documentation or information with the CNMV. In accordance with the Spanish Securities Market Law (Ley del Mercado de Valores), there is no need for the CNMV to verify, authorise or carry out a compliance review of this document or related documentation, and no information needs to be provided.
Switzerland: This publication is intended to be distributed to professional investors in circumstances such that there is no public offer. This publication does not constitute a prospectus within the meaning of Articles 652a and 1156 of the Swiss Code of Obligations.
Canada: The information provided in this publication is not intended to be distributed or circulated in any manner in Canada and therefore should not be construed as any kind of financial recommendation or advice provided within the meaning of Canadian securities laws.
Other countries: Laws and regulations of other countries may also restrict the distribution of this report. Persons in possession of this document should inform themselves about possible legal restrictions and observe them accordingly.
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