Sacyr returns to the Ibex with the market in its favor | markets

Almost total unanimity around Sacyr. After leaving the selective in June 2016, the construction company returned to the selective last Monday with analysts in its favor: 90% of the recommendations collected by Bloomberg are buy. There is only one advice, that of Alantra, to keep. In the year it rises 3.8% and has a potential of 44% on an average target price of 3.42 euros.

The key to its stock market performance lies in the progress of the business and its prospects. In the results of the first quarter of 2022, Sacyr registered a gross operating margin of 20.3%, the best in its history, and expects to improve the forecasts included in its strategic plan for the next three years. “It continues to present a solid growth profile based on the recurrence of its business, even in times of economic slowdown. The concessions area provides stability and visibility by having 90% of its assets not subject to demand risk”, explains Juan Tuesta, from Bankinter. “In our estimates we assume that it will be able to meet all of its long-term goals,” he adds.

Initially, Sacyr estimated a turnover of 5,500 million in 2025 compared to 4,500 million in 2020, going from a net profit of 36 million to 200 million euros and having an ebitda growth of 66% (1,200 million).

The concessions division is also one of the main attractions of the company, pointed out by Guillermo Barrio, from Intermoney Securities: “The Government’s decision to recognize the patrimonial responsibility of the Administration (RPA) of the radio stations is good news that should allow Investors focus on the value offered by Sacyr, with a secure exposure to concession activity, and most of which have guaranteed returns. The level of debt seems reasonable to us taking into account the global consolidation of the activity”, he argues.

But the group is no stranger to the current tensions. For example, the increase in the cost of raw materials has had an impact on costs of between 20 and 30 million euros.

Regarding the next interest rate hike announced by the ECB for July, Alphavalue-Divacons notes that the company has 42% of its loans at a fixed rate and 58% at a variable rate. “Rising interest rates may cause difficulties for concessionaires in terms of asset rotation.”

Similarly, the firm recalls that the group generates around 40% of revenue outside the euro zone; therefore, “it is exposed to exchange rate risks, despite the fact that it usually resorts to local institutions to obtain capital for its projects and uses coverage to minimize risks.”

For Alphavalue-Divacons, Sacyr’s appeal stems from the change in its profile: “It has gone from being a purely national construction company to becoming an international infrastructure construction company and concessionaire. We estimate that 70% of operating cash flow is now recurring,” she comments. Of course, he warns that “the concessionaires clearly need to have good relations with the Governments for the award of projects, something that happens with Sacyr and the countries where it has a significant presence (Colombia and Italy), but that can change if there is a variation in the Administrations”. Colombia has just held elections and for the first time in history the left has won.

Sacyr has a current portfolio of projects that exceeds 46,000 million. 51% of its revenues come from the United States, 49% from Europe and 2% from the rest of the world (Qatar, Oman, Australia and Algeria).

The infrastructure group has just divested itself of the remaining 2.9% of Repsol from an initial position of 20%. The divestment leaves a positive cash balance of 58 million, which will be used to continue reducing debt and attending to investments.

A value that more than doubles since the pandemic

Assessment. Sacyr has followed an upward path since the lows of the pandemic. In this period, the share price has gone from losing the euro to being above 2.3 euros, which represents a revaluation of 140%. It is now trading slightly below the level at the start of the pandemic. On the contrary, its return to the Ibex occurs with the highest capitalization since it left the index; Its market value exceeds 1,500 million compared to the 808.74 million at which it was listed in June 2016.

Dividend. The company executed the flexible dividend on June 21 against the results of 2021. Shareholders have been able to choose between receiving 0.066 euros per share in cash or receiving a new share for every 39 old ones. The group gave the option on February 1 to receive 0.049 euros in cash or one new share for every 45 old ones; 85% of shareholders decided to collect remuneration through shares. The dividend yield with respect to the current price exceeds 4%.

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