BPOST. Equity Report 25/03/2018

Transcription

1 BPOST Equity Report 25/03/2018 Summary : Share Price EUR Number of shares m Fair Value EUR Market Cap 3600 meur Upside 24% Enterprise Value 3898 meur Symbol ENXTBR:BPOST Credit Rating NA Isin Code Sales 2,260 2,351 2,394 2,417 2,442 2,393 2,400 2,977 3,090 3,173 Growth 1.4% 4.0% 1.8% 1.0% 1.0% -2.0% 0% 24.0% 3.8% 2.7% EBITDA Margin 17.1% 18.1% 20.3% 20.8% 20.6% 23.4% 22.4% 18.4% 18.4% 16.9% EPS P/E EV/EBITDA Dividend Dividend Yield 0.0% 0.0% 0.0% 7.5% 7.1% 5.4% 5.8% 7.3% 7.3% 7.3% Analyst Wim Lewi, CFA Valuescan.be Wim.Lewi@Valuescan.be FOR QUALIFIED INVESTORS ONLY, Please see inside front cover for important disclosures THIS DOCUMENT MAY NOT BE DISTRIBUTED TO PERSONS WITHIN THE US, AUSTRALIA, CANADA OR JAPAN.

2 I. Company Description Activities.It is one of Belgium s largest employers, with more than 25,000 employees. The CEO is Koen van Gerven. The Belgian postal service was founded in bpost is an autonomous state enterprise in which the Belgian state has a majority shareholding. P&L 33% Elimination 0% P&L 13% Elimination 0% MRS 67% Business units bpost s business is organized based on business units, service units and corporate units. It operates through two business units: The Mail & Retail Solutions business unit (MRS) and the Parcels & Logistics business unit (P&L). MRS 87% (Source: Company presentation) 1

3 Domestic mail, 58% of Sales (MRS) Domestic mail contains transaction mail, advertising mail and press distribution. Transaction mail develops and markets administrative and financial communication solutions based on paper and at-home services. In 2011, bpost launched RelatioMail, to help customers turn their large volumes of administrative and financial mail into a value-added communication channel to customers. Advertising mail markets communication and direct marketing products, such as addressed advertising mail, unadressed mail and opt-in addresses. Distripost is their unadressed mail services and offers daycertain delivery to advertisers. bpost also distributes newspapers and periodicals in Belgium as result of the concessions awarded by the State for the period Newspapers are delivered before 7.30 AM on weekdays and before 10 AM on Saturday. Parcels, 16% of Sales (P&L) Bpost offers domestic and international parcels. Concerning the domestic parcels, three customers segments are important for bpost: B2C, the delivery of goods from companies such as e-tailers to consumers, the B2B for shipments between companies such as spare parts shipments or shop replenishment and finally, the C2C parcels that consumers send between them for gifts or when they sell goods over internet marketplaces. Concerning the international parcels, bpost created a new organization under the new brand name "Landmark Global, a bpost company". Landmark Global integrates former bpost International subsidiaries and includes various facilities strategically located in the USA, Canada, the UK, The Netherlands, Belgium; China, Hong Kong, Singapore and Australia, in order to compete at an international level in the future. Additional sources of revenues, 26% of Sales Bpost also markets integrated solutions to manage end-to-end processes for our customers, from order to delivery, including document printing, payment and supplier contracts. Examples include the delivery of license plates, traffic fine management, processes and the delivery of INAMI health care certificates. Bpost bank, founded in 1995, is a Belgian bank based on an unique partnership model. She is a joint venture (50/50) between bpost and BNP Parisbas Fortis. Her services are complementary to what bpost offers. They also offer bpaid prepaid card and Western Union. Bpost as an autonomous state enterprise The Belgian State, directly and through the Federale Participatie-en Investeringsmaatschappij (FPIM), is the majority shareholder of bpost and holds 51.04% of bpost. Accordingly, it has the power to control any decision at the Shareholders Meeting requiring a simple majority vote. The Belgian State is one of bpost s largest customers, 12.2% of bpost s total operating income in 2017 was attributable to the Belgian State and State related entities. 2

4 History (Source: Company presentation) 2017 Acquisition of Radial 2017 Opening of the biggest sorting center in Benelux, Brussels X 2016 Acquisition of Lagardère Travel Retail 2015 bpost is selected for the distribution of the press in Belgium for the period Acquisition of CityDepot 2015 Launch first MSM (Mixed Sorting Machine) 2013 bpost issues an IPO and becomes a listed company 2013 CVC sells its stake in bpost 2013 Acquisition Landmark Global in US 2011 The Belgian postal market is completely opened up to competition 2010 De Post-La Poste changes its name to bpost 2009 CVC becomes the sole private shareholder in De Post-La Poste alongside the Belgian state 2000 De Post-La Poste becomes a company limited by shares under public law 1967 First optical mail sorting at the Brussels X sorting centre 1830 The Belgian postal service was founded 3

5 II. Business Model A. Growth Expectations 3,500 3,000 2,500 2,000 1,500 1, Sales Short term news and recent results 4

6 Radial consolidated only from 16/11/17 Outlook 2018 : Revenues Increase driven by: Volume decline in domestic mail up to -7%, average domestic mail price/mix effect of +4% Growth in domestic parcels: volume double digit, price/mix effect between -3% and -6% Continued growth in international parcels supported by newly acquired businesses Stable Radial revenues, Continued decline in Banking & Financial revenue Long term growth drivers Mail decline within European context 5

7 Parcel market segmentation and growth expectations Offer last mile delivery options, supported by acquisitions and partnerships: Home delivery 7/7 & evening delivery, including high-end deliveries (2-man) >2,200 pick-up & drop-off points (incl. 1,000open access Kariboo! points) 152 parcel lockers in B (>450 Cubeelockers by end 2018), 61 de Buren lockers in NL Non-exclusive partnership with DPDHL for B2C parcel delivery into Belgium Growth Conclusion ales by Segment overview BPOST Y2010 Y2011 Y2012 Y2013 Y2014 Y2015 Y2016 Y2017 Y2018 Y2019 MRS 1,977 2,033 2,052 2,006 1,972 1,870 1,839 2,008 1,908 1,812 P&L ,187 1,365 Elimination Totals 2,260 2,351 2,394 2,417 2,442 2,393 2,400 2,977 3,090 3,173 Growth% MRS 2.8% 0.9% -2.2% -1.7% -5.2% -1.7% 9.2% -5.0% -5.0% P&L 12.2% 7.6% 20.1% 14.4% 11.3% 7.5% 72.8% 22.0% 15.0% Elimination 0.0% 0.0% 0.0% -10.0% -44.4% 300.0% 105.0% 0.0% 0.0% Totals 4.0% 1.8% 1.0% 1.0% -2.0% 0.3% 24.0% 3.8% 2.7% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Peer growth BPOST Deutsche Post AG FedEx Corporation Österreichische Post AG PostNL N.V. Royal Mail plc 6

8 B. Profitability 25.0% EBIT% 20.0% 15.0% 10.0% 5.0% 0.0% Short term news and recent results Margin Decrease driven by: Salary indexationexpected as of November 2018 Increase in transport cost(reflecting growth in International Parcels & Mail) Consolidation businesses, Radial costs impacted by phase out webstore and opex (medical costs?) Partly compensated by continued cost optimization Long term Profitability drivers Profitability conclusion 7

9 Peer Margins 25% Peer EBITDA% 20% 15% 10% 5% 0% BPOST Deutsche Post AG FedEx Corporation Österreichische Post AG PostNL N.V. Royal Mail plc Profit by segment EBIT MRS P&L Elimination Corporate Totals Margin% MRS 20.2% 21.9% 23.8% 24.1% 26.0% 23.3% 25.0% 21.7% 18.5% 15.5% P&L -1.4% 3.3% 1.9% 1.1% 2.6% 13.2% 13.8% 6.9% 10.5% 12.0% Elimination Totals 3.1% 13.7% 18.8% 19.9% 19.1% 20.7% 20.7% 16.6% 15.5% 14.0% 8

10 C. Capital Needs Capex Working capital ,000-1, Net Financial debt Dividend (Source: Company data, Valuescan.be estimates) Capex Capex normalises to maintenance level after heavy M&A that has not improved confidence in the management. Working Capital Large negative working capital position. Debt Still healthy balance sheet position despite high Pay-out and failed M&A strategy. Other LT liabilities are around 300m EUR (mainly pension debt) < 10% of market cap. Solvency NetDebt/EBITDA ONCLiab/ONCAssets EBIT/Fin.Costs Tangible IC/NetDebt NetDebt/Equity Fin.Costs/Net Debt -4.8% 10.8% 5.1% 23.6% -24.7% -28.8% -6.5% -2.5% -4.7% -1.4% 1.4% 7.5% 3.5% Capital Needs conclusion 9

11 D. P&L and Balance Sheet tables with Cash Flow ratio s Price EUR NOSH 200 MktCap 3,600 EV 3,898 Isin BE Target Debt 294 Minorities 4 CredRat 0.00 Code ENXTBR:BPOST Peers December Sales 2,227 2,231 2,228 2,260 2,351 2,394 2,417 2,442 2,393 2,400 2,977 3,090 3,173 Salesgrowth 0.2% -0.1% 1.4% 4.0% 1.8% 1.0% 1.0% -2.0% 0.3% 24.0% 3.8% 2.7% Gross Profit Gross Margin 13.2% 15.5% 17.8% 19.1% 21.4% 21.4% 24.8% 24.6% 28.2% 26.3% 22.6% 21.1% 19.9% R&D R&D% SG&A SG&A% 3.3% 2.7% 2.5% 2.6% 2.7% 2.7% 2.9% 2.8% 3.5% 3.6% 4.1% 4.0% 3.9% EBITDA Margin 11.1% 12.7% 13.5% 17.1% 18.1% 20.3% 20.8% 20.6% 23.4% 22.4% 18.4% 18.4% 16.9% Depreciation Amortisation Other operating inco EBIT Margin 7.7% 9.3% 14.5% 3.1% 13.7% 18.8% 19.9% 19.1% 20.7% 20.7% 16.6% 15.5% 14.0% Financials Pretax Tax Rate -50% -29% -22% -33% -187% -36% -37% -35% -34% -29% -34% -28% -24% Tax Adjustments 0 0 Net adj EPS adj # Shares Dividend Valuations EV/Sales EV/EBITDA PE EBIT Growth 21% 55% -79% 367% 40% 7% -3% 7% 0% -1% -3% -7% NET Growth 242% 31% -28% -127% 65% 3% 5% 12% -5% 2% 1% EPS Growth 242% 31% -28% -127% 64% 3% 5% 12% -5% 2% 1% Balance Sheet Tangibles Intangibles Other Fixed Financial Assets Non-Curr.A , ,116 1,071 1,144 1,069 1,217 1,997 1,997 1,998 Inventory Receivables Cash 1,166 1,310 1,206 1,147 1, Other Current Curr.Ass. 1,534 1,692 1,570 1,548 1,548 1, ,043 1,074 1,227 1,310 1,401 Total Assets 2,529 2,669 2,580 2,474 2,403 2,231 1,929 2,122 2,112 2,290 3,223 3,307 3,399 Equity ,133 1, LT Debt Other NC Liabil Non-Curr.Liabil. 1,604 1,692 1,718 1,693 1,342 1,314 1,119 1,234 1,190 1,257 1,245 1,315 1,388 ST Debt Payables Other Curr.Liabil Current Liabilit , ,034 1,979 1,993 2,012 Total Liabil. 2,529 2,669 2,580 2,474 2,403 2,231 1,929 2,122 2,112 2,290 3,223 3,307 3,399 Net Debt ,044-1, Working capital Inv/Sales% 0.4% 0.4% 0.4% 0.3% 0.3% 0.3% 0.4% 0.5% 0.5% 1.5% 1.3% 1.3% 1.3% Rec/Sales% 15.5% 16.6% 15.4% 16.8% 16.3% 16.0% 16.0% 16.0% 16.8% 19.6% 22.8% 22.3% 22.2% Pay/Sales% 26.5% 25.6% 26.3% 25.8% 24.1% 25.8% 23.7% 24.5% 25.8% 29.9% 31.2% 30.5% 30.3% Capex/Sales% 2.1% 3.4% 3.2% 1.9% 3.0% 3.7% 3.3% 3.2% 1.9% 6.6% 25.3% 2.9% 2.9% (Source: Company data, Valuescan.be estimates) 10

12 III. Valuation DCF valuation range: Saved Salesgrowth 0.3% 24.0% 3.8% 2.7% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Sales Oper.Margin 20.7% 16.6% 15.5% 14.0% 13.0% 12.0% 11.0% 11.0% 11.0% 11.0% 10.5% Oper.Income Depreciation WC changes Taxes Capex Free Cash Flow Working Capital Net Debt Tax Rate -29% -34% -27% -24% -24% -24% -24% -24% -24% -24% -24% WC/Sales -21% -17% -17% -17% -17% -17% -17% -17% -17% -17% -17% Capex/Sales -7% -25% -3% -3% -3% -3% -3% -3% -3% -3% -3% Deprec./Capex 45% 11% 99% 99% 99% 99% 99% 99% 99% 99% 99% Free Cash Flow Discount Factor Discounted Flows Horizon Value 1,845 Terminal Value 2,578 Sensitivity Base Case - net debt 294 Rg/WACC 8.5% 8.0% 7.5% WACC 8.0% Equity Value 4, % LT Growth 2.0% Nr Shares % HV/TV Ratio 45% 2.5% Target Price : 22.3 Fin. Assets 329 (Source: business plan estimates from previous chapters by Valuescan.be, these can differ from the actual results) The DCF Peer analysis 12.0 Historic EV/EBITDA BPOST Deutsche Post AG FedEx Corporation Österreichische Post AG PostNL N.V. Royal Mail plc 11

13 Contents and methodology I. Company Description Brief company history to situate the roots and recent material events. Description of the activities in the reported segments that are used for the business model. The necessary background for investors to understand what the company does. II. Sector Overview Description of the market environments in which the company operates. Expectations of market growth potential and market share trends. The necessary sector background for investors to understand the business model. III. Business Model Value = Growth x Profitability / Capital needs IV. A. Growth Expectations The growth expectations are modelled by reported segment on a 10y history and 3y forward. The long term drivers by segment are evaluated, company expectations vs. sector dynamics. Recent results are discussed and a growth conclusion is discussed with the segment table. B. Profitability The profit margins are modelled by reported segment on a 10y history and 3y forward. Competitive situation and operating costs are discussed per segment, peer comparison. Profitability conclusion in a segment EBIT table, including corporate or exceptional costs. C. Capital Needs Equity reports often spent too little attention to the capital needs to realise growth and profitability. Hence, Capex, Working Capital, Debt and Dividends are discussed. The Capex is modelled towards the maintenance level at the end of the 3Y forecasting horizon. Valuation We use a DCF to translate the future free cash flows into a fair value estimate. The WACC is set at 8% for all companies as our expected return for the Equity investor. ValueScan.be measures value with the same yardstick, independent of noise or hype. For companies with higher risk profiles, a higher WACC is possible and will be justified. A ROIC analysis backtests the valuation with an EVA analysis. The historic Equity value is compared to the historic EVA calculation. This indicates whether the market has been over- or undervaluing the company in the past. 12

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