《ALópezVEOLIAENVIRONNEMENT(VIE.FP)DOWNGRADETON(V)：INCREASEDTAXINFRANCECOMPOUNDS1011.ppt》由会员分享，可在线阅读，更多相关《ALópezVEOLIAENVIRONNEMENT(VIE.FP)DOWNGRADETON(V)：INCREASEDTAXINFRANCECOMPOUNDS1011.ppt（13页珍藏版）》请在三一办公上搜索。
1、,9.00,8.33,8,Analyst,17934,5,679,4,349,100,Company report,Nat Resources&EnergyMulti-UtilitiesEquity France,abcGlobal Research,Veolia Environnement(VIE FP),Neutral(V)Target price(EUR)Share price(EUR)Potential return(%)Note:Potential return equals the percentagedifference between the current share pri
2、ce andthe target priceDec 2011 a 2012 e 2013 e,Downgrade to N(V):Increased tax in France compoundschallenging economic climate Transformation in progress,but business hit by deterioration in economic environmentand changes in French taxation,HSBC EPSHSBC PEPerformanceAbsolute(%)Relative(%),0.5814.31
3、M-10.1-9.0,0.4917.03M-7.9-15.6,0.869.712M-22.3-31.2,Target price reduced to EUR9 from EUR11.5 on the back ofrevised estimates;lower peer group multiples;higher beta;and higher tax;rating downgraded to Neutral(V),Note:(V)=volatile(please see disclosure appendix)Transformation in progress:By the end o
4、f 2012 we estimate that Veolia will have reducedits debt from EUR14.7bn at the half year to EUR11.6bn through selling UK Water and USsolid waste and deconsolidating its transport JV(VTD)and Berlinerwasser debt.This gives it,9 October 2012Verity Mitchell*,the scope to invest in future growth.An upcom
5、ing catalyst is the announcement of theappointment of a new Chief Operating Officer expected imminently.This is important to,Veolia:The COO will manage the asset disposal process and reduce costs in France.HSBC Bank plc,+44 20 7991 Adam Dickens*AnalystHSBC Bank plc+44 20 7991 Jos A Lpez*AnalystHSBC
6、Bank plc+44 20 7991 View HSBC Global Research at:http:/*Employed by a non-US affiliate ofHSBC Securities(USA)Inc,and is notregistered/qualified pursuant to FINRAregulationsIssuer of report:HSBC Bank plcDisclaimer&DisclosuresThis report must be readwith the disclosures andthe analyst certifications i
7、nthe Disclosure appendix,and with the Disclaimer,which forms part of it,France challenges to earnings growth:investors are sceptical that Veolia can delivercost cutting in France despite managements assurances that staff reductions will largelybe achieved through retirement or voluntary redundancies
8、.The market will be lookingclosely at whether it is able to fulfil its cost cutting promises and also whether contractswill be renewed at lower margins and returns.Industrial and Commercial production inEurope remains depressed and low recyclate prices offer little positive news for 2013earnings.Pol
9、itical risk perception is also much higher than we have seen previously due tothe change in taxation charges in France.Any growth in earnings ex France will restoreconfidence that Veolia is able to diversify political risk.TP cut to EUR9 from EUR11.5 on the back of revised estimates;rating downgrade
10、dto Neutral(V).We use the average of three valuation methods to value Veolia:DCF,DDM and sum-of-parts based on peer group multiples.Our revised target price is nowEUR9(from EUR11.5),on the back of revised estimates and updated peer groupmultiples because:In its 1H result,Veolia flagged that weakness
11、 in certain industrialsectors affected the business of the Environmental Services division,and we include newFrench dividend tax and reduced tax allowances on debt downgrading earnings.Veoliawill have to deliver several quarters of recurring operating profit before investors areconfident about the i
12、nvestment proposition.Index SBF-120 Enterprise value(EURm)Index level 2,660 Free float(%)RIC VIE.PA Market cap(USDm)Bloomberg VIE FP Market cap(EURm)Source:HSBC Source:HSBC,Veolia Environnement(VIE FP)Multi-Utilities9 October 2012Financials&valuationFinancial statements,Valuation data,abc,Year to,12
13、/2011a,12/2012e,12/2013e,12/2014e,Year to,12/2011a,12/2012e,12/2013e,12/2014e,Profit&loss summary(EURm),EV/sales,0.7,0.6,0.6,0.6,RevenueEBITDADepreciation&amortisationOperating profit/EBITNet interestPBT,29,6473,152-1,4521,700-748212,28,7192,567-1,0721,494-781714,29,1902,729-1,1651,564-695869,30,110
14、3,032-1,4631,569-691879,EV/EBITDAEV/ICPE*P/Book valueFCF yield(%)Dividend yield(%),6.81.214.30.6-4.08.4,7.01.317.00.660.28.4,6.41.29.70.66.08.4,5.71.29.00.6-1.28.4,HSBC PBTTaxationNet profitHSBC net profit,-188-541-490290,394-207506256,696-356503453,750-384487487,Note:*=Based on HSBC EPS(fully dilut
15、ed)Price relative,Cash flow summary(EURm),30,30,Cash flow from operationsCapexCash flow from investmentDividendsChange in net debtFCF equity,1,824-2,089-1,138-547-488-268,1,8532,2452,339-421-3,1383,819,1,809-1,329-1,348-419-82351,2,041-2,024-2,023-435377-62,25201510,25201510,Balance sheet summary(EU
16、Rm)Intangible fixed assets 11,706Tangible fixed assets 8,488Current assets18,692,11,7064,52022,076,11,7064,15322,356,11,7064,21422,365,52010Veolia EnvironnementSource:HSBC,2011Rel to SBF-120,2012,52013,Cash&others,5,724,9,498,9,579,9,202,Total assetsOperating liabilitiesGross debtNet debtShareholder
17、s fundsInvested capital,50,40614,90821,08914,7307,07018,254,50,18814,51421,08911,5927,22114,291,50,60114,71421,08911,5107,40813,921,51,17015,10521,08911,8877,56513,977,Note:price at close of 05 Oct 2012,Ratio,growth and per share analysis,Year to,12/2011a,12/2012e,12/2013e,12/2014e,Y-o-y%change,Reve
18、nueEBITDAOperating profitPBTHSBC EPS,3.1-4.9-14.2-81.1-40.7,-3.1-18.6-12.1236.1-16.1,1.66.34.721.875.8,3.211.10.31.17.0,Ratios(%),Revenue/IC(x)ROICROEROAEBITDA marginOperating profit marginEBITDA/net interest(x)Net debt/equityNet debt/EBITDA(x)CF from operations/net debt,1.5-11.93.9-2.710.65.74.2149
19、.84.712.4,1.85.93.62.38.95.23.3115.84.516.0,2.16.76.22.09.35.43.9112.64.215.7,2.26.76.51.910.15.24.4114.33.917.2,Per share data(EUR),EPS reported(fully diluted)HSBC EPS(fully diluted)DPSBook value,-0.990.580.7014.24,0.970.490.7013.83,0.960.860.7014.10,0.920.920.7014.31,2,Veolia Environnement(VIE FP)
20、Multi-Utilities9 October 2012Challenging economicclimate Asset sales nearly completed,debt deconsolidated External challenges from economic climate and French austeritymeasures TP reduced to EUR9 from EUR11.5 on the back of revisedestimates;lower peer group multiples;higher beta;and higher tax;ratin
21、g downgraded to Neutral(V),abc,Transformation in progressBy the end of 2012 we estimate that Veolia willhave reduced its debt from EUR14.7bn at the halfyear to EUR11.6bn through selling UK Water andUS solid waste and deconsolidating its transport JV(VTD)and Berlinerwasser debt.The appointmentof a ne
22、w Chief Operating Officer expectedimminently is important to Veolia as it will allowthe Chairman and CEO to focus on the strategicpriorities of the group,identifying geographies anddivisions that will allow Veolia to grow profitablyin the future.The COO will manage the assetdisposal process and redu
23、ce costs in France thiswill require careful planning so as to persuade theFrench authorities than Veolia remains committedto support French employment.External challenges fromeconomic climateAt the 1H results in August 30%of the grouprevenues were driven by environmental servicesfor Veolia.Managemen
24、t reported negativeimpacts on its waste businesses(Environmental,Services division)due to the deterioration of theeconomic environment a 5.7%fall in revenue atconstant consolidation scope and exchange rates,versus a 1.1%decline in the first quarter.We contend that there is continuing weakness incert
25、ain industrial sectors which affects thebusiness of the Environmental Services division,particularly in France,the United Kingdom andGermany.We set out below the outlook for IPwhich suggests that European growth may resumein 2013,especially in Germany.Globally,China a focus market for Veolia andIndi
26、a provide scope for growth in industrialactivities.Although management remainscautious about 2013 prospects,there also may besome opportunities for revival in the wastemanagement businesses.Geographically diversified portfolio future hope?We set out below the revenue split of the twoFrench water com
27、panies Veolia and SuezEnvironnement(SEVI.PA,Neutral,EUR8.55),3,Veolia Environnement(VIE FP)Multi-Utilities9 October 2012Asia:IP growth,Europe:IP growth,abc,16%12%8%4%0%-4%,C hinaIndiaAustraliaHK,6%4%2%0%-2%-4%,GermanyUKF ranc e,1Q 12a,2Q 12e,3Q 12e,4Q 12e,1Q13e,2Q 13e,1Q 12a,2Q 12e 3Q 12e,4Q 12e,1Q1
28、3e 2Q 13e,C hina,HK,Australia,India,Euroz oneF ranc e,Germ anyUK,Source:HSBC estimatesand the GDP growth estimates for 2013 in thosemarkets.We note that both Veolia and SuezEnvironnement have similar exposure to the otherEuropean markets,apart from their home country.Revenue split in 1H 2012 and GDP
29、 growth 2013e,Source:HSBC estimatesEnvironnement)and Veolia Environnement toincrease prices even as volumes in the UKdecline.It has also precipitated the signing of anumber of very significant long-term integratedwaste management contracts.These will underpin2013 earnings for these companies and the
30、re are a,50%,4.8%,5%,further significant number of public private,40%30%20%10%,1.3%,1.5%,1.8%,2.5%,4%3%2%,partnerships(PPP)waste contracts that will be letin the next two to three years.Veolia may use theproceeds from its UK water sale to reinvest inbuilding new waste facilities with more resilience
31、to waste volumes and with access to renewable,0%,1%,subsidies for energy from waste.,F rance GermanyVIE SEVI,UK As ia PacGDP grow th 2013e,RoW,Low recyclate prices persist,Source:Company data,HSBC estimatesVeolia will need to focus in growing its businessin higher growth markets in Asia Pacific and
32、UK.UK a growth opportunity:water and wastemanagement have been identified by the UKgovernment as being of strategic importance ineconomic recovery.The UK has an aggressiveapproach to ensuring a decrease in the volumes ofwaste sent to landfill through a ratcheting up ofthe landfill tax from its curre
33、nt level of GBP48per tonne to GBP80 by 2015.This has allowed theUK divisions of waste management companiesunder our coverage Viridor Waste(Pennon PNN.L,Neutral,731p),SITA(Suez4,We set out below the recent trend in prices ofpaper and plastic in UK as a proxy for the globaltrends.We see the deteriorat
34、ion in H1 has notcontinued so this may stabilise H2 revenues.Weexpect margin stability for H2.2012 response from the companyWe look to Veolia to update the market at Q3 onthe progress of the accelerated programme of costcutting announced at H1.Reduction of investments by EUR500m in2012-2013.EUR50m i
35、n additional targeted net costreductions,with an increase to EUR170m,Veolia Environnement(VIE FP)Multi-Utilities9 October 2012UK domestic mill prices(GBP per tonne)1201059075,Plastic film(GBP per tonne)180155130105,abc,604530Apr-12 May-12 Jun-12Sorted office w asteMix ed papers,Jul-12,Aug-12 Sep-12N
36、ew s and pamsOld kls(cardboard),805530Apr-12 May-12Export 80:20,Jun-12 Jul-12Export 90:10,Aug-12 Sep-12Ex port 95:5,Source:L(from EUR120m)in 2013 and to EUR470m(from EUR420m)in 2015.Other objectives for 2012-13 Asset disposals of EUR5bn.60%of this isalready signed or completed.Reduce the group net f
37、inancial debt belowEUR12bn.Dividend payment of EUR0.70 for FY2012.Other objectives post-2013 Organic revenue growth of over 3%p.a.Growth in adjusted operating cash flow ofover 5%p.a.Debt leverage ratio(net financialdebt/(operating cash flow before changes inworking capital+principal payments onopera
38、ting financial assets)of 3.0 x.Return to a dividend payout ratio in line withthe Companys historical average.French taxationRecent share price weakness of Veolia relative toour European universe has been exacerbated inour view by increases in taxation of corporates inFrance.We have increased the tax
39、ation ondividends in line with the governments policy of3%,representing a EUR16m hit to net income.There are also proposed reductions in tax,Source:Lallowances on interest which may have more of amaterial effect on Veolia in the future.Change in estimatesWe have revised our estimates based upon a mu
40、chmore pessimistic view of earnings growth inVeolias businesses after the H1 results.In addition we have incorporated the increase innumber of shares outstanding as a result of theoption of scrip dividend for 2011 diluting EPS.There are three permutations of changes inestimates:Those that are a func
41、tion of reduced underlyingprofits from the deteriorating economicconditions we highlight above.This is clearlyindicated in the reduction in EBITDA.Change in scope we are removing thecontribution from Berlinerwasser fromEBITDA and EBIT as Veolia post RWEssale will hold only a 25%stake.This howeveris
42、equity accounted.The change in scope alsoreduces net debt as we assume the debt fromVTD and Berlinerwasser is nowdeconsolidated,thus reducing the interestcharge.We also assume a further cEUR900mproceeds from non-core disposals in 2013which we net off against our EUR2.5bninvestment assumption.,5,2013
43、e,new,Veolia Environnement(VIE FP)Multi-Utilities9 October 2012 French corporate tax changes.We include the3%tax on dividends in our estimates.We arealso assuming a lower tax allowance forinterest for 2013 and 2014.In our SoP we are using a lower waste peergroup EBITDA multiple as we have removedUS
44、Waste given that Veolia has sold itssolid waste business in the US.US wastetraded at over 6x compared to the Europeanpeers at c4.9x.Veolias observed adjusted beta according toBloomberg has increased from 1.1 to 1.2 inour view this reflects increased political risk,We have cut our dividend growth ass
45、umption of5%in 2013e to zero to keep it constant atEUR0.70.With the additional tax incidence of 3%on dividend distribution,Veolia will have to bemore prudent about dividend growth.We havealso cut our terminal dividend growth rate from3%to 2%.We have increased our adjusted betafrom 1.1 to 1.2.In our
46、Stage 2 DCF valuation we have increasedour EBITDA margin from 9%to 9.2%reflectingthe effect of positive cost cutting measures.Under our research model,the Neutral band forstocks with a volatility indicator is 10ppts above,abc,Change in estimates(EURm)2012e 2012e%new old change,2013e%old change,and b
47、elow the hurdle rate of 9.0%for eurozonestocks.Our target price implies a potential return of8%,which is within the Neutral band;therefore,we,EBITDAEBITNet incomeEPS(EUR),2,5671,4942560.49,3,0281,6813220.63,-15%-11%-21%-22%,2,7291,5644530.86,3,0881,5644220.83,-12%0%7%4%,downgrade our rating to Neutr
48、al(V).Potentialreturn equals the percentage difference between thecurrent share price and the target price,including,Source:HSBC estimatesTarget EUR9 from EUR11.5,rating cut to Neutral(V)We use the average of three valuation methods tovalue Veolia:DCF,DDM and sum-of-parts basedon peer group multiple
49、s.Our revised target priceis EUR9,down from EUR11.5 previously,onthe back of updated peer group multiples andrevised estimates.We have cut our EBITDA estimates forunderlying business performance but also becausewe are deconsolidating Belinerwasser from 2013.This has affected our sum-of-parts valuati
50、on.In addition our sum-of-parts is negativelyaffected by updated peer group multiples andrevised estimates.6,the forecast dividend yield when indicated.Restoring the faith will take time and effortInvestors in the Europe and the US we have talkedto are nervous about further fiscal measures inFrance,
