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Edenred (NR, A-) vs. Pluxee (NR, BBB+; S)

CONSUMER CYCLICALS
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Two biggest employee benefits providers are expected to see healthy growth ahead by analyst; Edenred's history and strong guidance for this year by both back that. Balance sheet's are low levered for now yet cash curves trade wide (3y+). Edenred is the preferred name on the net of below. PLXFP28's & EDENFP29's (both at Z+77/3.7%) screen cheapest on their curves.

  • On ratings; we don't read too much on the one-notch difference; both have headroom, medium-term BS likely to be more dependent on acquisitions and how well they integrate those.
  • On interest rates; Pluxee more exposed - Float EBITDA estimated at 25% by analyst (vs. Edenred's 11%). Pluxee has reportedly disclosed sensitivity to global rates at 100bps to €24m on revenue - that's sizeable vol given float revenue in 1H at €75m and group EBITDA at €200m. Also note sizeable exposure to EM countries (Brazil ~30%). FYI float here refers to interest on cash balances pre-loaded by clients on cards/accounts.
  • On regulation; key issue in these markets (employee benefits tax exempt) with again Pluxee more exposed (~85% vs. 60%) given pure play employee benefits v.s. Edenred also operates in fleet & mobility (including fuel retail). Regulation impact dependent on country that comes into focus - France larger for Edenred vs. Pluxee etc.
  • On forecasts; similar growth rates expected in-near term but Edenred does have larger scale (3x+ the FCF), more history (as a standalone) & higher EBITDA margins. Both are high cash conversion businesses (>70% on EBITDA).
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Two biggest employee benefits providers are expected to see healthy growth ahead by analyst; Edenred's history and strong guidance for this year by both back that. Balance sheet's are low levered for now yet cash curves trade wide (3y+). Edenred is the preferred name on the net of below. PLXFP28's & EDENFP29's (both at Z+77/3.7%) screen cheapest on their curves.

  • On ratings; we don't read too much on the one-notch difference; both have headroom, medium-term BS likely to be more dependent on acquisitions and how well they integrate those.
  • On interest rates; Pluxee more exposed - Float EBITDA estimated at 25% by analyst (vs. Edenred's 11%). Pluxee has reportedly disclosed sensitivity to global rates at 100bps to €24m on revenue - that's sizeable vol given float revenue in 1H at €75m and group EBITDA at €200m. Also note sizeable exposure to EM countries (Brazil ~30%). FYI float here refers to interest on cash balances pre-loaded by clients on cards/accounts.
  • On regulation; key issue in these markets (employee benefits tax exempt) with again Pluxee more exposed (~85% vs. 60%) given pure play employee benefits v.s. Edenred also operates in fleet & mobility (including fuel retail). Regulation impact dependent on country that comes into focus - France larger for Edenred vs. Pluxee etc.
  • On forecasts; similar growth rates expected in-near term but Edenred does have larger scale (3x+ the FCF), more history (as a standalone) & higher EBITDA margins. Both are high cash conversion businesses (>70% on EBITDA).