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Elis IPT +170 looks to be coming wide; we see FV at +120

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Elis is in the market extending its curve with a new 6yr (IPT +170 – We see FV at 120, i.e. coming wide). Its secondary is +4-6bps.
  • As recap Elis is guiding to FCF of €340m in FY24 and continued deleveraging from 2* to 1.8* - it managed to already deleverage from 2.5* to 2* last yr on +€200m EBITDA boost and a €152m decrease in net debt (to €3b).
  • De-leveraging will slow this year; of the €340m it’ll use €100m in dividends & remaining majority for the acquisitions with any excess to pay down debt – its relying on EBITDA bump (bbg consensus looking for +8% to €1.6b) for the step down to 1.8* leverage – it didn’t comment on if this was the ceiling going forward but looks like its happy there & should be enough for Moody’s upgrade into IG.
  • Moody’s was only looking for debt repayments of around ~€150 million per year & 5% in FCF to debt. Its maturities are spread out and all sub <€500m/singe lines due in coming 5years.
  • Somewhat surprising Elis has moved tighter than half-notch higher ISS after S&P’s upgrade to IG in Nov – we don’t see downward rating risk on ISS to justify it trading wider.
  • We’re see FV at +120 – it trades wide of consumer staple & auto curves & in line with pharma's VTRS/Bayer. Within the sector itself its spread +20 wide of PLXFP, whose 6yr runs through at +95.

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Elis is in the market extending its curve with a new 6yr (IPT +170 – We see FV at 120, i.e. coming wide). Its secondary is +4-6bps.
  • As recap Elis is guiding to FCF of €340m in FY24 and continued deleveraging from 2* to 1.8* - it managed to already deleverage from 2.5* to 2* last yr on +€200m EBITDA boost and a €152m decrease in net debt (to €3b).
  • De-leveraging will slow this year; of the €340m it’ll use €100m in dividends & remaining majority for the acquisitions with any excess to pay down debt – its relying on EBITDA bump (bbg consensus looking for +8% to €1.6b) for the step down to 1.8* leverage – it didn’t comment on if this was the ceiling going forward but looks like its happy there & should be enough for Moody’s upgrade into IG.
  • Moody’s was only looking for debt repayments of around ~€150 million per year & 5% in FCF to debt. Its maturities are spread out and all sub <€500m/singe lines due in coming 5years.
  • Somewhat surprising Elis has moved tighter than half-notch higher ISS after S&P’s upgrade to IG in Nov – we don’t see downward rating risk on ISS to justify it trading wider.
  • We’re see FV at +120 – it trades wide of consumer staple & auto curves & in line with pharma's VTRS/Bayer. Within the sector itself its spread +20 wide of PLXFP, whose 6yr runs through at +95.