October 09, 2024 10:03 GMT
TRANSPORTATION: bpost (NR/A-/NR) background on co
TRANSPORTATION
bpost is the Belgian USO delivery provider - equivalent to IDSLN in UK and PostNL in the Netherlands. It has still diversified geographically (Belgium is 52-54% of revenue and EBIT) and seems to have a focus on building out logistics services (fulfilment and warehousing) to ride e-commerce growth there. We have concern for its NA performance and rough FY guidance for a -30% fall in EBIT. BS is low levered which alongside the majority govvie ownership holds the ratings up. We have no firm view on privatisation chances.
WNG €500m 5Y IPT MS+120a
WNG €500m 10Y IPT MS+150a
(FV to follow)
- Standalone BBB-, 3-notch uplift for 51% Belgian state (Aa3/AA/AA- Neg) ownership
- CoC, 3m par call
- UoP is to refi the €1b bridge facility used on acquisition of Staci Group (€1.3b purchase).
- Q3 results come on the 8th of Nov (~1 month).
Key notes;
- To be clear debt we see is; €1b above to refi bridge facility, the €650m 26s, €633.6m in leases. Another ~€215m (S&P est.) will come in leases with Staci acquisition leave pro-forma gross/net debt at €2.5b/€1.6b or 4x/2.6x levered pro0-forma (Staci brings 23% of EBITDA).
- FY24 guidance is for Belgium (50%) to see "slightly lower" revenue with a adj. EBIT margin of 5-7% (4.7% last year), NA logistics (35% of group) to see LDD decline (!) and a 2.5-4.5% margin and Europe logistics (~15%) to see to see HSD growth and a 6-8% margin.
- Net it has group guidance for a revenue decline by LSD and adj. EBIT to be between €165-185m (FY23 was €249m - mid-point implies a -30% (!) fall in EBIT). Staci (the acquired logistics co) will come in and add €8-9m in EBIT/month from August onwards (implies ~€40m top-up). As we note below Staci is about 11% of bpost in size, has seen "strong organic growth" in revenues and runs a superior 12% EBIT margin. It will be welcome support for bpost bottom line heading forward.
Other notes;
- S&P downgraded it from A to A- after the Staci acquisition on the leverage bump, not fundamentals. Staci is margin accretive (EBIT 3.8% vs. 11.6%) and is well diversified itself (France 32%, USA 25%, Netherlands 21% are its major markets).
- We have concerns about US logistics performance - investors should not ignore it given 1/3 of revenues. It's blaming the double digit falls on Amazon insourcing its logistics network. There is no signs of stabilisation in the 1H with a 15% fall in revenue dropping the EBIT margin to a razon thin 1%.
- European Logistics division (~15% of revenue and EBIT) is growing and runs the strongest margin (5.7%) in the group.
- It has provisioned €75m for compliance issues see here; https://press.bpost.be/update-on-bpostgroup-compliance-reviews.
- Stock trades at a market cap of €500m and at all-time lows since the IPO in 2013.
- Calls for privatisation below but we have nothing from government sources who has held the stake at 51% since IPO in 2013:
https://www.brusselstimes.com/917079/selling-off-public-assets-could-pump-billions-into-belgian-state-coffers
https://www.brusselstimes.com/487266/flemish-liberals-call-for-privatisation-of-bpost
Keep reading...Show less
469 words