CTT: Challenging outlook
We reiterate our Neutral rating on CTT but lower our FV from Eur3.9 to Eur3.4/sh. We have included the announced restructuring plan but also the more thorough regulation in our estimates. We revise EBITDA down by 16% for 2018E (mostly due to restructuring costs) but for 2019E, and still with restructuring costs, we increase it by 3%, driven by lower costs. However we feel management credibility is at low levels and visibility on CTT’s future is at this stage very low. We would see a brighter future for CTT if the restructuring plan is fully implemented, the decline in mail volumes is not as aggressive as we currently assume (-5.5% YoY in the coming years) and if growth levers finally start to deliver. However visibility is still low and with some risks to consider: i) the Mail volume decline may accelerate if the govt’s digitalization plan finally goes ahead; ii) Treasury certificates subscriptions have declined markedly since November and this could represent a large shock for EBITDA; iii) Regulator risk remains an issue, especially due to the current turbulent relationship with government due to store closures and the redundancy plan. All in all CTT looks like a cheap restructuring story but with low management credibility and lack of short-term triggers.CTT Correios de Portugas, S.A. operates through the following companies: CTT Expresso, Postal services and Logistics, which specializes in courier services, urgent mail and merchandise; Mailtec, which addresses the needs of management of written communication between suppliers and customers ensuring the production of physical and hybrid mail and the electronic management of documents; Payshop, which enables the payment of several services and utilities through a national network of more than 4,000 agents; PostContacto Advertising Mail, which provides services related to the distribution of advertising mail; and Tourline Express, which focuses on courier service and urgent mail transport.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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