Wendel : A quiet revolution

Publication date 27/04/2017 14:42 - Writing date 27/04/2017 14:39 - - Ownership structure at 31/12/16 - (% stake) - Wendel Participations - 36.9% - Institutional investors - 34.0% - Individual investors - 20.7% - Employees, managers & others - 5.3% - Treasury stock - 3.1% - - * Includes 1,120 individuals and legal entities of the Wendel family - Bond issuances - - Amount - € m - Swap spd. - Price - 4.375% 09/08/2017 - 507 - 21bp - 101.4% - 6.750% 20/04/2018 - 350 - 21bp - 106.8% - 0% 31/07/19* - 500 - - - - - 5.875% 17/09/19 - 212 - 20bp - 114.0% - 1.875% 10/04/2020 - 300 - 20bp - 104.1% - 3.750% 21/01/2021 - 210 - 20bp - 110.8% - 1.000% 20/04/2023 - 300 - 20bp - 98.3% - 2.750% 02/10/2024 - 500 - 20bp - 108.3% - 2.500% 09/02/2027 - 500 - 20bp - 103.5% - * Exchangeable in Saint-Gobain shares - Equity data - Reco: Buy, Target : € 132.00 - Equity analyst: Christophe Chaput - Corporate governance: Moderate risk (3) - / - / - Armed with an optimised financial situation, management has announced a new ambitious strategic plan for the 2017-2020 period that will reshape the portfolio. The idea is to continue its development of unlisted assets, to maintain a good mix in terms of sectors, regions, and business models (cash-burning/generating profile) of the companies where it holds a stake, with the purpose of creating value while respecting the group's overall financial stability, to preserve its investment grade rating (and the optimal financing conditions it induces). - - >Support factors - - Portfolio of quality assets which sector and geographic diversification has significantly increased in recent years. - Ability to seize transformative acquisitions and good 'track' record in value creation. - Very conservative financial policy, which resulted in a significant reduction in debt, an extension of its average maturity and a decrease in its average cost.It also reduced the loan-to-value ratio to 21% at 10 March 2017 (vs. 60% in October 2011). This financial recovery was welcomed by S&P, given that the rating was raised to BBB- in July 2014 and maintained at this level (with a stable outlook) since.- Liquidity is highly comfortable with € 1.4bn of cash at 10 March 2017 and € 1.15bn of undrawn credit facilities (maturities 2019-20). Points to watch - - The group intends to 'boost' its investment programme to € 3bn-€ 4bn over the 2017-20 period (vs. € 2bn over the 2013-2017 period) but it has the means to meet its ambitions and we believe that it will fine-tune its asset rotation policy (disposals or possible IPOs) to avoid weighing heavily on leverage and the loan-to-value ratio (S&P set a limit of 30% maximum among the different criteria to maintain a BBB rating). - Exposure of the portfolio to changes in Bureau Veritas’ market price (stake valued at € 3.3bn on 10 March 2017, i.e. 30% of the revalued gross assets) and, to a lesser extent, Saint1eGobain (stake valued at € 1.6bn, i.e. 15% of the revalued gross assets).- Wendel recorded a currency translation loss of € 160m in 2016, recognised by IHS following the devaluation of the Nigerian naira (in June 2016). Economists are anticipating another devaluation of the Naira this year.