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CELLNEX: 1Q’20 RESULTS AND T.P. UPGRADE (ANÁLISIS BANCO SABADELL)

1Q'20 vs 1Q'19 Results
Sales: € 358.0 M (+48.5% vs. +49.0% BS(e) and +49.4% consensus);
EBITDA: € 260.0 M (+63.5% vs. +62.3% BS(e) and +62.9% consensus);
EBIT: € 38.0 M (-10.2%);
Net Profit: € -30.0 M (€ 0 m in 1Q’19);
Good results and in line, underscoring the high visibility and business robustness, as well as the company’s flexibility to keep its delivery even against a very adverse backdrop as we are currently seeing given the impact from Covid-19, which is allowing it to maintain organic growth (PoPs +5%, +7.1% in RLFCF). 1Q’20 sales grew +48.6% due mainly to the effect from including the towers business in the scope of consolidation (+70.5%). 1Q’20 EBITDA came in at € 260 M (+63.6%), with a margin of 74% (vs. 68% in 1Q’19). RLFCF increased by +50% to € 127 M (vs. € 127 M BS(e)). The company reiterates its 2020 targets: between € 1.05 and € 1.08 Bn of adjusted EBITDA (vs. € 1.11 Bn BS(e) and € 1.12 Bn consensus) and >+50% growth in RLFCF (vs. +57.5% BS(e)), although it has mentioned that it will give an update in 2Q’20 to provide higher visibility on the impact from recent acquisitions.
We raise our estimates to include the acquisitions made since December 2019: NOS and OMTEL Portugal, Orange’s and El Corte Inglés’ towers in Spain and the Fibre agreement with Bouygues (see the following pages for more details). With this in mind, we raise our sales’20e by +8% and EBITDA’20e by +10.5%, with an impact of +6% on cash levels. In 2021, the impact would be somewhat more significant due to the gradual incorporation of the towers, with sales, EBITDA and RLFCF increasing by +9.2%, +12.3% and +9.9%, respectively.
Likewise, we raise our T.P. to € 55.80/sh. (+24%, +13.8% upside), bearing in mind that the company continues to execute its inorganic expansion plan in Europe (which is in CLNX’ DNA and has allowed the company to increase the number of sites to 61,000, with a backlog worth € 46 Bn), where there continue to be great opportunities. Given the company’s current financial position (NFD/EBITDA of 5.7x) and, although it could still make further medium-sized moves (of up to €~700 M), we believe that a €~4.6 Bn rights issue would be feasible (25% of the market cap), as this would give the company financial strength to carry out transactions totalling as much as € 13 Bn, bringing the leverage ratio back to levels of ~6x NFD/EBITDA. As for the project pipeline worth € 11 Bn that was announced in February’19, the company has already executed it almost entirely, but it continues to see multiple opportunities (which have not been quantified). In this scenario, and assuming synergies of 15% (as the transactions could be made in the regions where the company is already present, which would make the creation of synergies much easier), our T.P. would stand at levels of € 55.80/sh., which is the valuation we set in our base-case scenario. Thus, we reiterate our BUY recommendation against a backdrop of global uncertainty, where high visibility and business robustness are fundamental. Moreover, the current scenario of ultra low rates could provide a tail wind for CLNX’ equity story.