EUR 100.00 For Business Accounts Only

CELLNEX: FY2019 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'19 vs. 4Q'18 Results
Sales: € 282.0 M (+19.5% vs. +21.6% expected and +16.9% expected by the market consensus);
EBITDA: € 188.0 M (+72.5% vs. +69.7% expected and +71.6% expected by the market consensus);
Net Profit: € 3.0 M (-70.0% vs. -60.0% expected);
FY2019 vs. FY2018 Results
Sales: € 1.035 Bn (+14.9% vs. +15.4% expected and +14.2% expected by the market consensus);
EBITDA: € 686.0 M (+64.1% vs. +63.4% expected and +63.9% expected by the market consensus);
Net Profit: € -9.0 M (€ -13.0 M in FY2018 vs. € -8.0 M expected);

The results were robust, and fully in line with expectations. Sales’19 grew +15%, driven by the tower business (+19.3%), and EBITDA stood at € 686 M (+16%, with organic growth of more than +3%), coming in above the high end of the guidance (between € 680-685 M). We highlight the cash generation, with RLFCF reaching € 350 M, meaning +15% growth (+6.5% organic, beating our estimate of € 343 M). As for the 2020 guidance, the company expects: Adjusted EBITDA between € 1.065-1.085 Bn (vs. € 1.058 Bn BS(e) and € 1.114 Bn consensus), RLFCF growing more than +50% (vs. +60% BS(e)) and organic PoP growth above +4%. The guidance does not include the Arqiva deal.
The company has also announced and agreement with Bouygues in France to invest € 1 Bn over the next 7 years. This agreement means the creation and management of a new company (CLNX will hold 100% of the economic rights and 51% of the voting rights and 49% Bouygues) that will deploy and operate a fibre optic network in France to connect towers, telecommunications sites and edge computing centres. The new infrastructure will interconnect the telecommunications towers that serve Bouygues Telecom (with 5,000 belonging to CLNX), with the network of data processing centres. The agreement also contemplates the deployment of up to 90 new metropolitan office until 2027. Bouygues Telecom will be the main client (anchor tenant) of this new network through a 30 + 5 year contract (above the average lifespan of the current contracts) that extends the CLNX backlog by € 4 Bn (+10%). Once the network and the metropolitan offices are fully deployed, the EBITDA generated by the new company will reach € 80 M. (+ 7.6% of CLNX's EBITDA’20e), and thus the implicit multiple of the deal would stand at around 12.5x EV/EBITDA, below CLNX’s trading multiples and those seen in the past acquisitions.. The acquisition will mean € 60 M of RLFCF (at the end of the project), around +11% vs. RLFCF’20 BS(e). The deal is subject to the usual regulatory authorizations in these cases. Despite the fact of being a fibre business (different from traditional towers), the economics are similar (long-term contracts with anchor tenant) and that it will strengthen and improve operations in the traditional tower business in the country (main for 5G). Furthermore, the deal will strengthen CLNX’x footprint in France and its relationship with Bouygues mainly for the future deployment of 5G. The investment calendar, distributed in 7 years, does not entail a financial problem for CLNX that will be able to finance without a rights issue.
In summary, good and robust results that underscore the company’s strength and are fully in line with our estimates. As for the 2020 guidance, if we were to include the latest acquisitions not yet assumed in our model, it would be also in line. Lastly, we welcome the deal with Bouygues, as it reinforces its position in the country, mainly for 5G, and the implicit multiples are attractive compared to CLNX’s and its latest transactions. BUY. Target Price: € 45.00/sh.