(BFM Bourse) – The Canadian bank resumed coverage on Tuesday of the shares of French infrastructure groups, namely Vinci, Eiffage and Getlink. Royal Bank of Canada believes that Vinci and Eiffage shares are trading at excessively discounted levels.
Vinci and Eiffage shares are too cheap to ignore. This, in summary, is the message sent by Royal Bank of Canada this Tuesday.
The Canadian bank has taken over coverage of infrastructure operators in Europe, namely the construction and concessions groups Vinci and Eiffage, the Channel tunnel operator Getlink and the Spanish group Ferrovial.
Royal Bank of Canada has decided to advise “outperformance”, equivalent to buying in its terminology, Vinci and Eiffage shares, with respective price targets of 130 euros and 125 euros. Which grants respective potentials of around 30% and 48% compared to Monday's close.
On the Paris Stock Exchange this Tuesday, Vinci shares gained 0.15% while Eiffage gained 0.02% around 10:50 a.m., the two shares resisting a little to the ambient gloom, since at the same time the CAC 40 dropped 1%. .
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Political fears too high
For both Eiffage and Vinci, Royal Bank of Canada judges that political risk has been “excessively” integrated into prices by the market, with perhaps even a risk of nationalization. Vinci and Eiffage trade respectively less than seven times and five times their expected gross operating profit in 2025, compared to almost 15 times for Getlink and more than 20 times for Ferrovial. And an average of 14.5 times for transport infrastructure operators in developed countries.
“The perceived risk of nationalization may still weigh on stocks. The National Rally has favored the nationalization of highways in the past (among other radical economic policies on which the party has gradually reversed course)”, underlines Royal Bank of Canada .
But “we consider that nationalization is unlikely given the high budgetary burden represented by the nationalization of French motorways, and given that the concessions expire in 2031-2036 anyway. We believe that the risk that nationalization will translated by the expropriation of French highways is even weaker”, puts the Canadian bank into perspective.
Beyond this aspect common to the two actions, Royal Bank of Canada believes that Vinci should benefit from a good trend in traffic on its French motorways next year, thanks to a favorable basis of comparison. Its activity will also be supported by the continued recovery in its airports, to the extent that passenger traffic is still 12% below its pre-Covid-19 trend in European airports.
Still in transport, the Canadian bank judges that the extension of Gatwick airport in London will constitute a “potential catalyst for Vinci action”.
Eiffage driven by its “energy” activity
“We believe that plans to expand Gatwick through the opening of its additional runway are relatively well placed given the need to expand London Airport and the new UK government's desire to side with the 'builders and not the blockers' in an attempt to stimulate economic growth,” the bank writes.
Royal Bank of Canada also highlights the improvement in the quality of its “contracting” division (construction, roadworks, energy). Its “energy” activity benefits in particular from “robust” growth prospects, it argues.
As for Eiffage, Royal Bank of Canada also emphasizes that its largest asset APRR (Autoroutes Paris-Rhin-Rhône) will benefit from a lenient basis of comparison next year. Similarly, Royal Bank of Canada argues that the company benefits from high growth in its energy branch, with revenue growth of 15% expected in 2024, and higher margins than in all “works” activities. “. Furthermore, the order book for this division, at 28.4 billion euros in the first half, offers visibility at an “unprecedented” level, notes the Canadian bank.
As for Getlink, Royal Bank of Canada has a “sector performance” rating, equivalent to “neutral”. The bank considers that the potential of the action is limited although it recognizes that the volumes of freight trucks passing through the cross-Channel tunnel could improve now that Keir Starmer's Labor is at the head of the British government.
Julien Marion – ©2024 BFM Bourse
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