Indian Accounting Research Analyst, Trudence Capital Advisors

Nitin Mangal

Indian Accounting Research Analyst

Trudence Capital Advisors

Trudence Capital Advisors Private Limited is a SEBI-registered Research Analyst, holding SEBI registration number INH000015747. Our firm is dedicated to providing independent and unbiased research on Indian mid to large-cap companies. Trudence Capital is known for its counter-consensus views, with a focus on forensic research and on-ground primary investigations. Our research approach is thorough, involving detailed analysis of accounting practices and governance, alongside extensive channel checks.

Independent & Unbiased Research

Forensic Accounting

GMR Airports Infrastructure / Forensic Accounting

<ul>
<li>
<a href="https://www.smartkarma.com/entities/gmr-airports-infrastructure-ltd" target="_blank" data-smartkarma-citation="entities:306:1" rel="noopener">GMR Airports Infrastructure (GMRI IN)</a> saw pressure on its scrip after its results, that witnessed losses widening to INR-8.4 bn in F23 from INR -7.5 bn in F22 (continuing operations).</li>
<li>The losses have further dented the balance sheet, that already looked fragile over a number of years.</li>
<li>The company also faces cash generation problems on the back of debt burden, apart from severe contingent liabilities, that could further hamper the net-worth. Investors should remain cautious.</li>
</ul>



GMR Airports Infrastructure (GMRI IN) saw pressure on its scrip after its results, that witnessed losses widening to INR-8.4 bn in F23 from INR -7.5 bn in F22 (continuing operations).
The losses have further dented the balance sheet, that already looked fragile over a number of years.
The company also faces cash generation problems on the back of debt burden, apart from severe contingent liabilities, that could further hamper the net-worth. Investors should remain cautious.


GMR Airports Infrastructure- Still a Work In Progress

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

On 18 February <a href="https://www.smartkarma.com/entities/acciona-sa" target="_blank" data-smartkarma-citation="entities:21248:1" rel="noopener">Acciona SA (ANA SM)</a> announced it would list 25% of its renewables subsidiary, Acciona Energías Renovables, and would retain control.
On 7 June, the Spanish Securities and Markets Commission (CNMV) approved the registration document for the IPO, exclusively aimed at institutional investors.
<ul>
<li>
The IPO consists of a secondary offering by parent company Acciona SA and will serve as a preliminary step for Acciona Energias Renovables' admission to trading on the Spanish Continuous Market.
</li>
<li>
Press sources point to a value between €10 bn and €12 bn, the largest IPO in the Spanish market since <a href="https://www.smartkarma.com/entities/aena-sa" target="_blank" data-smartkarma-citation="entities:21244:1" rel="noopener">Aena SA (AENA SM)</a> in 2015. Acciona plans to place around 25% of the capital (30% if the green shoe is added), for which it could raise between €2.5 and €3 bn.
</li>
<li>
The objective is to have the shares listed on the last week of June.
</li>
</ul>
According to Acciona, the rationale of the spin-off is:
<ul>
<li>
financing its ambitious growth plans in renewables: the IPO will allow to accelerate growth goals. The pre-IPO target was to reach 15,000MW in 2024 from 10,700MW in 2020. Now this target is improved to 20,000MW in 2025. Acciona Energías Renovables, as a pure renewables operator, will seek to maximize its growth potential, with an unrestricted balance sheet with access to a more efficient cost of capital. 
</li>
<li>
Acciona will crystallize the value in the group's fastest growing subsidiary. This subsidiary represents 75% of the group's EBITDA, but Acciona receives little recognition for its renewables business and the high proportion of profits these assets now generate.
</li>
</ul>
I calculate Acciona's fair value by using a DCF (Capital IQ consensus, WACC 5.5%, g 1.5%). I add the value of subsidiaries and apply a 15% holding discount.
Fair value is €172.4/share, 25% upside, although planned growth acceleration for Acciona Energías Renovables, should allow further upward revisions in the parent company target prices.
<ul>
<li>
Acciona's shares trade at 10.3x EV/Fwd EBITDA, below 16.1x at which <a href="https://www.smartkarma.com/entities/orsted-a-s" target="_blank" data-smartkarma-citation="entities:24765:1" rel="noopener">Orsted A/S (ORSTED DC)</a> trades.
</li>
<li>
The valuation of Acciona Energías Renovables includes some €4 bn of financial debt, over 4x EBITDA. Assuming a cautious 20% discount on Orsted, or 13.0x EBITDA, Acciona Energías Renovables would be valued at €12,000 mn euros, 87% of the current market of the entire group.
</li>
<li>
Assuming Acciona nets €3 bn, half of the IPO proceeds, €1.5 bn, together with another €1.5 bn from the syndicated loan (see background section), will significantly lower the net debt (and the WACC) of Acciona parent, thus triggering a re-rating of the shares.
</li>
</ul>
Recommendation long ANA SM, TP €172.4, with possibility of further upside.

On 18 February Acciona SA (ANA SM) announced it would list 25% of its renewables subsidiary, Acciona Energías Renovables, and would retain control.
On 7 June, the Spanish Securities and Markets Commission (CNMV) approved the registration document for the IPO, exclusively aimed at institutional investors.


The IPO consists of a secondary offering by parent company Acciona SA and will serve as a preliminary step for Acciona Energias Renovables' admission to trading on the Spanish Continuous Market.


Press sources point to a value between €10 bn and €12 bn, the largest IPO in the Spanish market since Aena SA (AENA SM) in 2015. Acciona plans to place around 25% of the capital (30% if the green shoe is added), for which it could raise between €2.5 and €3 bn.


The objective is to have the shares listed on the last week of June.


According to Acciona, the rationale of the spin-off is:


financing its ambitious growth plans in renewables: the IPO will allow to accelerate growth goals. The pre-IPO target was to reach 15,000MW in 2024 from 10,700MW in 2020. Now this target is improved to 20,000MW in 2025. Acciona Energías Renovables, as a pure renewables operator, will seek to maximize its growth potential, with an unrestricted balance sheet with access to a more efficient cost of capital. 


Acciona will crystallize the value in the group's fastest growing subsidiary. This subsidiary represents 75% of the group's EBITDA, but Acciona receives little recognition for its renewables business and the high proportion of profits these assets now generate.


I calculate Acciona's fair value by using a DCF (Capital IQ consensus, WACC 5.5%, g 1.5%). I add the value of subsidiaries and apply a 15% holding discount.
Fair value is €172.4/share, 25% upside, although planned growth acceleration for Acciona Energías Renovables, should allow further upward revisions in the parent company target prices.


Acciona's shares trade at 10.3x EV/Fwd EBITDA, below 16.1x at which Orsted A/S (ORSTED DC) trades.


The valuation of Acciona Energías Renovables includes some €4 bn of financial debt, over 4x EBITDA. Assuming a cautious 20% discount on Orsted, or 13.0x EBITDA, Acciona Energías Renovables would be valued at €12,000 mn euros, 87% of the current market of the entire group.


Assuming Acciona nets €3 bn, half of the IPO proceeds, €1.5 bn, together with another €1.5 bn from the syndicated loan (see background section), will significantly lower the net debt (and the WACC) of Acciona parent, thus triggering a re-rating of the shares.


Recommendation long ANA SM, TP €172.4, with possibility of further upside.

The Spanish Government ends, de facto, the liberalizing regime that ruled over the Spanish economy since 1999, because it considers necessary to limit the possible acquisitions of strategic Spanish companies by ANY foreign investor after the COVID-19 hit.
The Spanish Government enhances anti-takeover rules:
<ul>
<li>Temporarily until June 30, 2021, the Government has suspended the liberalization regime for foreign direct investments made by residents and other countries of the EU and the EFTA. Any attempt to acquire over 10% of a Spanish listed company by any EU or EFTA corporate or investor must be approved by the Cabinet.
</li>
<li>In the case of investments of non-EU origin, the suspension of the liberalization regime is maintained indefinitely, until a new legislative change is introduced.</li>
<li>This protects the Ibex 35 companies from takeover raids by European rivals.</li>
</ul>
This rule could make it possible to avoid hypothetical bids of <a href="https://www.smartkarma.com/entities/total-sa" target="_blank" data-smartkarma-citation="entities:812:1" rel="noopener">Total Sa (FP FP)</a> or <a href="https://www.smartkarma.com/entities/eni-spa" target="_blank" data-smartkarma-citation="entities:21185:1" rel="noopener">Eni SpA (ENI IM)</a> for <a href="https://www.smartkarma.com/entities/repsol-sa" target="_blank" data-smartkarma-citation="entities:21292:1" rel="noopener">Repsol SA (REP SM)</a> or <a href="https://www.smartkarma.com/entities/deutsche-telekom-ag" target="_blank" data-smartkarma-citation="entities:21611:1" rel="noopener">Deutsche Telekom Ag (DTE GR)</a> for <a href="https://www.smartkarma.com/entities/telefonica-sa" target="_blank" data-smartkarma-citation="entities:21299:1" rel="noopener">Telefonica SA (TEF SM)</a> , which have been the subject of rumours in the market.
<ul>
<li>Analysts see Repsol and Telefónica as the most vulnerable members of the IBEX 35 index, due to their current low valuation. Repsol trades at 4.9x EV/Forward EBITDA vs. the median of comparable companies, 6.3x. Telefonica is trading at 5.2x EV/Forward EBITA vs. the median of comparable companies, 6.5x.</li>
</ul>
Some transactions that are underway could be affected. For example, the French group Vinci agreed to buy the industrial services division of ACS, for over €5 bn (for reference: <a href="https://www.smartkarma.com/insights/acs-unlocking-value-via-disposals" target="_blank" data-smartkarma-citation="insights:44311" rel="noopener">ACS: Unlocking Value Via Disposals</a>).

The Spanish Government ends, de facto, the liberalizing regime that ruled over the Spanish economy since 1999, because it considers necessary to limit the possible acquisitions of strategic Spanish companies by ANY foreign investor after the COVID-19 hit.
The Spanish Government enhances anti-takeover rules:

Temporarily until June 30, 2021, the Government has suspended the liberalization regime for foreign direct investments made by residents and other countries of the EU and the EFTA. Any attempt to acquire over 10% of a Spanish listed company by any EU or EFTA corporate or investor must be approved by the Cabinet.

In the case of investments of non-EU origin, the suspension of the liberalization regime is maintained indefinitely, until a new legislative change is introduced.
This protects the Ibex 35 companies from takeover raids by European rivals.

This rule could make it possible to avoid hypothetical bids of Total Sa (FP FP) or Eni SpA (ENI IM) for Repsol SA (REP SM) or Deutsche Telekom Ag (DTE GR) for Telefonica SA (TEF SM) , which have been the subject of rumours in the market.

Analysts see Repsol and Telefónica as the most vulnerable members of the IBEX 35 index, due to their current low valuation. Repsol trades at 4.9x EV/Forward EBITDA vs. the median of comparable companies, 6.3x. Telefonica is trading at 5.2x EV/Forward EBITA vs. the median of comparable companies, 6.5x.

Some transactions that are underway could be affected. For example, the French group Vinci agreed to buy the industrial services division of ACS, for over €5 bn (for reference: ACS: Unlocking Value Via Disposals).

Enhanced Limits to Investments in Spanish Companies

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

The broad global indexes (MSCI ACWI, ACWI ex-US, and EAFE) remain near logical resistance as investors await monetary policy decisions from the ECB and Federal Reserve. Considering overhead resistance and continued mixed economic and market signals, we remain squarely in the neutral camp.  We outline important technical levels across major indexes and highlight attractive opportunities within the Manufacturing, Transportation, and Materials Sectors, most of which hail from Europe and Japan.

The broad global indexes (MSCI ACWI, ACWI ex-US, and EAFE) remain near logical resistance as investors await monetary policy decisions from the ECB and Federal Reserve. Considering overhead resistance and continued mixed economic and market signals, we remain squarely in the neutral camp.  We outline important technical levels across major indexes and highlight attractive opportunities within the Manufacturing, Transportation, and Materials Sectors, most of which hail from Europe and Japan.

Global Equity Strategy: Overhead Resistance Looms

Equity Research Analyst, Maritime sector, Drewry Maritime Financial Research

Ankush Kathuria CFA, FRM

Equity Research Analyst, Maritime sector

Maritime Sector, Equity & Credit Research

Drewry Maritime Financial Research

With no ties to other players in the shipping, finance or banking world, we provide a uniquely impartial view of the markets and companies we cover. Our parent organization, Drewry is a leading independent provider of research services to the maritime and shipping industry, employing over 100 professionals across an international network of offices in London, Delhi, Singapore and Shanghai. Combining our market-leading resources with seasoned sector expertise DFRS offers a highly differentiated and comprehensive range of investment and financial research services to lenders and prospective investors in publicly listed maritime and shipping companies. The full service of reports, supporting resources and sector orientated webinars provides our clients with the most complete picture of the organisations under coverage as is possible. We have been charting and analysing the world’s maritime markets for more than 40 years. This unrivalled intelligence and understanding provides the foundation of our research service. Our analysts have access to one of the most up-to-date, comprehensive and reliable sources of market insight and research data available today. We look at globally listed companies within the following sectors: Port Operators, Container Shipping, Container Manufacturing & Leasing, LNG Shipping, Dry Bulk Shipping and Tanker Shipping. Combine in-depth sector expertise with financial analysis focusing on over 50 stocks globally.

Thematic (Sector/Industry)

Container Shipping - Asia Import Drive Will Boost Asia-Europe-Asia Box Profits for CarriersBackground - Space shortage has disrupted the Europe-Asia container trade in February and March and European exporters face highly unusual space crunch. This is highly unusual for a ‘back-haul’ route where ship utilization rarely reaches 70%. Carriers charged an ‘emergency minimum rate’ to accept bookings and some of them have put a stop to bookings until mid-April. Boxes already on the quay are getting…

Container Shipping - Asia Import Drive Will Boost Asia-Europe-Asia Box Profits for CarriersBackground - Space shortage has disrupted the Europe-Asia container trade in February and March and European exporters face highly unusual space crunch. This is highly unusual for a ‘back-haul’ route where ship utilization rarely reaches 70%. Carriers charged an ‘emergency minimum rate’ to accept bookings and some of them have put a stop to bookings until mid-April. Boxes already on the quay are getting…

Container Shipping - Asia Import Drive Will Boost Asia-Europe-Asia Box Profits for Carriers

Spain

Aena S.A. manages general interest airports and heliports in Spain. The Company, through its subsidiaries, also participates in the management of airports abroad.

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Aena SA (AENA SM)

GMR Airports Infrastructure- Still a Work In Progress

The losses have further dented the balance sheet, that already looked fragile over a number of years. The company also faces cash generation...

Nitin Mangal

Spin-Off of Acciona Renewables

Acciona trades at 10.3x EV/Fwd EBITDA, below 16.1x for ORSTED DC. IPO should allow value to crystallize and financial debt to be repaid, thus...

Jesus Rodriguez Aguilar

Enhanced Limits to Investments in Spanish Companies

Any attempt to acquire over 10% of a Spanish listed company by any foreign investor must be approved by the Cabinet. This could prevent bids of...

Jesus Rodriguez Aguilar

Global Equity Strategy: Overhead Resistance Looms

The broad global indexes (MSCI ACWI, ACWI ex-US, and EAFE) remain near logical resistance as investors await monetary policy decisions from the ECB...

Vermilion Research

Container Shipping - Asia Import Drive Will Boost Asia-Europe-Asia Box Profits for Carriers

Container Shipping - Asia Import Drive Will Boost Asia-Europe-Asia Box Profits for CarriersBackground - Space shortage has disrupted the...

Drewry Maritime Financial Research

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