European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>On 31 May the acceptance period started, it will run until 14 June (inclusive). The adjusted offer price is €7.2 (around 50% of NAV, not too generous in my view).</li>
<li>Slim seeks to build a large real estate landlord and developer. Top shareholders are Santander and BBVA (49.5% and 20.9% respectively), but cannot tender without booking losses on their stakes.</li>
<li>In the long term, this stock should be worth more, albeit it won't be very liquid. For now, gross spread is 1.8% (est. 33% annual return). Long.</li>
</ul>


On 31 May the acceptance period started, it will run until 14 June (inclusive). The adjusted offer price is €7.2 (around 50% of NAV, not too generous in my view).
Slim seeks to build a large real estate landlord and developer. Top shareholders are Santander and BBVA (49.5% and 20.9% respectively), but cannot tender without booking losses on their stakes.
In the long term, this stock should be worth more, albeit it won't be very liquid. For now, gross spread is 1.8% (est. 33% annual return). Long.


<ul>
<li>
<a href="https://www.smartkarma.com/entities/fomento-de-construcciones-y-co" target="_blank" data-smartkarma-citation="entities:21269:1" rel="noopener">Fomento De Construcciones Y Co (FCC SM)</a> launches an offer to buy 24% of <a href="https://www.smartkarma.com/entities/metrovacesa-sa" target="_blank" data-smartkarma-citation="entities:28925:1" rel="noopener">Metrovacesa SA (MVC SM)</a> for €284 million, €7.8/share, cum dividend, in cash (implied EV €1,271.7 million).</li>
<li>The offer represents 19.4 EV/22e EBITDA, and a whopping c. 50% discount to NAV. Reference shareholders (Santander and BBVA) own 70.21% of Metrovacesa. Gross spread is 3.5%.</li>
<li>Considering recent underperformance of the shares, most free float shareholders will tender, in my view. Closing of the offer should happen in less than six months. Long and tender.</li>
</ul>



Fomento De Construcciones Y Co (FCC SM) launches an offer to buy 24% of Metrovacesa SA (MVC SM) for €284 million, €7.8/share, cum dividend, in cash (implied EV €1,271.7 million).
The offer represents 19.4 EV/22e EBITDA, and a whopping c. 50% discount to NAV. Reference shareholders (Santander and BBVA) own 70.21% of Metrovacesa. Gross spread is 3.5%.
Considering recent underperformance of the shares, most free float shareholders will tender, in my view. Closing of the offer should happen in less than six months. Long and tender.


FCC/Metrovacesa: Opportunistic Voluntary Partial Offer

Over the last weeks, distressed investors have reportedly shown interest in <a href="https://www.smartkarma.com/entities/metrovacesa-sa" target="_blank" data-smartkarma-citation="entities:28925:1" rel="noopener">Metrovacesa SA (MVC SM)</a>, whose share price has dropped by 70% since its last public offer in February 2018.
After delays in unit deliveries and two profit warnings, management offers no guidance for unit deliveries, although it does for cash flow generation. The business mix will now involve less houses and apartment deliveries and more land sales. It is therefore difficult to calculate a DCF valuation. I sense that the patience of the main shareholders (Santander and BBVA) is ending and both banks are increasingly interested in extracting value from the business sooner rather than later. This may involve a sale of the business and/or a combination with a peer.
I believe that the current valuation is that of a company in distress, which does not seem to be the case for Metrovacesa. The current economic standstill, the clumsy response to coronavirus from Spanish government and the foreseeable slow down in housing demand, at least until the current situation clears, will certainly not help house buying. Nevertheless 72% discount to NAV seems excessive.
Leaving aside the current market conditions, the market had previously been doubting the asset valuations or the long-term business plan. Moreover, the coronavirus has abruptly brought the economic cycle to an end. Therefore, in the short term, the share may lack catalysts, unless the company ramps up production (unlikely) or steps up land sales.
Applying the P/BV of Neinor Homes, 0.7x to Metrovacesa, would give a valuation of EUR 11.5 per share of Metrovacesa, which although uncrazy, seems overly optimistic at the moment.
Applying a straight discount of 50% to the NAV of Metrovacesa would give EUR 8.8 per share, which seems an undemanding valuation for such a large land bank.

Over the last weeks, distressed investors have reportedly shown interest in Metrovacesa SA (MVC SM), whose share price has dropped by 70% since its last public offer in February 2018.
After delays in unit deliveries and two profit warnings, management offers no guidance for unit deliveries, although it does for cash flow generation. The business mix will now involve less houses and apartment deliveries and more land sales. It is therefore difficult to calculate a DCF valuation. I sense that the patience of the main shareholders (Santander and BBVA) is ending and both banks are increasingly interested in extracting value from the business sooner rather than later. This may involve a sale of the business and/or a combination with a peer.
I believe that the current valuation is that of a company in distress, which does not seem to be the case for Metrovacesa. The current economic standstill, the clumsy response to coronavirus from Spanish government and the foreseeable slow down in housing demand, at least until the current situation clears, will certainly not help house buying. Nevertheless 72% discount to NAV seems excessive.
Leaving aside the current market conditions, the market had previously been doubting the asset valuations or the long-term business plan. Moreover, the coronavirus has abruptly brought the economic cycle to an end. Therefore, in the short term, the share may lack catalysts, unless the company ramps up production (unlikely) or steps up land sales.
Applying the P/BV of Neinor Homes, 0.7x to Metrovacesa, would give a valuation of EUR 11.5 per share of Metrovacesa, which although uncrazy, seems overly optimistic at the moment.
Applying a straight discount of 50% to the NAV of Metrovacesa would give EUR 8.8 per share, which seems an undemanding valuation for such a large land bank.

Spain

Metrovacesa, SA provides real estate services. The Company owns, operates, and develops real estate properties. Metrovacesa serves customers in Spain.

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Metrovacesa SA (MVC SM)

FCC/Metrovacesa: Acceptance Period

The acceptance period will last until 14 June. This stock, because of its lower liquidity, has been under the radar, but some hedge funds have...

Jesus Rodriguez Aguilar

FCC/Metrovacesa: Opportunistic Voluntary Partial Offer

The offer price is not particularly generous for Metrovacesa's shareholders, although considering the underperformance of the shares, I believe a...

Jesus Rodriguez Aguilar

Metrovacesa (MVC SM) Circled On

Over the last weeks, distressed investors have reportedly shown interest in Metrovacesa SA (MVC SM), whose share price has dropped by 70% since its...

Jesus Rodriguez Aguilar

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