European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

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Event-Driven

<a href="https://www.smartkarma.com/entities/cellnex-telecom-sau" target="_blank" data-smartkarma-citation="entities:21258:1" rel="noopener">Cellnex Telecom Sau (CLNX SM)</a> has closed a transformational operation, valued at around €10 bn, which has allowed it to reach over 103,000 telecommunications towers (vs. the prior 73,000) and strengthen its leadership position in Europe. The company has met its expansion objectives, even earlier than planned (December 2021). A capital increase has not been necessary, although it has run out of ammunition for future acquisitions.
It is difficult to overstate the importance of the purchase. It represents an earthquake in the European market for telecommunications towers, which now has a colossus, far away from any other potential European player.
<ul class="">
<li>Since its IPO in 2015, Cellnex has invested c. €26 bn in acquisitions.</li>
<li>After the pact, Cellnex's footprint extends to twelve countries. Spain (where Cellnex is based), with its 11,000 towers, is now only the fifth market in number of towers (and represents only 10% of the total footprint) behind Italy (24,500) , United Kingdom (14,700), France (13,700) and Poland (11,900).</li>
<li>This operation is unique due to its size and transformative nature: it involves raising the number of towers by 41%, revenue by 46% and backlog by up to 63%, long-term insured revenue.</li>
</ul>
A capital increase was not strictly necessary to purchase the Hutchison Towers. The company had cash available of more than €8 bn. However, the net debt/EBITDA approaches 6x and therefore Cellnex runs out of ammunition for future acquisitions. I do not rule out that Cellnex pays future purchases with its own shares.
Taking an average of DCF valuation and multiples, my TP is €64.36 per share, which implies an upside of 20% to the last closing price. Therefore my recommendation is LONG Cellnex.
<ul>
<li>The dividend yield is low because Cellnex is in an accelerated expansionary phase. However, the generation of recurring cash implies a profitability of more than 5% as of 2022e.</li>
</ul>

Cellnex Telecom Sau (CLNX SM) has closed a transformational operation, valued at around €10 bn, which has allowed it to reach over 103,000 telecommunications towers (vs. the prior 73,000) and strengthen its leadership position in Europe. The company has met its expansion objectives, even earlier than planned (December 2021). A capital increase has not been necessary, although it has run out of ammunition for future acquisitions.
It is difficult to overstate the importance of the purchase. It represents an earthquake in the European market for telecommunications towers, which now has a colossus, far away from any other potential European player.

Since its IPO in 2015, Cellnex has invested c. €26 bn in acquisitions.
After the pact, Cellnex's footprint extends to twelve countries. Spain (where Cellnex is based), with its 11,000 towers, is now only the fifth market in number of towers (and represents only 10% of the total footprint) behind Italy (24,500) , United Kingdom (14,700), France (13,700) and Poland (11,900).
This operation is unique due to its size and transformative nature: it involves raising the number of towers by 41%, revenue by 46% and backlog by up to 63%, long-term insured revenue.

A capital increase was not strictly necessary to purchase the Hutchison Towers. The company had cash available of more than €8 bn. However, the net debt/EBITDA approaches 6x and therefore Cellnex runs out of ammunition for future acquisitions. I do not rule out that Cellnex pays future purchases with its own shares.
Taking an average of DCF valuation and multiples, my TP is €64.36 per share, which implies an upside of 20% to the last closing price. Therefore my recommendation is LONG Cellnex.

The dividend yield is low because Cellnex is in an accelerated expansionary phase. However, the generation of recurring cash implies a profitability of more than 5% as of 2022e.


Cellnex Telecom Sau

Cellnex's Transformational Acquisition