ArjanF schreef op 21 augustus 2014 09:30:
BAM Groep (Buy): Better than expected underlying results, weak outlook
The facts: BAM reported 1H14 results this morning. CEO Nico de Vries resigned as of 1 Oktober and current board member Rob van Wingerden will be his successor. Analyst meeting at 11:30 hours CET.
Our analysis: BAM reported better than expected results, especially in the Infra division. Where we had anticipated a loss of EUR 56m, as a result of the reported problem projects with EUR 75m in losses (actual EUR 68m), in combination with a very weak 1Q, operational result came in at -/- EUR 19m, which implies that the remaining business had underlying margins of 2.6%, which is actually quite strong. In that light we are surprised by the fact that BAM gave a profit warning on the 2 problem projects in Infra, while refraining to say that the remainder of the Infra business was actually performing quite strong. This has made investors very nervous, certainly in light of BAM's past and this leads to very volatile share price movements. BAM's communication has a lot room for improvement and this is hurting the business in our view.
In that light we were now surprised by the guidance for FY14. BAM guides for a profit before tax and exceptionals of ~EUR 20m and with the underlying development in Infra alone, it should be a lot higher. We are aware that there will be a new CEO and that the threshold should not be too high for the new man, but this guidance looks very conservative.
In the other divisions the negative result in Construction Netherlands continues to be a drag. We are very curious to see to what extend these losses are attributable to The Netherlands and how profitable the Foreign operations are. Property and PPP are showing strong results.
Source: BAM, SNS Securities research
BAM's financial position continues to be strong with an improvement of net debt yoy of >EUR 100m to EUR 568m, despite the adverse movement in working capital. The company is well within covenant ratios.
Conclusion & Action: BAM's results were much better underlying than we had expected (with no exceptional positive one offs, other than reported). Nevertheless, we do not really get the outlook and will look for more clarity in the analyst meeting later today. For now, we have a Buy rating.
www.snssecurities.nl/Research/Actions...