18 Dec 2014
A predator amongst the cables
The Italian financial daily Milano Finanza has analysed the Group’s performance and forecast a positive 2015 for the company and its stock.
From its position in the submarine cables business to the investments outlined in the Juncker plan, Prysmian is forecast to be amongst top-performing stocks in 2015. In the last week alone, the company received two orders for a total of over €150 million in Turkey and the Philippines. Prysmian has thus suddenly returned to being one of the hot themes in reports by financial analysts. In fact, the cable company is considered one of the firms to watch in 2015. Why?
There are a number of reasons, and, fortunately for CEO Valerio Battista, they are all positive. Experts believe that the stock is undervalued compared to its competitors and that the company is among those that are expected to benefit from both the Juncker plan and the quantitative easing, is positioned in higher-profitability segments and has struck agreements that may prove to be of considerable strategic importance. All of this is, without considering future extraordinary transactions, the most exciting aspect of all.
In a recent study, Credit Suisse calculated that worldwide the industry is worth a total of €112 billion, and Prysmian, with its nearly €7 billion sales in 2013, currently has market share of approximately 6%. However, in the study it is emphasised that the cable business remains regional rather than global in nature, and mergers could provide access to new countries. To date, the industry’s largest business combination remains that between Prysmian and Draka, the successful completion of which shows that the Group is an ideal candidate for a new business combination. However, this is easier said than done, and the strategy pursued by the company headed by Valerio Battista will remain focused on ordinary operations in the near and medium term.
The financial report for the nine months show a group with slightly higher revenue than in 2013 and EBITDA stable at €438 million (excluding the impact of the Western Link order in Great Britain). Essentially, 2014 appears to be a year in which the company will maintain the previous year’s levels, whereas analysts expect a more robust performance in 2015.
A performance that, in any event, will start with well-defined industrial objectives: from cash generation to debt reduction. There can be no doubt that the company’s presence in a high added value business such as energy transmission, and submarine cables in particular, may have an impact. In addition, one must also consider the decisions reached by EU Commission President Jean Claude Juncker, who has called for the launch of a three-year, €300-billion investment plan focusing on infrastructure.
Prysmian will most likely be among the companies best poised to benefit from such investments, which is why the goals set by Battista may even be achieved in advance. At that point, the external growth avenue (which Battista has never excluded a priori) could be explored more concretely, and considering that the company is attractive, it will sooner or later be forced to decide whether to be predator or prey. Of course, they will also have to decide with whom to tie the knot, i.e., with Nexans (or, as wagered by Credit Suisse, for example) or General Cable. The situation should become clear in 2015, or in 2016 at the latest.