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A catch-up potential on Assystem

After being sacrificed by the portfolio managers on the altar of the health crisis, this major player in engineering and innovation consultancy, notably present in the nuclear sector, is starting a rebound sequence. The anemic recovery theoretically leaves a great potential for appreciation.

by Aymeric Val

If the CAC40 is striding closer to its pre-crisis levels, this is not the case for many stocks. Down about 40 percent since its peaks in summer 2019, Assystem clearly falls into the lagging category. The title has only recovered a few euros from its floors three months ago. This leaves a taste of unfinished, especially as the group should remain profitable in 2020 with a profit projection of 13 million euros for 2020, a year of lean cows, and 27 million for 2021, according to the consensus of analysts compiled by FacSet. At the current price, the file therefore capitalizes less than 13 times the expected profits for next year, which is modest in terms of the quality of the fundamentals and the value of the holdings (5% of Framatome and 38.2% of ‘Expleo). With an atypical profile, the group founded and led by Dominique Louis hardly enters the radar of investors. They currently prefer high-visibility growth stocks or cyclicals likely to mechanically benefit from the economic recovery phase looming on the horizon. But the fundamentals always end up taking over. In the case of Assystem, we can only congratulate ourselves on the solidity of the contracts and the relative resilience of customers, in particular EDF and SNCF, a guarantee of the activity’s sustainability. Not surprisingly, the activity rate was penalized by the containment period. The first quarter of 2020, which partially integrates the effects of the pandemic, thus ended with a turnover of 122.9 million euros, down 2.2% in real terms and 5.3% in organic.

A substantial discount on the sum of the parts

But the worst is likely to come. In April, as a result of the brake on electricity consumption and transportation paralysis, sales suffered from an air gap. The activity rate for the month concerned is estimated at 55% compared to the business plan established at the start of the year on the French perimeter (70% of sales) and 60/65% at group level. Despite everything, the leaders chose to send a strong signal to the market by maintaining the dividend distribution. At 1 euro per share, this shows a return of 4.30% at the current price. Rather attractive for a value whose main interest rests, let us recall, on the development potential in the nuclear sector, in view of the growing maintenance needs for aging plants and those emerging on new generation reactors under construction, in France and abroad (United Kingdom, Turkey, Gulf countries). Without forgetting the speculative dimension while the value at cutting is much higher than that currently prevailing on the market. The shares of Assystem in Expleo, an entity created in 2017 as part of the sale of high technology consultancy to the fund, alone can be valued at nearly 500 million euros, given its size of this entity (1 billion about turnover). That’s more than Assystem’s market capitalization, which currently stands at 360/370 million. On this sole argument, and while Dominique Louis could eventually be tempted to organize his succession, it is possible to draw up a short line on this dossier, which is probably late.

Our advice: buy Assystem at 22.5 euros to bet on a return to 27 euros in a few months. Isin code: FR0000074148.

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