The French giant of bus shelters, information screens and billboards in streets, stations and airports, JCDecaux, is going through a nightmarish period. Containment measures imposed around the world resulted in the worst results in its history, with a net loss in the first half of 254.9 million euros for a turnover of 1,075.4 million d euros down 41.6%.
As a result, the stock is trading at its lowest level in ten years. And while it had rebounded, like other stocks, after the fall of the markets in mid-March, it was struck by investors’ lightning a second time at the beginning of June (- 30% in the space of three months) to fall back to the lows of the year.
Taking an interest in value in these circumstances is a speculative bet, as the media sector appears to have its head under water. Between the consequences of the epidemic and the recommendations of the Citizen’s Climate Convention (ban on certain advertisements and billboards in the public domain), threats to the activity of players in the sector abound.
Encouraging signs of recovery
In this uncertain environment, the outdoor advertising specialist nevertheless sees signs of recovery, even if the rebound in its activity remains fragile, and still suspended by the evolution of the epidemic.
The market took off again this summer at a high rate in France. The question is whether the new restrictive measures are unlikely to dampen this momentum. Airports, on the other hand, continue to idle. And this situation can be duplicated in Belgium, Spain or even Germany. The only certainty for now, and little consolation, total containment is no longer on the agenda. On the other hand, the economic recovery seems well underway in China, a market that has become as important as France because of the Covid.
JCDecaux has also taken measures to reduce its costs and preserve its liquidity. Rents have been renegotiated, a departure plan in France which should concern 5% of the workforce is being negotiated, and the dividend planned for 2019 has been canceled. Net debt was thus reduced on June 30 to 1.18 billion euros against 1.31 billion a year earlier.
Due to the lack of visibility, the markets are counting on a gradual recovery in the group’s results, which should not return to their pre-crisis levels before 2023. They therefore anticipate a net profit of 88 million euros in 2021 and 203 million euros. in 2022. Very conservative estimates capitalized respectively 40 and 15 times. To buy the title today is to bet that the group will manage to contradict these assumptions and do better. He has the resources.
Our advice: Buy JC Decaux at 14.50 euros to aim for 19 euros. Isin code: FR0000077919.
The JCDecaux article, a bet on its ability to bounce back, appeared first on La Lettre de la Bourse.