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OHL: Working Capital Outflows Erode Ohl Net Cash Ytd Q3 2019. How Does It Play Out from Here?

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    Company Profile

  • 43 Pages
  • December 2019
  • Everest Research Group
  • ID: 5131085
Why Read?

  • Understand potential positive catalysts - Amodio family equity investment; sale of OHL Desarrollos (Canalejas, Old War Office); Q4 19E working capital inflow; repayment of loans to shareholders; sale of claims against customers (e.g. Cemanosa); Mayakoba sale cash proceeds; bond buybacks
  • Understand potential key risks - cash burn on legacy contracts; customer claims; cancellation risk on performance guarantee lines
  • Understand how OHL’s turnaround post its Q3 2018 contract review is progressing at 9m 2019 - legacy contract cash flows; cost overheads reduction; new orders / backlog; EBITDA; working capital
  • Understand the working capital cycle and how it impacts FCF generation
  • Understand OHL’s sensitivity to regional EBITDA margins, working capital, new orders and cost of capital in terms of equity cushion and valuation and debt coverage

What’s New?

  • Assessment of value within the OHL Desarrollos business
  • Assessment of OHL’s available liquidity (with and without current financial assets in escrow and cash in temporary subsidiaries) and projection thereof
  • DCF valuation of OHL using its high cost of equity
  • Valuation sensitivity analysis - impact of regional EBITDA margins, working capital, new orders and cost of capital

Questions Answered

  • Will OHL buy back its 2022 and 2023 senior unsecured bonds?
  • Is OHL reducing its underlying cash burn?
  • What is our base case and sensitised valuation of OHL?
  • Can OHL generate sufficient FCF to meet bond maturities in 2020, 2022 and 2023?
  • How much equity upside is there and how does this break out between the current net cash position, real estate development and improvement in the core construction business?

Table of Contents

  • View, Variant Perception & Recommendation
  • Business Overview
  • Industry Drivers
  • Competitive Positioning
  • Valuation, Recoveries & Scenarios
  • Model Summaries

Companies Mentioned

  • Aldesa
  • OHL
  • Astaldi