OHL Memo 091219
- 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
- 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
- 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?
- View, Variant Perception & Recommendations
- Business In Detail
- Working Capital Explained
- YTD 9m 2019 Performance & Outlook
- Risks to Investment Thesis
- Model Assumptions and Valuation
- Sensitivity Analysis