OHL Memo 310519
- Understand the background behind OHL’s challenging 2018 and the precipitous drop in bond price
- Understand the impact of cost over-runs and contract review on cash flows
- Understand the possibility of successful claims against OHL’s customers
- Understand valuation of OHL’s real estate development projects and importance for OHL liquidity and valuation going forward
- Understand the working capital cycle and how it impacts FCF generation
- Understand catalysts and risks for the long thesis
- Understand mitigants to these risks
- Understand options available to the company in order to meet bond maturities
- 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.
- Understand the real estate developments business within OHL
- Assessment of value within OHL’s real estate development projects
- 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
- 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 Overview
- Key Events
- Real Estate Developments Explained
- Risks To Investment Thesis
- Model Assumptions & Valuation
- Sensitivity Analysis