The experts speak
Virginie Rousseau - Analyst, Oddo
VINCI’s 2016 results were better than market expectations. The Concessions business confirmed its excellent momentum, with record growth both in motorway traffic (+3.2%) and airport passenger numbers (+10%). There was also good news in Contracting which, after three years of decline, showed signs of stabilisation with an improved margin.
2016 also saw a continuation of the external growth strategy, with the integration of new airports (Lyon, the Dominican Republic, etc.) and the acquisition of motorway concessions in Latin America (Peru and Colombia).
We are maintaining our Buy recommendation for the VINCI share, with a target price of €78. Even if the increase in interest rates has a negative impact on the value of concessions, the soundness of the Group’s results, cash flow generation – and, therefore, its dividend – as well as the improved outlook for its Contracting business, remain strengths for 2017.
Nicolas Mora - Analyst, Exane BNP Paribas
2016 ended with good momentum, both in Concessions and Contracting. VINCI has been riding an outstanding “wave” in Concessions over the past three years.
Although traffic growth is expected to slow down somewhat in 2017, it will still be far above the trends in the long term. The prospects for an improvement in Contracting represent a good source for profit growth: VINCI Construction should be driven by France and the strong upturn in medium-term margins; Eurovia should benefit from a better revenue trend given the refreshed order intake; VINCI Energies will see an upturn in its organic growth while picking up the pace of acquisitions outside France. We are continuing to monitor the political situation in Europe, the change in actual interest rates and external growth, but the combination of a dynamic profit trend, excellent cash flow generation and an attractive valuation mean that we have an Outperform rating on the stock, with a price target of €85.
Cécile Le Coz - Head of Department, Investir-Les Echos
Like the previous year, VINCI achieved results better than market expectations for 2016, with net profit up more than 16%, excluding non-recurring changes in deferred tax. The improvement in operating margin from 9.8% to 11% was appreciated. We also noted, within the Concessions business, the growth momentum in the airport sector, which reached 14.2% in organic growth, driven in particular by the airports in Portugal. Investors have been attracted not only by past results but also by the outlook. The Group’s long-standing construction business, in particular, has improved its margins and returned to growth, supported by a more vigorous European economy. In France, the works associated with the Grand Paris project, should take up the slack from major rail works. We are therefore maintaining a favourable view of the share, despite its sensitivity to an upturn in interest rates. In addition, its 3% yield is very respectable.
Raymond Quenin - VINCI shareholder for more than 10 years
VINCI is my first line of direct shareholdings. For me, it is therefore one of the main shares in my portfolio, and one that I expect to give a sufficient pay-out and good visibility over time. What I like about VINCI is its diversification policy in its business activities and opportunities, while avoiding the risks of being spread too thin on the ground and poorly assessed profitability in new projects.
Pierre Château - VINCI shareholder since 2005
I’ve always kept my VINCI shares because it’s a safe investment, with a constant dividend policy. I’m also a member of the Shareholders’ Club, so I’m kept up to date with the Group’s news. I find VINCI’s strategy clear and its business model effective. That’s all very reassuring to me.
François Jager - shareholder
I’ve been a VINCI shareholder for 20 years. I like the fact that it has the ability to develop a long-term vision, as shown by its recent diversification. When the Group withdraws from a sector, it’s because it has seen the end of a cycle and it believes it can better use its human and financial resources. I also like its civic engagement and Manifesto.
I would like the government to meet the contractual commitments it made to motorway concession companies, which enabled it to make significant savings by delegating billions of euros of investments. As a motorway user, I find them very expensive but remarkably well equipped. The scheduled toll increases appeared relatively minor to me compared with those of other public services. More importantly, it all comes under a predictable contract signed with the government. I don’t think it’s sensible to reproach private companies for making money by honouring their contracts.
Philippe Dunoyer - VINCI shareholder for 10 years and member of the Individual Shareholders’ Club
The Group is reliable and reassuring thanks to its integrated business model and its prudent, efficient management. The annual results are good, better even than projections. The VINCI share is a portfolio cornerstone because there are very few bumps along the way on the stock market. The strategic swerve towards airports doesn’t scare me because it’s a strong growth sector.