Loxam – shelving coverage post Q3 20 results
All,
Please refer to our unchanged analysis here.
We are shelving our coverage on Loxam. We see the company as out of the woods following today’s results and call, and its bonds are now back to behaving similarly to other conventional High Yield names.
The Q3 20 results call has confirmed again our view that the underlying business has a countercyclical FCF profile, which is boosted by lower Capex and working capital requirements, even as revenues and EBITDA decline.
With the construction sector expected to benefit from the significant wave of fiscal and monetary stimulus going forward, Loxam is back to business as usual.
Like other conventional HY names, including CMA CGM, Loxam is now repaying the significant precautionary liquidity raised during the peak of the Q2 20 lockdowns. This includes the RCF drawdowns and the near-term bilateral facilities. The buybacks of the subordinated bonds in Q3 and so far into Q4 for EUR25m suggest that the focus will return to lowering total financial costs. M&A is once again being considered, although management does not have any immediate plans. Capex and fleet disposals, turned off during the peak of the Q2 20 lockdowns, are returning to normal levels.
Feel free to reach out if you would like to exchange ideas on the name.
Juliano
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