OHL - War’s end.
All,
Please refer to our unchanged analysis here.
Progress on disposing of assets it had promised to sell is expected but the execution is still the driver. OHL is likely to get less than the EUR100m valuation, however. Together with the EUR75m cash from the Toledo hospital stake, this transaction will serve to increase much-needed liquidity at OHL. Note that our model suggested that the restructuring itself was not going to result in adequate liquidity.
War Office Stake:
A stake in the War Office project in London, which OHL values at EUR100m is subject to “advanced negotiations” with Hinduja Group, the parent of its JV partner. OHL holds a 49% stake in the project. As always, there will be a negotiation over the end sale price and we are expecting a discount to OHL’s valuation. We take some comfort from the fact that both parties are not coming at this from a standing start.
Liquidity:
In our analysis, we identified a minimum cash balance of EUR250m and - accounting for the $140m of restricted cash - an ultimate liquidity “inadequacy” of around EUR40m. With the Toledo Hospital proceeds of EUR75m received after Q121 ended, this gap should be addressed and assuming a quick agreement proceeds from the War Office will start to build some crucial excess cash, which should, in turn, facilitate higher bonding lines. The impact of both Toledo and The War Office will be seen in the Q2 figures (at the earliest for the War Office). So for now our cash flow analysis is unchanged.
Sidra Litigation:
We have also added some granularity to our analysis of the Sidra Litigation in Qatar. The potential size of the claim is huge, however, there is a range of claims and counterclaims and we now see some more upside to our EV analysis. We have not changed our analysis yet but will continue to monitor progress on the arbitration.
Positioning:
We continue to hold our position - originally in the SUNs for 6% of NAV.
Happy to discuss any ideas as always.
Aengus
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E: amcmahon@sarria.co.uk
T: +44 203 744 7055