In October I wrote about Mota-Engil Africa as a potential interesting special situation because the company had launched a tender offer for all shares outstanding while the stock continued to trade at a relative big 5% discount. Today the company declared the self-tender unconditional and that payment for the shares is expected to occur on or before 9 December. This translates to a pretty awesome IRR of more than 50% while I thought that the transaction would be near riskless. Of course, the fact that the deal was completed without problems doesn't prove that this was the case, but it does make it a bit more probable that I was right :).
This entry was posted in Portfolio and tagged MEAFR.AS on December 4, 2015 by Alpha Vulture.
Last week Mota-Engil listed the shares of its African subsidiary on the Euronext stock exchange in Amsterdam. The company cancelled an IPO in London earlier this year and has now spun off 20% of the African subsidiary to shareholders. Mota-Engil wanted to IPO a part of the subsidiary at a price between €11.50 and €14.50. After opening at ~€11.50 last week the stock is now trading a bit below this range at €10.50 giving it a €1 billion market capitalization.
The Angolan construction industry had 44 major international contractors in 2011, however the industry is dominated by companies from Portugal, Brazil and China. Portuguese and Brazilian companies (or companies with ties to Portugal and Brazil) have leveraged strong cultural ties to build an established presence in the country with the Group, Teixeira Duarte, Somague Engenharia and Soares de Costa from Portugal and Odebrecht and Camargo Correa from Brazil winning the majority of new projects up for tender. In respect of Chinese firms, the model is slightly different, where China has acquired Angolan resources in exchange for infrastructure investment. Furthermore, extensive credit lines have been extended to Angola, although these are specifically to fund projects built by Chinese companies. As of 2011, there were 22 Chinese construction companies present in Angola.
It also looks like Mota-Engil Africa will be able to continue its fast growth in the near term since they have been awarded a project worth US$3.5 billion in Cameroon (conditional upon financing being secured). Their biggest contract is currently the almost completed Malawi Nacala Corridor Railway Corridor that is worth €691 million. Because of the growth difference Mota-Engil Africa should trade at a premium compared to Conduril. But this much?
I don't think so. A big project is nice for Mota-Engil, but it's probably not sustainable growth since it will probably be extremely difficult to replace their backlog once it's completed. With a P/E-ratio of 10.84 the market is presumably also not expecting growth miracles from Mota-Engil Africa. So it should be a reasonable comparable, and possibly undervalued itself given where it is trading compared to the proposed IPO range and the relative low P/E-ratio given its growth.
This entry was posted in Portfolio and tagged CDU.LS, MEAFR.AS on December 1, 2014 by Alpha Vulture.