*Justin* schreef op 30 mei 2012 09:48:
PostNL (Buy): Discounting pain
The facts: the going concern's net funding position would allow for significant pay-outs in 2013E. With a balance sheet structure ill-prepared for exceptionally low interest rates, negative equity may prevent such distribution of UPS-originated cash: semi-pension liabilities on the group balance sheet are inflated by low corporate bond yields.
A premium has also emerged in PostNL's inherited debt earmarked for a buy-back. Equity may further be impacted by provisions for pension-fund top-ups triggered by Dutch government bond yields. As recently as February of this year, PostNL (http://bit.ly/PostNLpres11FY , slide 29) presented a solution that would allow dividend payments, but in the 2012Q1 call, CFO Jan Bos would have none of that anymore.
Our analysis: As a result, we have to conclude that as things stand currently, there will not be enough equity in the books to pay a dividend in April 2013E. We continue to believe in a pension turnaround and are for the time being not adjusting our forecasts. We are of the opinion that much more than the mechanism for immediate distribution, the existence of funds should drive value alongside operating cash flow prospects.
The Aspirin scenario: Send nearly half of the TNT Express proceeds straight to the pension fund, give away the non-Dutch mail businesses, buy back two-thirds of the listed bonds at double-digit premiums. End up with net debt of EUR 300m and a steady domestic mail & parcel business yielding an annual net free cash flow of EUR 250-300m after an already paid-for restructuring. In today's markets, all of that can be yours for an equity investment of EUR 1.1bn. This must be the wrong price.
What would be a "knocked out on the floor" valuation? Would anyone want to take PostNL on his books and administer quick-relieve medication rather than let the group sweat out the fever? We believe that such an investment case can be built at the current share price. Even swallowing exceptionally bitter pills on pensions would leave plenty of raw capitalist upside from the current evel. Effectively paying 4x 2013E EV/EBITDA after aggressively treating the hammering headache of the pension issues and the nagging toothache of the funding mismatch, a buyer could take advantage of the cold-turkey fever amongst dividend seekers. After such expensive treatment, there would still be significant valuation upside, arguably better attainable because of the simplified investment case.
The current corporate set-up may not allow shareholders access to the ample future cash flows, but in the grand scheme of things, there is little holding back focused investors from altering the ownership structure and thus dismantling the related accounting barriers. Assuming blue skies and calmer waters further out, our DCF model suggests longer-term valuation upside beyond EUR 6.
Conclusion & Action: The Aspirin scenario is a floor valuation, not our base case. In the prevailing interest rate
environment, with Dutch government yields having contracted 40bps since we published our Dividend Dreams scenario, it may be worth sketching this scenario. Whether sweating it out through 2x EV/EBITDA or going for a quick recovery at 4x EV/EBITDA, the stock is attractive. Buy, target EUR 5.85.