The pains of DoValue
What happens to doValue after the publication of the quarterly report
Some shadows on the horizon for doValue which presented a quarterly report with declining revenues and ebitda, so much so as to worry analysts who also fear a negative reaction of the stock on the stock exchange.
WHAT DOVALUE DOES
doValue, a group based in Verona, boasts 120 billion in assets under management and 3,000 employees. It is currently the main operator in Southern Europe in the management of credit and property portfolios deriving from impaired loans. It offers clients, banks or investors, management services for portfolios of non-performing loans, loans with unlikely to pay, overdue loans and in-performing loans. Furthermore, doValue is active in the management and development of real estate assets deriving from the management of non-performing loans.
The president of the group is Giovanni Castellaneta and the CEO is Manuela Franchi. The first shareholder is Avio with 25.05%, attributable to Softbank Group Corp., a Japanese multinational with a focus on investment management. With other investors attributable to Softbank Group Corp. the share rises to 28.27%.
doValue shares have been listed on Euronext Milan since 2017 and on the STAR segment of Euronext Milan since 2022.
THE BILLS
In the first nine months of the year doValue achieved gross revenues of 335.2 million (down 21.2% on year) and net revenues of 304.6 (-9.8% on year). A negative sign also for the cash flow from operating activities at 38 million from 63.9 million in the first nine months of 2022 and for the ex NRIs ebitda at 115.4 million (-24%). Net debt is growing (485.5 million at 30 September 2023 from 479 million at the end of June 2020). For 2023 the group expects gross revenues of 490-500 million and an ebitda, excluding non-recurring items, of 175-185 million.
THE REACTION OF THE MARKET AND ANALYSTS
Numbers that have somehow alarmed analysts. As reported by Milano Finanza , according to Citi (buy and target price at 8.50 euros) the revenues for the third quarter of the year and those expected for the whole of 2023 are lower than the consensus estimate (520 million) and therefore require "a strong rebound” in the fourth quarter and in 2024 so as to achieve the objectives of the industrial plan. Ebitda and net financial leverage were also below estimates.
“We expect an initial negative reaction of the stock and we also expect a downward revision of the consensus estimates, given the revision of the guidance and the absence of details on the dividend” we read in a note from Citi according to which “the trend in costs and new flows from new business are positive, as they demonstrate that the company is focused on its action plan. However, the underlying trends have been weaker over the 9 months, guidance has been revised downwards and unless the outlook for 2024 and the dividend is more constructive, we see a lack of positive catalysts for the stock on the stock market, despite a ~50% drop in the share price over the last year.”
Banca Akros, like Citi, reiterated its buy rating and target price of 5.50 euros, while Mediobanca Securities and Equita – which speaks of third quarter results "substantially in line with its expectations" – are more cautious.
Certainly, however, Mediobanca, as stated in a note released by the investment bank, highlights that doValue in the two-year period 2024-2025 will have to face a more challenging scenario than expected, with low formation of NPLs and illiquid NPL markets. “Moreover, in this new context, and considering the low price of the shares and the multiples of doValue – continues the press release -, M&A seems to be a less attractive option than before and the current dividend policy does not seem sustainable in the medium term ”. Without forgetting that, given that the banking sector enjoys solid asset quality, growing profitability and solid capital ratios, “it is difficult to foresee an increase in liquidity in doValue's main NPL markets”. Therefore, Mediobanca analysts do not predict that NPL sales by banks will increase in 2024 nor are there any short-term plans for "large 'institutional' operations" as happened with Ariadne in Greece or with Glam in Italy.
RELATIONS WITH SPAIN
Recently some innovations in doValue's activities have concerned Spain. The company led by CEO Franchi has in fact announced that Santander has exercised the put option on 15% of the Spanish business (doValue Spain), a fact which – according to Equita – should lead to an outlay of around 21 million in the fourth quarter of 2023. Furthermore, in the first nine months of 2023, doValue – as communicated in October – acquired new contracts worth 689 million euros from important Spanish banks, including Banco Sabadell and CaixaBank, and from other investors. An operation created to diversify its activities, to increase its customers and to strengthen its strategic line so as to become the main servicing partner of the major Iberian banks.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/dovalue-risultati-trimestrale/ on Mon, 20 Nov 2023 05:53:44 +0000.