Loxam - model update and comments on Q2 20 results

All,

Please find our updated model for the Q2 20 results here.

Loxam’s Q1 20 and Q2 20 results have shown that the company was not just another “French Hertz”, as the underlying exposure to the construction sector played out very differently from travel and leisure. However, following the significant rally of the bonds, they currently price in a full recovery of EBITDA to pre-virus levels by 2021 or 2022. At the current trend of -25% pro forma EBITDA decline, the equity valuation cushion would be zero. Considering that even before the coronavirus crisis Loxam expected a slowdown in 2020, our estimates lie in between these two scenarios. However, Loxam is likely to use its significant cash cushion to retire some bonds over the next two quarters, making a short position unattractive.

Feel free to reach out if you would like to exchange ideas on the name.

Juliano