Modulaire (Algeco) – Implications of the Trading update
Dear All,
With a potential exit or refinancing event increasingly likely in the near term, we retain our long position on the USD8% 2023 bonds, entered on 4 Jun 20. We see limited additional upside for any new positions into the Unsecured bonds, but note potential opportunities in a refinancing of the capital structure, especially at lower levels of leverage and with stronger covenants.
Modulaire released a decent trading update, with revenues at around EUR1.2bn and Underlying EBITDA of around EUR347-350m (around EUR303-306m pre IFRS 16). Both figures are generally in line with our estimates. Utilization and revenues per unit remain strong. Audited results are expected for the second half of March.
Trading updates are often released ahead of either bond issues or an IPO. The update has a bullish tone, with the company emphasizing words such as “strong”, “momentum”, and “growth”. The CEO states that the group is “very confident about the future”. This suggests to us that a debt or equity transaction is increasingly likely in the near term. As a reminder, this follows a recent press release from the company confirming that it is considering an IPO or sale.
Feel free to reach out if you would like to exchange ideas on the name.
Juliano
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E: jtorii@sarria.co.uk
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