MONACO ALPHA: BUY: FRENCH CONSOLIDATION BASKET

BUY +3.17%

BOUY: Numbers a beat with revs 3%. Guidance reiterated.

French telco consolidation will happen this year. Stay long the basket. 30% upside

 

MONACO ALPHA: BUY: FRENCH CONSOLIDATION BASKET

Friday • 5th May 2017 • 11:14

Consolidation in France has been like the boy who cried wolf. Often attempted and never completed. We are not alone in expecting something this year, yet most of the stocks do not appropriately price the synergies.

In the past we have had differences in price, safeguarding of french jobs and the government’s stakes as issues preventing a transaction. With a new government in place, there is increased probability that these issues are surmounted. However, the likelihood that they are discussed publicly pre election is small, to prevent it becoming a bargaining chip for the campaign. Given it was Drahi’s paper that revealed discussions recently , we can be quietly confident that there are talks behind the scenes, but that denials will be for this reason.

Our consolidation analysis implies that a deal could generate €10-18.6 bn of growth improvement value for the overall French market. Post-consolidation, we believe that the French market would be one of the most attractive in Europe, with the division of Bouygues’ customer base creating a broadly balanced market structure.

CONSOLIDATION BASKET:

ILIAD: French growth but Italian uncertainties, biggest direct beneficiary of French consolidation. 20% upside from consolidation

ORANGE: Growth & capital discipline justify a re-rating. 30% upside outside of consolidation

BOUYGUES: Great value with catalysts. See full note at http://monacoalpha.com/ideas/update-long-bouygues/ . 40% upside

ALTICE: Altice has a high US structural growth outlook and it drives 38% of revenue. Results have been better than market expectations as the solid operating momentum continues. 50% upside

Call or get in contact for me details on individual names.