Reduces engine oil due to acquisitions



BofA Merrill Lynch turned the engine oil to a disadvantage and reduced its performance (neutral) than neutral by setting the target price to 17 euros from 20.90 euros as a result of the recent acquisition of the group after the acquisition of 50% Alpha TV and 97% of the IBG.

As stated, the rationale for these acquisitions remains unclear, and these synergies remain uncertain as they see the risk of deteriorating management and lack of clarity about the Group's long-term strategy. Concerns about this strategy "hit" investment psychology in its view.

BofA notes that Motor Oil has announced the acquisition of 97.08% of Greece's investment bank, 94.52% of CPB Asset Management and 100% of Factors Laiki and Forfaiters S.A for 73.5 million euros. Motor Oil plans to sell most of the shares in these assets, and in the future maintains a minority stake. It also announced the acquisition of three media companies: Alpha Satellite TV, Alpha Radio S.A. and Alpha Radio Kronos S.A., through a series of related transactions for a total consideration of EUR 33 million.

Net debt growth of 59%, risk of tide

The acquisition will raise Motor Oil's net net debt by 103.5 million, or 59%, to 288 million euros, notes. Net debt / EBITDA will increase from 0.2x to 0.5x in 2018. The most important is the risk of a further outflow of cash from the assets acquired (especially in the banking sector) after consolidation of assets. BofA does not include acquisitions at this stage because they are subject to regulatory approval and no financial data is available yet.

Discount is justified

Engine oil is currently traded at an estimated value of P / E 2018 at 8.2 and EV / EBITDA at 4.5, which is almost an average of three years. BofA estimates that a 20% discount is guaranteed due to management risks.

Lack of clarity about the strategy

Motor Oil has not provided any rational argument for acquiring assets outside its region (ie Greece) and its core business (ie Oil Refining and Petroleum Products Retail). At the Extraordinary General Meeting on October 24, Motor Oil approved an amendment to "Article 3 – Subject of Business". The aim of the amendment was to extend its business portfolio, including the latest acquisitions.

BofA notes that it believes these acquisitions are not expected from the market, so the company will seek to clarify its long-term strategy and liquidity.

Eleftheria Kourtalis


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