CTTOF - Maran Partners - Correios De Portugal: Attractive Even Without The Potential Catalyst
Summary
- Correios de Portugal is on track to generate more than €120 million of EBITDA this year, putting its valuation at around 4x EBITDA.
- CTTPY plans to monetize its bank and real estate assets.
- CTTPY stock is attractive even without the potential catalyst of unlocking the sum-of-the-parts value.
The following segment was excerpted from this fund letter .
Correios de Portugal, S.A. ( CTTPY )
I laid out the thesis on CTT in more depth in recent letters, but here is a quick recap. CTT’s market cap is €430 million, and its enterprise value is around €500 million. The company is on track to generate more than €120 million of EBITDA this year, putting its valuation at around 4x EBITDA. It owns a bank, with book value of over €200 million, and real estate conservatively worth another €200 million. The company plans to monetize both of these assets—the bank likely via an external investment followed by a spin, and the real estate with private equity partners via a fund structure. I expect an update on both fronts in the upcoming quarterly investor report.
The stock is attractive even without the potential catalyst of unlocking the sum-of-the-parts value. CTT is the monopoly postal carrier in Portugal, with a new government contract that allows for inflation passthrough. E-commerce penetration in Portugal lags that of Spain and the rest of northern Europe but is catching up. These factors should mute any European-wide economic weakness.
At its analyst day earlier this year, CTT guided to 2025 EBITDA of €160 million to €180 million based on annual 7-10% revenue growth. The market does not believe this guidance—it is not even close to being priced in. In fact, while I think the company has a sound rationale for its guidance, it is currently priced for revenue declines.
Finally, CTT has been buying back stock aggressively. Its share count is down from 150 million shares to 143.5 million shares. If the stock remains this cheap (again, the market is valuing the core business for essentially nothing after giving credit to the bank and real estate), the company will likely continue to take advantage of market sentiment by continuing to buy back shares.
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Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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Maran Partners - Correios De Portugal: Attractive Even Without The Potential Catalyst