"Headquartered in Madrid, ACS is one of the world’s
largest global infrastructure engineering firms providing
construction and management of utility networks,
transportation systems, airports, waste facilities, and similar
large projects. Through its own business and its stakes in
Hochtief and Leighton, the company’s unique capabilities and
experience provide an advantage in pursuing large civil works
projects. CEO Florentino Perez owns 13%, and other board
members hold an additional 40%. The company sells for
approximately half of our valuation because the market
oversimplifies this as a Spanish business with optically high
leverage. In addition, many question ACS’ strategy around its
19% ownership of Iberdrola, Spain’s #1 utility and the largest
owner of renewable assets in the world. In fact, less than half
of ACS’ direct operating exposure is to Spain, and most is
outside of Europe when looking through their 50% ownership
of Hochtief. The debt, which financed the stakes in Iberdrola
and Hochtief, is extended through 2015, and, importantly, is
non-recourse to ACS. A recent court victory gives ACS
increased rights at Iberdrola, making it easier to pursue a
significant and profitable investment outcome. Over the next
few years without any Spanish or European economic
recovery, ACS should generate a stable earnings coupon from
its long-dated concession contracts, build construction
projects around the world, and monetize assets when buyers
are willing to pay fair prices for high-yielding infrastructure as
they did in 2011 with some of ACS’ wind, solar, and toll road
assets. Although strapped municipalities have made the
market bearish on infrastructure spending, projects that
physically must be done will have to be private-public
partnerships, aided by today’s low interest rates. ACS is a
world leader in privatized infrastructure projects. The
company’s current free cash flow yield based on expected
2012 FCF is 16.8%, and if adjusted for sold assets and assets
held for sale, is over 30%."
Retirado do relatório "Longleaf Year-End Letter to Shareholders" referente 2011.
NOTA: O autor é accionista da empresa ACS.
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