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Veni, Vidi, Vinci The Economic Downturn

|Includes:Vinci SA (VCISF)

Elevator Pitch

World leader in construction and concessions providing visibility for 2013 despite a challenging economic environment thanks to a resilient business model

Thesis & Catalyst For Vinci Sa (OTCPK:VCISF)

-Despite a tough economic environment in Europe, Vinci recorded an extremely strong Q1, providing visibility for 2013 : sales rose by 3.4% to 8.4 billion euros ($10.9 billion). Contracting revenues rose +5.2% (vs cs -0.6%), order intake increased +5.5%, the backlog remains solid €33.1 billion +2.3% year on year ($43 billion) representing 11.4 months of activity. Traffic is practically stable -0.3%.

-Uncertainties are high in 2014, given the expected slowdown in French activity and fiscal tightening but Vinci has a resilient business model especially in its motorways business model which brings two-thirds of EBIT and high flexibility on costs that limit margins deterioration. The group should also benefit from the French Motorways stimulus plan (talks underway with the government and possibly to be announced this summer). Vinci has been excelling, delivering historic peak margin level (between 4% and 5%) since 2005, even during the crisis in 2009.

-The balance sheet is strong with a 2.5x Net Debt/Ebitda. Net debt declined at €12.8 billion ($16.6 billion) as of March 31, 2013 vs. €13.1 billion ($17 billion) as of March 30, 2012 and should continue to decrease during this year.

-The solid balance sheet and strong FCF generation (8-10%) allow the group to make some acquisitions in order to deliver an EPS growth in the coming years. In the last two years, the only significant acquisition has been ANA (the holding controlling all Portuguese airports) for €3.1billion ($4 billion)and is expected to close within the next couple of months.

Valuation

A safe play, given its growing diversified profile (37% sales outside France, international order book up 12% YoY, diversification in airports), high flexibility on costs) and an attractive dividend yields (around 5 %).

Revenue & EPS Outlook

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: VCISF