Today we will publish a 16 page Company Note on Alfacam, titled “Growth in India, Saudi Arabia and Brazil”.
The Belgian TV-facilities specialist Alfacam Group offers outside broadcasting (OB) services to TV stations and rights holders and studio rental to production houses.
Alfacam is appointing an additional managing director, Sven Marinus, and in the financial department Rudi De Winter will replace current CFO Francois Caesbroeck.
Alfacam has not only rearranged its management team. The capital is also being held against the light, with the help of an investment banker, with a view to supporting the growth in India, Saudi Arabia and Brazil. One option is to sell buildings. At end-2010 these buildings and grounds were valued at € 24.5m in the books and they carry over € 16m of debt. We believe that one idea could be a sale and leaseback operation to lower the debt.
As a reminder, Alfacam’s 3Q11 sales were in line with 2Q11, but there was some margin pressure. 4Q11 should be solid thanks to the Champions League Cricket in India and the Pan American Games.
The prospects for 4Q11 look decent thanks to the Champions League Cricket in India and the Pan American Games. The project in Saudi Arabia should contribute 30% of the H2 turnover, most of it in the last quarter. Alfacam will provide all services for the Saudi Premier League with an annual value of approximately $ 20m
We are especially focused on news coming out of Brazial as Alfacam is a leading candidate for the 2014 football World Cup Finals and the 2016 Olympics, both to be held in Brazil. TV Globo and Record TV are the top two candidates for the broadcasting of both events. Alfacam has been working closely with TV Globo,but also with Record TV, who according to Alfacam has indicated a preference for working with Alfacam.
Conclusion
The fund-raising exercise of 1H11 was part of a major debt rescheduling. Since the financing was completed, many investors were expecting a new start with focus on new initiatives and activities in India and especially in Latin America. But it looks as if Alfacam will have to concentrate on a review of its capital structure instead, in order to support this growth in India, Saudi Arabia and Brazil.
We lowered recently our rating to HOLD and our target price to € 3.80 to reflect our fears on margin pressure and the impact of the new capital structure. This target price assumes top-line growth to € 58.3m by 2015E.