With profitability moving up: The 8.0% margin target set by management for 2015 in Europe Main and Europe Other & Americas combined is credible in our view. It assumes a return to normal conditions in Europe, revenue CAGR of 2.0% and € 220m in savings from Deliver! We are at an 8.5% margin on 2.7% revenue CAGR12-15.
… and Invested Capital moving down: As a result of the disposals of Domestic Brazil and Domestic China, the sale of other non-core assets (Apriso, aircrafts, the Dutch operations of TNT Fashion), aggressive impairments made in 2Q13 and strict working capital management, Invested Capital declines steeply over 2012-13. Although we expect a partial recovery over 2014-15 stemming from Deliver! capex, the net effect is still a decline in Invested Capital 2012-15 of ~ € 150m.
… reported ROIC should almost triple over 2012-15: We expect TNT Express to significantly improve its post-tax Return on Invested Capital (ROIC) for 2012-15. The company will almost reach our WACC in 2013, even without a recovery in profitability in Europe Main and we expect it move to 1.7x WACC by 2015 (1.2x incl. impairments).
… but TNTE is still fairly valued: We value TNT Express using DCF to obtain a new TP of € 7.5 (up from € 5.8). P/E multiples drop from 38.7x 2013 to 12.7x 2015 on EPS CAGR 2013-15 of 75%, while our TP implies an EV/EBITDA 2014 of 6.9x versus peers trading at 6.6x. We prefer bpost (Accumulate, € 16.0) over TNT Express (Hold, € 7.5) and PostNL (Hold, € 3.2).