ATU
Q1 results preview
Speculative “buy” on the ATUGRP Float 6M +725 bps 10/14 at 85 (discount margin of 1,284 bps); “hold” ATUGRP 11% 05/14 at 102.5/103.5 (Z+753/714 bps)
Tomorrow, A.T.U will release Q1 figures, which we believe to be mixed. We further believe relatively warm weather conditions had a negative impact on the company (lower demand for replacement parts e. g. batteries). Hence, we do not think that numbers are indicative of the full year development. Moreover, we expect working capital needs to peak, which will add temporary strain on net debt and liquidity. In its annual conference call A.T.U had already guided that weather conditions in January and February were less favourable than in Q4 FY 2010 and tyre and winter related item sales were lower y-o-y. However, workshop revenues (around 20% of sales) were up. Like-for-like sales were down by 4.8% for the first 2 months. Furthermore, management expects the seasonal switch from winter to summer tyres to take place later in the year than in FY 2010, therefore leading to a shift in revenues and EBITDA from Q1 to Q2. While our estimates have a high degree of uncertainty, we estimate revenues of around EUR 250 mn and a marginally positive EBITDA. However, we believe the conference call on Friday will shed some light on the latest developments and outlook for the remainder of the year. We recommend investors with a high risk tolerance to use a potential weakness of bond prices to get involved in A.T.U’s subordinated paper. We keep our “High Risk” assessment on the LARA scale. We will comment in more detail in an Earnings Flash after the conference call on Friday.
Q1 results preview
Speculative “buy” on the ATUGRP Float 6M +725 bps 10/14 at 85 (discount margin of 1,284 bps); “hold” ATUGRP 11% 05/14 at 102.5/103.5 (Z+753/714 bps)
Tomorrow, A.T.U will release Q1 figures, which we believe to be mixed. We further believe relatively warm weather conditions had a negative impact on the company (lower demand for replacement parts e. g. batteries). Hence, we do not think that numbers are indicative of the full year development. Moreover, we expect working capital needs to peak, which will add temporary strain on net debt and liquidity. In its annual conference call A.T.U had already guided that weather conditions in January and February were less favourable than in Q4 FY 2010 and tyre and winter related item sales were lower y-o-y. However, workshop revenues (around 20% of sales) were up. Like-for-like sales were down by 4.8% for the first 2 months. Furthermore, management expects the seasonal switch from winter to summer tyres to take place later in the year than in FY 2010, therefore leading to a shift in revenues and EBITDA from Q1 to Q2. While our estimates have a high degree of uncertainty, we estimate revenues of around EUR 250 mn and a marginally positive EBITDA. However, we believe the conference call on Friday will shed some light on the latest developments and outlook for the remainder of the year. We recommend investors with a high risk tolerance to use a potential weakness of bond prices to get involved in A.T.U’s subordinated paper. We keep our “High Risk” assessment on the LARA scale. We will comment in more detail in an Earnings Flash after the conference call on Friday.
