(News Bulletin 247) – The Swiss bank made a purchase this Tuesday on the operator of the Channel Tunnel, judging that the group should regain market share and benefit from a better price environment at the end of the year. year.

Infrastructure operators have suffered on the stock market in recent days. Since the announcement of the dissolution of the National Assembly by Emmanuel Macron, Vinci (-9.7% cumulatively), Eiffage (-11.5%) and ADP (-12%), have floundered.

The first two suffered from the specter of a renationalization of motorway concessions by the National Rally, and the third was penalized by fears of more pronounced regulatory uncertainty with a new executive, and of even less probable privatization.

Getlink held up better. The operator of the Channel Tunnel limited its decline to between 3% and 4%. UBS, however, considers that this decline, coupled with more promising prospects, offers an entry point.

The Swiss bank raised its buy advice on the group led by Yann Leriche, compared to “neutral” previously. It also increased its price target to 18.5 euros compared to 17.7 euros previously, a target which gives the stock a potential of 18%.

On the Paris Stock Exchange, Getlink shares are somewhat supported by this change of opinion, gaining 1.7% at the start of the afternoon, the fourth largest increase in the SBF 120.

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Limited political risks

The Swiss bank recognizes that the legislative elections can represent a heavy uncertainty on the action. However, the risks seem limited to him. According to his calculations, around two-thirds of Getlink’s cash generation is linked to the British economy compared to around a third for France. The international nature of the Channel Tunnel also makes a risk of nationalization unlikely.

“Higher French bond yields could represent a valuation headwind, but we note that the majority of Getlink’s debt is fixed and has a 17-year maturity, with the exception of its €850m green bond. euros which matures in 2025″, underlines UBS.

Based on the known proposals of the National Rally and the New Popular Front regarding salaries and pensions, the Swiss bank carried out a risk analysis on labor costs for Getlink. In an extreme scenario, without repercussions of salary increases on prices, UBS arrives at a negative impact of 4% on the gross operating profit (Ebitda) 2026. But the bank notably argues that in such a scenario, operators of ferries, Getlink’s main competitors, would probably be even more penalized and the group is known for effectively passing on its cost increases to the prices of its shuttles.

Ferries that will be less competitive

UBS does not limit itself to putting political risk in France into perspective. The establishment believes that Getlink’s shuttle business, which transports freight trucks and passenger vehicles, is close to an inflection point.

This activity suffered from competition, particularly in pricing, from ferry companies, which led Getlink to lose market share, explains UBS. But according to advanced data compiled by the bank, the situation seems about to change. In May, ferry companies passed price increases of 2% to 10%, significantly higher than those of Getlink (+2%).

The bank believes that the ferry companies carried out these price increases to prepare the ground for an increase in their costs due to the upcoming entry into force of a French law to combat social dumping, notably forcing the application of French minimum wage for the crews of all shipping companies. A similar law in the United Kingdom is applied (Seafarer’s Wage Bill).

As a result, UBS expects ferry groups to increase their fares to pass on their cost increases in the coming months. They will thus lose competitiveness against Getlink, which should start to gain market share in truck transport from the last quarter of 2024, and benefit from more latitude to raise its prices on private vehicles in 2025.

“Furthermore, we believe that a possible Labor government, if elected (in the United Kingdom, editor’s note), could lead to an improvement in trade relations between the United Kingdom and the European Union, which would be favorable to truck volumes which are at 80% of pre-Brexit levels,” adds UBS.

In the medium term, the Swiss bank also sees opportunities for Getlink in rail transport. The number of passengers transported could increase from 10.7 million people in 2023 to 14 million people in 2028, she predicts. Work to expand Amsterdam Central Station could ultimately add 800,000 passengers to the London-Amsterdam route. New operators on certain routes (such as Paris-London) or new routes are all possibilities for increasing traffic in the medium to long term.

Note that before UBS, Barclays had moved to the equivalent of purchasing on Getlink at the beginning of June, citing more or less the same arguments as the Swiss bank.