Zegona – Key Notes for Monitoring
1. Main thesis:
Zegona acquired Vodafone Spain (EV €5.0 B) with very little cash outlay thanks to debt financing and €900 M in Redeemable Preference Shares (RPS) issued to Vodafone via EJLSHM Funding Ltd.
These RPS represent 69% of the current share capital and are redeemed for a fixed amount of €900 M, not their market value.
2. Hidden value:
By paying the €900 M and cancelling that 69%, the number of shares would drop from 759 M → 236 M.
EPS would multiply by ≈3.2× (from €0.53 to €1.69).
At the same current PER (~22), the theoretical share price would go from ~€11.7 to ~€37.
At PER 44 (as shown on Tkir due to current dilution), the theoretical share price would exceed €74.
3. Revaluation potential:
Immediate payment → potential +200–300%.
Payment within 1–2 years → high potential but delayed.
Payment in 6 years → moderate potential in terms of IRR.
4. Catalyst financing:
Cash received from GIC for FibreCo: €1.4 B (> €900 M needed).
Possible sale of FiberPass: +€500–800 M.
Estimated annual FCF: ~€800 M tax-free (tax loss carryforwards >€5.0 B).
It is possible to pay now without compromising operations.
5. Current market situation:
Low free float (~23%) → low liquidity and high volatility.
LTM PER on Tkir: ~44× (inflated by dilution), adjusted PER post-redemption: ~14–16×.
NTM EV/EBITDA: ~8.65× (high for telecom, but with EBITDA growth expectations of +27.5% CAGR over 2 years).
6. Risks:
Voluntary delay in RPS payment (preference for debt reduction or reinvestment).
PER decline due to changes in earnings expectations or macro environment.
Possible use of cash in less profitable acquisitions.
7. Monitoring signals:
Announcements on capital policy or RPS buyback/redemption.
Developments regarding the sale of FiberPass.
Statements on the use of GIC cash.
EBITDA and FCF performance.
How well do narratives help inform your perspective?
Disclaimer
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