Sell ACS say Credit Suisse analysts

ACS the large European toll operator and developer has "significant liquidity issues" and stockholders should sell. That was the advice from equity research analysts (tipsters) at Credit Suisse (CS) this morning.

CS analysts this morning emailed customers to their research service with the headline "ACS: Significant liquidity issues possible on Monday? Sell".

They recommended the sell based on cash calls on SPVs (special purpose vehicles) and equity swaps. The calls due are E1.6b due the drop in share prices of Iberola, Hichtief and Abertis in the past three weeks. ACS's debt is secured with shares of these companies.

CS dropped their so-called target price - an estimate of the medium term equilibrium - from E31 to E23.

One can imagine the anger this generated at ACS!

CS later issued a "Clarification" but largely stuck to their guns:

"As mentioned in our research earlier today (“Significant liquidity issues possible on Monday, Sell”, 10 October) we re-iterate that we believe it will be difficult for ACS to find our estimate of the €1.6bn of cash needed for the cash calls for its SPV and equity swaps we believe they have to find for Monday. We are not necessarily saying ACS will not find the cash needed but rather that it will be difficult in this environment.

"Initially we mentioned potential sources of financing as being: €2bn of undrawn credit lines, €1.1bn of post tax proceeds from the sale of the first 10% of Fenosa post debt pay down and €350m from the sale of concessions to Abertis. However, we also want to highlight the company may or may not also have access to some other additional less conventional sources of financing...

"On our stock ranking system ACS is eleventh favourite stock out of twelve. The scale of these cash margin calls have highlighted to us the risks in buying highly leveraged minority stakes in quoted companies."

see http://grupoacs.com

TOLLROADSnews 2008-10-10