Global order book reached the record level of 15

Three years, 11 months and ten days of engagement: many suitors would be discouraged for less than that. PAS da Vinci, who was eventually concluded on 10 March, officially, her marriage to ASF, for EUR 9.1 billion. A union celebrated in large pumps, investor offering the same month in the title of the French construction group a more historic high-level, 85,50 EUR. Honeymoon seems to never end, no analyst consensus being to sell on value.

The enthusiasm is up to the change in size of the French group. From the outset in partial ASF scholarship in March 2002, Vinci invites to the capital of the company of highways with the idea of strengthening its strong concessions pole detained in Cofiroute 65 and its parking Vinci Park pole, which was then less than a third of its turnover and less than half of its outcome. The figures are all other today, after the redemption of 50.7 held by the State: the concessions "are now 67 of the result of exploitation, against 41 before the operation, while the share of the construction passes from 29 to 17, note Exane BNP Paribas.

This situation is of Vinci "the world's leading concession and construction with a turnover estimated EUR 25 billion in 2006 and an Ebitda of 3.9 billion", according to Deutsche Bank. The title would be only honorary, if this new status allowed the group "to eliminate the discount history of 15 found to its net assets revalued term stock", said an analyst of an Anglo-Saxon Bank.

Complementary activities

Why such infatuation for this dealer-manufacturer model Even installed one of the leaders of the sector in France with Bouygues and Eiffage, Vinci construction division is facing a strong cyclical nature of its activity, which has seen including its operating margins from 0.5 per cent in 1996 to 4.9 in 2005. The opposite of concessions, "a generation of robust and predictable cash flow and a lenient legal framework", as summarised in Standard & Poor's. The traffic of highways closely linked to the evolution of GDP should grow by an average of 1.7 over the coming years, while the increase in rates is indexed on the inflation. Operating margin 43.8 in 2005 to ASF will thus remain on the same upward slope.

"The two activities are complementary, especially since the construction is very low capital intensive and concessions require investment of several hundreds of millions of euros", said one French analyst. Better therefore to the constructor at the top of cycle reinvest its many cash in a concession, rather than in building and construction companies which is at the top. Even if it means sacrificing profitability of capital employed (RoCE), which is expected for Vinci fall by 14.9 in 2005 to 7.5 in 2006 according to Exane, because of the arrival of ASF, gourmet in assets.

Synergies in concessions

Additional asset for da Vinci in the eyes of investors, no cloud is obscuring his short-term horizon. Driven by the demand for residential housing, construction still doesn't show signs of shortness of breath, with a backlog growing end of December from 13 to 10.1 billion. While the activity routes lost 20 basis points in the margin (at 3.6), due especially to the increase in the cost of the contents first, but Eurovia has always a market share of 24 in France, according to Exane. The energy pole, him, pleasantly surprised in 2005, with a margin at 5.1. "Global order book reached the record level of 15.8 billion, or 10 months of activity," noted Deutsche Bank.

Optimism reigns for the pole concessions. "The objective of the management of 70 million of synergies should be quickly exceeded", consider the JP Morgan analysts. The broker points including the gap between the ASF that Cofiroute management: "the salary costs of the first were higher basis in 2004 380 points, while the rate of automation of transactions is 59, against 32 for the subsidiary of Vinci," he says. Cofiroute also proved best negotiator for the evolution of its rates, the growth of revenues with higher of 180 points base in 2003 and 20 points in 2004. JP Morgan estimates that da Vinci could gain enhancement up to 11 euros per share by applying its methods in Cofiroute to ASF.

The issue will now be to instil this potential unanimously accepted in scholarship of the French group. Not easy, as the title already won 170 between January 2003 and December 2005, surperformant 120 French market! As "that a large part of this stock market fever can be explained by the decrease in long-term rates", advance an Anglo-Saxon Bank analyst. Stability and recurrence of revenues from concessions before already present ASF in the portfolio of Vinci them are indeed compete with obligations.

"The sensitivity of the title to the evolution of the rates, which have started their ascent, will be now stronger still," the analyst continued. JP Morgan calculates as well as an increase of 100 points of the rate base would reduce the value "sum of parts" of Vinci of 10, 6 previously. The stock time may be much more difficult that the second engine of growth of title risk him also of gripper: "the margins of the construction reached a high point and their potential for improvement is very low," said a specialist in the sector.

Even crowned the redemption of ASF, Vinci will thus have very quickly get for new growth relays. "The story is not over, companies who stop to grow eventually die," warned late January Antoine Zacharias, the non-Executive Chairman of the group. End March, the Group has also launched a capital increase of 2.53 billion, which will enable it to reduce its debt from 18.3 to 16 billion.

Financial flexibility

Fitch remained therefore to BBB , pointing out that if "late 2005 adjusted debt represents 5 times the Ebitdar against 0.9 prior to the acquisition, operational profile to benefit from the stability of the risk-taking of ASF. For Charles - Edouard Boissy in Oddo, "the group now has free rein to its development and financial flexibility that not all competitors". Vinci made no secret that Amec Spie, multi-technical services company, interested in him. Problem: "competition is going to be rude with funds whose appetite for the sector is not denied and who have already swept Cegelec the beard of the industrial", noted one observer. The privatisation of highways accelerates in Europe, including Greece and Ireland, but the candidates are more and more as sector earns its letters of nobility.

Same thing for the construction of the countries of Eastern Europe, where "the establishment of transparent procedures increases competition and reduced margins," according to & Standard Poor's. To adapt to this new situation, Vinci is ready to modify its approach and to partner with industrialists or financiers, in tenders. The price to pay to keep this new status.