Cintra still has upside as growth stock, long-term rate moves link - analysts

05.08.08

Thomson Financial News

MADRID - Cintra Concesiones de Infraestructuras SA's share price still has substantial upside, as investors revisit the potential for catch up with moves in real long-term interest rates and the stock's growth profile ahead of expectations for further U.S. expansion, analysts said.

Earlier, Cintra reported a solid set of first-quarter to March results, driven by a mix of growth at existing toll roads and the positive impact of new projects coming on stream.

The weaker traffic growth at its Spanish motorways was offset by a strong performance in Chile, as well as the opening of the Ionian Roads concession in Greece, where Cintra holds a 33.3 percent stake.

At a later conference call with journalists, Financial Director Paco Clemente was upbeat about the possibility that the concessionaire will lodge a bid for the Pennsylvania Turnkpike tender this Friday.

The huge contract, reported to be worth up to about 21.2 billion euros, would be another jewel in Cintra's North American crown, which includes Canada's 407 ETR and the Chicago Tollway.

Analysts have described the winning of this contract as a key catalyst for Cintra's share price.

The Spanish group will bid in consortium, with the Macquarie Group reportedly one of its partners.

Apart from its expansion plans, Citigroup also flagged as positive the fact the sharp fall in real long-term interest rates since September 'has not been reflected in (Cintra's) share price ... thus adding attractions.'

The U.S. house also highlighted the concessionaire's comfortable financial position, with net debt at some 8.1 billion euros.

'While indebtedness remains high ... parent cash of some 232 million euros leaves investment capacity intact given considerable re-leverage potential,' they noted.

Focus will also be on the possible timing of parent Grupo Ferrovial SA.'s move to raise its stake to 75 percent from a current 65 percent, which the builder has not ruled out.

A dealer at a leading Spanish brokerage said: 'We see a lot of upside potential in Cintra's share price, but with Ferrovial's debt refinancing still hanging over investors' heads, it's hard to judge how to get the timing right.'

At 1:20 p.m., Cintra was off 0.08 euros at 10.31, while the IBEX-35 index shed 41.8 points to 13,985.0.