Value- accretive deal. The price of the deal implies a 2011 EV/EBITDA of 3.9 and P/E of 6.1, which represents a discount to Globaltrans’ levels (6.7 and 10.5, respectively, the day before the deal announcement) and global peers. The price per owned railcar is $65,000, which looks fair for an average railcar age of 8.7 years, versus $70,00075,000 for a new one, but implies a discount to Globaltrans’ valuation.
Strong increase in fleet and financials. After the deal is completed and the company receives the last part of the fleet it purchased earlier this year, Globaltrans’ owned fleet will increase 46% to 58,101 railcars, the share of gondola railcars at 66%. Fleet size is a key driver for operating and financial results, and we forecast strong growth in financials over the next two years. We project 27% EBITDA growth this year and 19% next. At the same time, increased leverage will translate into higher interest expenses, which will cut net income growth to 25% in 2012 and 12% in 2013.
Potential synergy effect – upside risk. More than just acquiring fleet, Globaltrans is gaining access to cargo flows, and will thus have more room to optimize cargo flows. This could lead to further improvements in operating efficiency of longer runs. At present, we model Metalloinvesttrans on a standalone basis and do not include any potential synergy effect in our valuation.
Post-deal 2012E net debt/EBITDA of 2.5. During 2012, Globaltrans invested heavily in fleet expansion, which was mostly financed through debt, as will be the Metalloinvesttrans acquisition. This could push its net debt to circa $1.5 bln, implying a 2012E net debt/EBITDA ratio of 2.5. However, as the investment program for 2012 has already been financed, Globaltrans can easily reduce this ratio to below 2.0 by year end, leaving room for further acquisitions.