Brussels: on cost inflation and stock deflation
By contrast, with the bond markets, the equity markets remain calm on the annual rally. you are a shareholder of Ontex and Balta.
After a very strong month of October – the best in six years – the Bel20
even on the brakes. After a hesitant start, the stock market barometer is 0.3 percent higher at 4,319 points.
The rippling equity markets contrast with the bond markets, where investors have faced heavy losses in recent weeks as more central bankers indicate that the current inaugural rally is a signal to reverse the pandemic stimulus. After the Canadian central bank last week, it was the Australian’s turn today. On Wednesday and Thursday, there is a chance that consequences will follow US and British central bankers.
“How long can stock markets trade what goes on in the interest rate market?” wonders Bank of America strategist Lars Naeckter. “We don’t think that rust will last and equity markets, which are getting lasting durability that central bankers get, will have to factor more risk into prices.”
Under the onset of the price surge begins to emergepower, unlike – potentially – Argenx with ‘efga’. The textbook example is Ontex
.
After last week’s dramatic quarterly update, more analysts are throwing in the towel. The stock exchange house HSBC outlines in an update how much the diaper manufacturer is being held back by cost inflation. “We predict that it will certainly increase for oil derivatives in the next two quarters,” writes analyst Robert Price. ‘And compared to the bigger rivals (Essity, P&G, Kimberly-Clark, red.) Ontex finds it much more difficult to calculate those costs due to the lack of executive power at the European supermarkets, which represent 40 percent of sales.’
Price calls its 2023 ambitions — about a 13 percent profit margin and net debt less than three times EBITDA — as “optimistic.” “We think the margin will be 11 percent by 2023, and 3.4 times the EBITDA.”
Price suspects that speculation about a capital round to restore the balance sheet will flare up, but doesn’t suspect it will. ‘We don’t think that the viability tree we have experienced would be enough to break the covenants and thus necessitate a capital increase.’ Price’s advice is ‘hold’, with a price target of 8.60 euros.
Kepler Cheuvreux advice The advice for Ontex from ‘buy’ to ‘hold’, the price target goes from 15 to 9 euros in one go.
It is clear to everyone that Ontex is going through too much trouble: 15 times the free cash flow over the last three years.
, says analyst Karel Zoete. “Some of that theory holds up, but we’re getting more results over operational issues and slower earnings. That’s why there are problems now. It is clear to everyone that Ontex is bearing too much weight in relation to its cash flow potential’.
Zoete points out that the debt is issued against operating profit before depreciation (EBITDA). But according to the analyst, free cash flow is a better measure, especially since Ontex often takes ‘exceptional’ charges in its accounts and also a lot of interest. “Net debt is 15 times free cash flow of 63 million over the last three years.”
Investors are also throwing in the towel: during the trading day the share reached a record low of 7.84 euros, more than 10 or 56 percent below 18, against which Ontex was re-entered on the Brussels stock exchange in 2014. Ontex is now 4 percent lower at 7,955 euros.
Investors seem to be listening to that message. The Balta share falls 3.2 percent to 2.66 euros.