In September 2019, Telefónica bought 50% of its alarm business in the Iberian Peninsula from Prosegur and what was an almost insignificant business for both can become something increasingly relevant, especially for the latter.
The company chaired by Álvarez-Pallete saw an important growth opportunity, as is being the case with a joint venture that has the muscle and commercial scope of Telefónica to attract new customers. In 2020, the portfolio of 200,000 alarms that Prosegur already had in the Iberian market was valued at 600 million, which is equivalent to 75 monthly installments per alarm.
From then on, they began to expand the connections to the point that in the next presentation of results it is speculated that it will already reach 350,000 installed alarms .
Maintaining the same alarm value as in 2020, this business should already have a value of 1,050 million euros, of which half, 525 million, belong to Prosegur.
However, it must be taken into account that these levels come from the valuation of 75 installments per connection, which was what Telefónica paid, despite the fact that there have been other operations in the sector, such as that of KKR and Corporación Financiera Alba with Securitas in which more than 100 installments were paid for the connection 33% more. The doubt, in any case, is whether this value is being reflected in that of the group, which currently capitalizes around 1,200 million euros.
In other words, the value of the joint venture would account for 43% of the total capitalizationof the parent company (it must also be taken into account that the cash management subsidiary, Cash, also capitalizes more than 1,000 million euros). The prospect of greater growth is very clear, based on the fact that the penetration of alarms in Spain is low, at 6%, compared to an average of 12% in Europe and 28% in the United States.
Álvaro Aristegui, an analyst at Renta 4, predicts that “they will reach 350,000 connections in MPA and another 350,000 in the rest of the world; what happens is that we believe that it is not going to contribute practically anything yet since it is a business that is growing a lot and while you carterize new clients, you spend a lot on capturing, so the ebitda is low”.
“Starting this year, starting from that base of 350,000 connections that are going to be contributing to you from the beginning, even if there are new clients, the percentage of the total will be lower,” adds Aristegui. “The ARPU [average revenue per client] also drops a bit, due to the offers you make to attract, something that is corrected as you have a larger portfolio,” the expert concludes. In this sense, in the results of the third quarter, they announcedan ARPU of 37 euros for MPA and 31 euros for the rest, in addition to an EBITDA of 47 million.
“The alarm business already exceeds that of security in our valuation by sum of parts of Prosegur”, points out Manuel Lorente, from Mirabaud. “Its prospects are favorable [doubling connections between 2020 and 2023] and its fundamentals are solid; however, its monetization and crystallization of value by the company will depend on whether Prosegur is capable of reporting independent magnitudes of the business and going public in 2 or 3 years as he did with Cash, although for that there should be a prior delisting of Cash,” he concludes.
Regarding this possibility, Antonio Rubio, general secretary of the company, in an interview with elEconomista, pointed out that “there is still no critical mass since at least half a million alarms must be received to assess it, although it is a possibility that is on the table”.
The consensus of analysts collected by Bloomberg sets its target price for 12 months at 3.5 euros, which leaves it with a potential upside of 60% from its current levels. Regarding the recommendation, 3 out of every four analysts who follow it advise taking positions while the rest suggest that it is best to maintain them.