Sunday, March 5, 2017

For Vinci, Strong Concessions Can Backstop A Contracting Recovery

France's Vinci (OTCPK:VCISY) (SGEF.PA) is a bit of an odd company in a few respects. Its contracting business is overwhelmingly large in terms of its revenue contribution, but it generates less than a third of the company's income, and the shares of this contractor and concession operator often seem to behave more like a bond than equity. It's also very much a France-centric company in terms of its revenue and earnings base, but most of its growth potential lies outside France and outside Europe.

Those quirks aside, I think this is an interesting name to look at right now. Close to 70% of the company's operating income is in high-margin, low-risk concession businesses that should continue to grow and that are supported by long-term contracts. What's more, the other 30% should see improving operating conditions as the French government moves forward with significant building projects and as industrial and energy markets recover around the world. With a double-digit annual total return potential and a roughly 3% dividend, I think Vinci merits further due diligence.

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For Vinci, Strong Concessions Can Backstop A Contracting Recovery

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