CTT

Depot overview & individual analyses

Depot overview & individual analyses


CTT Correios de Portugal

Update 03.05.2022

CTT Correios de Portugal

Update 03.05.2022

business model

CTT Correios de Portugal is a postal service provider in the Iberian Peninsula (Portugal and Spain). We are active in the following 4 business areas:
  1. Express & Parcels: This is about the shipping and delivery of parcels
  2. Mail & Other: This is about all types of letter mail and services that are also offered, but the overheads are also included here
  3. Financial Services & Retail: Here, for example, government bonds and treasury bills from the Portuguese state are placed, insurance is sold and payments are processed
  4. Banco CTT: In order to compensate for the expected decline in the mail business, the decision was made to found a bank of its own that would issue car, real estate and consumer loans

Investmentcase

The e-commerce market in Portugal and Spain is still very underdeveloped compared to Western European countries - but is growing very strongly thanks to Corona. CTT has positioned itself well here and has tapped into additional growth potential with its expansion into Spain. The new mail contract and the acquisitions should significantly increase EBIT in the mail segment, the bank is benefiting from the turnaround in interest rates and is already scaling strongly. The strong balance sheet allows for further acquisitions and/or share buybacks increasing dividends.

Trigger

CTT has a large portfolio of non-core real estate that is to be sold or floated on the stock market as a spin-off. This process has been going on for over a year now, but it should come to an end in the near future. The new letter contract will lead to a significant increase in earnings in the coming quarters. In addition, a lawsuit has been filed against the unilateral extension of the letter concession by the Portuguese state, and I expect the chances of success here to be good. Finally, one is currently in talks with investors who want to participate in Banco CTT - an external investor would then make the actual value of this area visible.

risks

If the boom in e-commerce in Spain and Portugal turns out to be corona-related (which I don't think) the results would of course not develop as I expected. In addition, there is always the risk that the state will take measures that adversely affect the business model (eg the "de minimis" change decided by the EU has significantly impacted the margins in the mail sector).

sustainability

CTT is pursuing an ambitious sustainability strategy based on the UN SDGs. Topics include recycling of packaging, electrification of the vehicle fleet and route optimization.

business model

CTT Correios de Portugal is a postal service provider in the Iberian Peninsula (Portugal and Spain). We are active in the following 4 business areas:
  1. Express & Parcels: This is about the shipping and delivery of parcels
  2. Mail & Other: This includes all types of letter mail and services that are also offered, but the overheads are also included here
  3. Financial Services & Retail: Here, for example, government bonds and treasury bills from the Portuguese state are placed, insurance is sold and payments are processed
  4. Banco CTT: In order to compensate for the expected decline in the mail business, the decision was made to found a bank of its own that would issue car, real estate and consumer loans

Investmentcase

The e-commerce market in Portugal and Spain is still very underdeveloped compared to Western European countries - but is growing very strongly thanks to Corona. CTT has positioned itself well here and has tapped into additional growth potential with its expansion into Spain. The new mail contract and the acquisitions should significantly increase EBIT in the mail segment, the bank is benefiting from the turnaround in interest rates and is already scaling strongly. The strong balance sheet allows for further acquisitions and/or share buybacks increasing dividends.

Trigger

CTT has a large portfolio of non-core real estate that is to be sold or floated on the stock market as a spin-off. This process has been going on for more than a year now, but it should come to an end in the near future. The new letter contract will lead to a significant increase in earnings in the coming quarters. In addition, a lawsuit has been filed against the unilateral extension of the letter concession by the Portuguese state, and I expect the chances of success here to be good. Finally, one is currently in talks with investors who want to participate in Banco CTT - an external investor would then make the actual value of this area visible.

risks

If the boom in e-commerce in Spain and Portugal turns out to be corona-related (which I don't think) the results would of course not develop as I expected. In addition, there is always the risk that the state will take measures that adversely affect the business model (eg the "de minimis" change decided by the EU has significantly impacted the margins in the mail sector).

sustainability

CTT is pursuing an ambitious sustainability strategy based on the UN SDGs. Topics include recycling of packaging, electrification of the vehicle fleet and route optimization.
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