Southern European private companies healthier than public peers, finds S&P Capital IQ
LONDON, Oct. 23, 2012 /PRNewswire/ -- Privately-held businesses in debt crisis-stricken Portugal, Spain and Italy are in many respects in better financial health than their publically-listed peers, according to analysis from S&P Capital IQ, a leading provider of multi-asset class data, research and analytics.
While recent investor concerns over the ability of Portugal, Spain and Italy to service their sovereign debt have helped to depress local equity markets, S&P Capital IQ's analysis shows that – in the aggregate – private companies in those three countries enjoy better short-term liquidity profiles and revenue growth reports while maintaining lower leverage rates than their public counterparts.
"These findings highlight that, while many public companies in Southern Europe are in distress on account of what are perceived to be troubled markets and heightened country risk, their private counterparts may be in position to fare better over the coming months. This divergence may yet provide an opportunity for market participants, as long as they possess sufficient transparency into the fundamental balance-sheet items of all these private entities," says Silvina Aldeco-Martinez , Managing Director of S&P Capital IQ. "With access to such data, opportunities may exist for investors, lenders and acquirers."
Sizing up the fundamental differences
From January 2008 to September 2012, Spain's IBEX 35 contracted by 47.9%, Portugal's Psi-20 by 58.9% and Italy's FTSE MIB by 59.2%, according to S&P Capital IQ, indicating that publically-listed firms in Southern Europe's flagship indices have lost appeal for equity investors.
Yet private companies across all three countries tended to show a more efficient operating cycle with a better ability to turn products into cash, according to their current ratios – a measure of current assets against current liabilities. According to S&P Capital IQ's analysis, this measure appears particularly strong for the Portuguese private energy sector with an average current ratio of 2.03 and Spanish private industrials with 2.15 over the last year, versus 0.9 and 1.13 for publically-traded firms across those respective sectors.
The analysis also reveals that the latest annual growth figures are generally better for private companies. For instance, public Portuguese industrials reported revenue contraction of 4.8%, while private firms in the same category generally reported revenue growth.
Leverage rates also appear to be higher in public versus private firms. For example, private companies in Spain's materials sector have a liabilities to total assets ratio of 42.3%, while public businesses in the same sector have a liabilities to total assets ratio of 55.9%, indicating that the public companies have a higher dependency on debt to fund their operations.
That said, the analysis does reveal some negative signals for privately-held firms. For example, private Italian and Portuguese materials companies reported a worse average Days Sales Outstanding (DSO) figure compared to publically-traded firms in the same sectors.
"This could be a consequence of large public companies using their size to bring in receivables at a faster rate," says Pavle Sabic , Solutions Architect at S&P Capital IQ. "It highlights the need for greater transparency into private fundamentals in volatile markets, where positive and negative signals can be difficult to identify."
Private company fundamental data expansion
The data in this analysis is based on S&P Capital IQ's recent expansion of their private company fundamental datasets throughout Europe, including Italy, Portugal and Spain. The data – subject to rigorous quality checks – is made available to investors, risk managers and researchers via the firm's market-leading S&P Capital IQ desktop and Xpressfeed channels.
"The number of smaller M&A transactions and the globalization of business operations – from both suppliers' and client's perspectives – are two trends that point to greater appetite for the analysis of private companies," says Aldeco-Martinez at S&P Capital IQ. "This is why private company data additions will remain crucial for S&P Capital IQ's market positioning in the short- to medium-term."
Indeed, S&P Capital IQ clients across several market segments will be able to improve their in-house analysis of counterparties and targets with this data. This includes risk managers quantifying risk exposures, or private equity analysts and corporate finance teams at investment banks conducting research into prospective investments and M&A targets.
About S&P Capital IQ:
S&P Capital IQ, a business line of The McGraw-Hill Companies (NYSE: MHP), is a leading provider of multi-asset class and real time data, research and analytics to institutional investors, investment and commercial banks, investment advisors and wealth managers, corporations and universities around the world. We provide a broad suite of capabilities designed to help track performance, generate alpha, and identify new trading and investment ideas, and perform risk analysis and mitigation strategies. Through leading desktop solutions such as the S&P Capital IQ, Global Credit Portal and MarketScope Advisor desktops; enterprise solutions such as S&P Capital IQ Valuations, and Compustat; and research offerings, including Leveraged Commentary & Data, Global Markets Intelligence, and company and funds research, S&P Capital IQ sharpens financial intelligence into the wisdom today's investors need. For more information visit: www.spcapitaliq.com.
No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
The information contained herein does not constitute a recommendation to buy, hold or sell any security. The information is not intended for any specific investor and does not take into account a particular investor's investment objectives, financial situations or needs. The securities, financial instruments or strategies mentioned herein may not be suitable for all investors. When an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. Any opinions expressed herein are given in good faith and are subject to change without notice.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
SOURCE S&P Capital IQ
More by this Source
S&P Capital IQ Picks AFLAC Inc. Focus Stock of the Week
May 20, 2013, 12:32 ET
Browse our custom packages or build your own to meet your unique communications needs.
Learn about PR Newswire services
Request more information about PR Newswire products and services or call us at (888) 776-0942.