Veolia: Recent Changes in the Shareholder Structure Are Positive; Shares Cheap

Bpifrance’s Lac1 sovereign wealth fund and narrow-moat Veolia announced a shareholder agreement on March 17, under which the former will acquire a EUR 800 million stake in Veolia and get a seat on its board of directors. On March 4, CriteriaCaixa, the investment division of La Caixa Foundation, concluded a similar agreement with Veolia, under which it will acquire 5% of its capital that it pledges to keep for at least two years and get a seat on its board. Those long-term shareholders provide stability to Veolia's capital structure and the shares purchased to build their stakes should support the share price. They are likely enticed by Veolia's attractive dividend. The current yield is 4.6%, in line with the sector's median whereas we project 7.4% annual growth by 2028, nearly twice as high as the 3.8% median of our coverage. We confirm our fair value estimate of EUR 37.50 and see the shares as materially undervalued.