Siemens-Gamesa: Have you run enough blood?

"When there is blood on the streets, go out and buy property." That was what Rothschild and other known investors said. Siemens-Gamesa shares have gone from listing at € 20.8 per share at the time of the merger, now trading at around € 11 per share, it is true that it has influenced the discount of the extraordinary dividend of 3.6 € / Acc, but still the descent is very important. Maybe this might be a good time to buy, but has there been enough blood running at Siemens-Gamesa?

Siemens-Gamesa is having a number of short-term problems that for a long-term investor can be an opportunity rather than a problem. The temporary cessation of the Indian market, the normal costs and inefficiencies associated with the organization of the new group, the way in which information is being consolidated, and Adwen's additional incorporation do not contribute to the good performance of the group or good information to analyze them .

The merger will provide minimum positive synergies of 230 million euros per year, however, they will not be manifested until it is consolidated. When there is interest in completing a process, the best source of information for calculating synergies is not precisely in the parties involved. We will have to wait for them to manifest and for the moment, I think we should consider them with great caution or simply not consider them in the study of the company.

The information that is available, in my opinion, is not very useful to make a reasonable investment decision. The merger, in fact, has been an acquisition, in which Siemens WindPower Business absorbs Gamesa, however, the continuity of the information in the CNMV and the listing in the stock market, Gamesa provides. In addition, the annual information for 2017 will close on 9/30/2017 and the next fiscal year will begin on 10/1/2017 and end on 9/30/2018. As a result, the annual information for 2017 will have 9 months. On the other hand, the consolidated information presented in the 1H 2017 to the CNMV includes six months of Siemens WindPower Business and only the second quarter of Gamesa. But that does not end the thing, to make it more complicated, the information corresponding to the 1H 2016 that is published for comparative purposes, includes only that of Siemens WindPower.

I think that, given the circumstances, in order to understand the company it is better to disregard part of the information presented and to study only what the group has done during the first half of 2017. To do so, we will have to add Gamesa's first quarter results to the results of 1S of the group and with this, we will obtain the complete semestral results of Siemens-Gamesatal and as it will be from now on.

According to the consolidated financial statements presented to the CNMV in the first half of 2017 by Siemens-Gamesa, its revenues amounted to € 4,209 million, with an Operating Profit of € 197 million (4.7% of sales) and a Profit before Taxes of 185 million, which leads to a Net Profit of 131.3 million, which means a Profit per Share of 0.19 euros / share, calculated on the 679,507,853 shares outstanding on June 30, 2017 ( 681,143,382 issued less the 1,635,529 treasury shares). It is a relevant fact to understand, from the fundamental point of view, why the quote is lowering since a BPA in the half of 0.19 € / Acc means approximately an annual BPA for 2017 of 0.4-0.5 € / Acc that can hardly justify prices beyond 8-10 € / Acc, although we consider that the group is able to grow at the pace that Gamesa was doing separately and justify a PER 20. However, we must bear in mind that this BPA does not include the first quarter of Gamesa and is what we are going to introduce now.

Gamesa has obtained Revenues of 1,546 million euros in the first quarter of 2017, with a Result of Exploitation of 173.2 million (11.2% on sales) and a Profit before Taxes of 148.6 million, in the end, the net profit amounts to 100 million.

If we add both operating accounts we would have the Siemens-Gamesa group, if it had consolidated the whole period from January 1, 2017, would have obtained revenues in the first half of 2017 of 5,755.4 million euros, with a Result of Exploitation of 370.1 million (6.4% on sales), a Profit before Taxes of 333.5 million and a net profit of 231.7 million.

The operating income of the group in relative terms is substantially worse than that obtained by Gamesa separately (10-11%) and this decrease in the margin was mainly due to the increase in personnel expenses from Siemens. In Gamesa, personnel expenses were 9-10% in sales in the previous years (in the 1Q 2017 they were 7.2%), however, the segment that collects the Siemens wind farm worked with personnel costs higher than 18% on sales. In the consolidated statement s