General presentation of the Alstom Company:
Alstom is one of the leaders in the manufacture of infrastructures destined for the energy and transport sector on an international level. Its activities can be divided among several different areas, the principal being that of energy production equipment and services. It is also a significant player in the sector of rail transport equipment construction as well as the manufacture of equipment for transport and the distribution of electricity.
Although mainly active in Europe, Alstom has also developed its activities all over the world, notably in Pacific Asia, Africa, the Middle East, North America and Latin and Central America.
Know the competition to Alstom shares:
The Alstom Group is undoubtedly the French leader in its activity sector but has to face fierce competition from foreign companies on the international market. It is therefore very important to know the major companies in this sector to be able to compare their financial results with those of Alstom and read all the news and events susceptible to influence this company’s stock market share price. We therefore offer you the opportunity here to read through our list of major competitors to Alstom worldwide:
- Hyundai Rotem
- Bombardier Transport
- Siemens Mobility
- Hitachi Rail (AnsaldoBreda and Ansaldo STS)
- Kawasaki Heavy Industries
- Nippon Sharyo
- Mitsubishi Heavy Industries
Strategic alliances implemented by the Alstom Group:
The Alstom Group has gained parts of the market through its association with other large companies worldwide. To better understand how it operates its alliance strategy here are some examples of the company’s recent partnerships.
- SNCF: In 2016 Alstom and the SNCF formed an innovative partnership to create a new generation TGV.
- Bouygues: The Bouygues Company also became a partner of Alstom through the acquisition of a stake in its capital in 2014.
- General Electric: Still in 2014, the American giant General Electric approached Alstom with a project to create a number of strategic joint ventures.
- Thales: Finally, in 2017 there were rumours of a possible partnership under discussion between Thales and Alstom relating to the rail transport activity sector. This is still unconfirmed and details remain sketchy.
The advantages and strong points of Alstom shares as stock market assets:
The primary advantage of the Alstom group is clearly its position in one of its major activity sectors, that of rail transport with products and services for tramways, underground and TGV. In fact, Alstom is currently one of the leaders in this area on an international level.
Alstom has also benefitted for a while now from the development of emerging countries and their significant ongoing requirements regarding infrastructure. Also, the western countries continue to renew and modernise their own infrastructures. All this combined leads to a worldwide market that the specialists estimate to be worth over 10 billion Euros with a growth of between 2.5 to 3% each year.
Another strong point of the Alstom Group concerns its ability to cover all the aspects of rail construction. This is notably the case since the group acquired the signalisation activities of the General Electric Group which represents over 54% of sales in the signalisation systems and services sector with 17% for signalisation alone. 45% of sales is achieved by the trains and the rest from maintenance services.
The Alstom Group also offers a clear visibility on its future financial returns due to a full order book notably related to international contracts. The short and medium term profitability of this company is therefore not a reason for anxiety at present and investors are thereby largely reassured.
Finally, we also note that the cash return recorded by Alstom over recent years of over 3.2 billion Euros following the sale of its energy activities to the American group General Electric confers Alstom with a certain stability and financial solidity with an almost total elimination of the group’s debt.
The disadvantages and weak points of Alstom shares as stock market assets:
Firstly, we know that Alstom shares are highly dependent on public expenses and the financing capacities of its major clients. This leads to a significant risk exposure regarding a few different clients that feature on Alstom’s order book. The policy decisions relating to these budgets can therefore be highly influential.
We also know that the Alstom Group has entered, during the last few years, in a sale procedure with the General Electric Group. As can be easily noted, the volatility of the Alstom share price has continued to increase over the same period and in accordance with the announcements made that can be linked to this procedure. This situation should continue through 2020 following a major acceleration in 2018. In fact, in September 2018 Alstom and General Electric were expected to launch their joint venture with Alstom sales options for GE regarding Grid and Renewables that could be introduced onto the stock markets. In 2020 the same situation was predicted to occur with Global Nuclear and French Steam.
Although there is clearly ongoing international development of the Alstom Group activities, growth of these same activities in France remains a major problem that the group needs to resolve which is also reinforced by a governance conflict with the French state which is a minority shareholder in the group.
The investors are also disappointed by the lack of clear objectives relating to the last few years’ operations and a 7% forecast for 2020 against the recent 5.3%.
Of course, we also know that the joint ventures that the Alstom Group has implemented with the General Electric Group are susceptible to significant risks of under-evaluation of the Alstom share price. In fact, the status of the future group is that of an industrial holding until the agreement has been completely finalised.