Ebitda Multiple Comps: Angel Trains

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Ebitda Multiple Comps: Angel Trains

3 minutes
July 27, 2023 10:02 pm

In June, Arjun Infrastructure Partners acquired a 10% stake in Angel Trains from Public Sector Pension Investment Board (PSP Investments), a Canadian pension fund. Despite this transaction, PSP Investments will continue to hold the majority ownership of Angel Trains, retaining a 64.25% stake in the company. The financial details of the transaction have not been publicly disclosed.

Established in 1994, Angel Trains operates as a British rolling stock company, also known as a ROSCO. Their core business revolves around providing railway rolling stock, such as trains and locomotives, to train operators on a lease basis. Rather than train operators purchasing and owning the rolling stock outright, they enter into leasing agreements with Angel Trains. This allows operators to access the necessary rolling stock without the significant upfront costs of purchasing new trains. Instead, they pay lease fees to Angel Trains for the use of the rolling stock. As of 2022, the Company owned 3,254 rolling stock vehicles.

Angel Trains holds a significant position within the UK railway industry by providing crucial rolling stock through leasing arrangements. The acquisition of Readypower Group in January 2022 further strengthened Angel Trains’ position and potential. Readypower’s specialisation in on-track plant equipment aligns with the modernisation efforts of the UK’s rail network. This strategic acquisition is expected to enhance Angel Trains’ valuation by tapping into the growth potential of the rail industry.

From a financial perspective, Angel Trains experienced a decrease in revenue growth of 19% in 2022 compared to the previous year. Their revenue primarily comes from operating lease rentals and maintenance lease rentals. The decline in revenue can be attributed to the retirement of certain older fleets that reached the end of their operational life. As these fleets were phased out, the recognition of non-capital revenue decreased. Furthermore, the cyclical nature of heavy maintenance events, which impact the recognition of non-capital revenue, also contributed to the overall decrease in revenue.

The price for this transaction was not disclosed. But given that Angel Trains is part of UK infrastructure lore, we thought it might be useful to estimate the price using data from infraMetrics.

Table 2 presents a comprehensive range of valuation ratios for the transport sector in the United Kingdom obtained from the infraMetrics platform. Based on this, as well as Angel Trains’ financial information, we are able to estimate an implied equity valuation. We find the estimated valuation of the equity to be approximately GBP 1,260 million when considering the Price-to-Sales ratio (PSR) and GBP 2,197 million when considering the EV-to-EBITDA ratio.

The Price-to-Sales (PSR) ratio shows a minimal difference, with Angel Trains having a PSR of 3.4x, almost equal to the average PSR of 3.5x for comparable companies. This suggests that Angel Trains is not pricey in relation to the average of comparable companies in the transport sector. However, Angel Trains’ EV-to-EBITDA ratio is 13x, which is lower than the average EV-to-EBITDA ratio for comparable companies, which stands at 15.2x. This indicates that Angel Trains’ earnings are relatively higher in proportion to its enterprise value compared to its peers, making it potentially more attractive from an investment perspective.

For more information or to discuss, please contact michelle.ho@scientificinfra.com.