Exane BNPP - ENAGAS
Outperform
- Target price EUR16.7 (+25%)
- Sector rating Underperform
H1 09 results due on 28 July
► We are forecasting a 7% yoy increase in H1 09 net profit
We are estimating a 7% increase in net profit for H1 09 at EUR139m. This growth rate in earnings is lower than the 9% increase in Q1 09. The lower growth in earnings implicit in Q2 09 is due to flat sales in Q2 09 (similar growth than in Q1 09), while EBITDA is expected to grow by only 2%. Company guidance points to a 9% yoy growth in earnings for the whole year. We believe Enagas will most likely accelerate the rate of earnings growth during H2 09.
► Q2 09 still a transitional quarter
We are expecting H1 09 to be intensive in terms of assets under construction and assets close to completion, while H2 09 is expected to be intensive in terms of assets put into operations. Therefore, Q2 09 is being penalized by the high cost of financing, close to EUR800m of work in progress, according to our estimates. In H2 09 we expect these assets to start contributing to the group’s revenues.
► Net financing costs benefiting from low interest rates
We expect Q2 09 to further benefit from low interest rates and cost of debt to be close to 3% in H1 09. Approximately 30–40% of Enagas debt is exposed to variable rates. Overall, we are overall expecting net financing costs to drop by 18% yoy in H1 09.
► We are expecting net debt to reach EUR2.7bn at the end of H1 09
Financing the huge work-in-progress is expected to increase the net debt to EUR2.7bn (from EUR2.5bn in Q1 09). The utility has guided for EUR2.8bn by the end of the year. We expect the debt to grow more slowly during H2 09 as a consequence of close to EUR800m worth of assets being put into operation in H2 09.
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