Good results for the listed energy companies (Mihai Căruntu analysis)


Some companies will record profits over estimates, while others are still dependent on strategic decisions to increase, Mihai Căruntu, head of BCR’s Capital Markets Division, told

However, the estimated financial results for 2017 are sufficiently visible after the six / nine months and generally put the Bucharest Stock Exchange (BSE) in an attractive spot. A plus should go to OMV Petrom and Romgaz, which will have notable results over last year, as results show at six / nine months.

Among the three regulated utilities companies, Transgaz drew attention via its six-month results and for 2017 will post a net result well above initial expectations and over budget, but after the income adjustment regulated by ANRE, approved from October 2017, is expected a normalization of profitability in 2018.

For Electrica, 2017 is inevitably a transition year, with relatively weak financial results after the turbulence and transformation of the electricity market and especially in the energy supply area, but management has announced that dividends distributed in 2017 can be supported by allocations from reserves, to be consistent with the 2017 budget.

After the acquisition of the minority shares of Fondul Proprietatea in subsidiaries, Electrica’s shareholders will no longer share with FP the dividends generated by the subsidiaries.

Electrica has more than 300 million euros to make acquisitions, which are notable positive details of the company’s profile, given that investors have to take on a regulatory risk specific to regulated utilities when it comes to future tariffs approved by ANRE.

“I believe that the evolution of many BET actions will be marked by strategic decisions to be implemented in 2018 and the following years and which can generally improve the foundations of medium-term companies: 1) ambitious investment programs for regulated utilities TGN, TEL and EL , with a plus for Transgaz, where the BRUA project and Black Sea gas will transform the company through a substantial increase in assets and business; 2) OMV Petrom’s decision regarding the exploitation of Black Sea gas, expected in the second half of 2018; 3) Electrica’s decision to make purchases with the money collected from IPO; and 4) Romgaz exploration and production programs following the encouraging results of the past year (the largest gas breakthrough in the company’s 2016 announced history) and the construction of a new gas plant at Iernut, “the BCR analyst said.

BVB offers an average yield of 7% this year

The average dividend yield in 2017 for the main BSE shares is around 7%, and the yield on government bonds issued by the Romanian state is about 4.4%. As such, the main BSE shares would in principle have attractive prices.

“However, it should be noted that the attractiveness will diminish as interest and yield on government bonds issued by the Romanian state will advance this year and 2018, following the inflation trend. Therefore, even if the dividends distributed by the main listed companies remain attractive enough, it can not be said that the growth potential of the BSE would be too generous,” Căruntu explained.

On the other hand, an annual increase in quotations for the BET area of 5% could be considered as a benchmark for our stock exchange, as a potential annual yield of 10% would be exceeded taking into account the dividends. What is reasonable for our stock market and its low risk profile by the nature of the main listed companies in the energy and utilities area.

“In this area, medium and long-term investors’ expectations should be located, which would correspond to the evolution of the main BSE shares listed through IPOs, including dividend contributions (of more than 50%) in the total annualized yield,” the BCR analyst concluded.

More about BSE’s energy sector evolution in the Winter edition of Magazine.


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Bogdan Tudorache

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