OMV - Standing Out From The Rest

OMV – Earnings Revision

Rating: Accumulate (prev. BUY)

Target Price (12-m): HUF 52.7 (prev. EUR 57.0)

Current share price: EUR 48.4

 

 

We cut our long-term Brent oil price estimates from USD 70/bbl to USD 65/bbl due to increasing growth fears. Accordingly, we reduced our 12-m TP from EUR 57 to EUR 52.7, yet implying a 9% upside potential from the current share price (which with a DIVY of 4.9% may result in a total return of ca. 14%).

 

Dividend should remain on a progressive path thanks to the continued strong free cash flow generating ability. FCY is expected to be ca.7pc this year and grow to 12% in the next. 

 

We anticipate that OMV’s clean CCS EBITDA will reach ca. EUR 6 bn in 2018 (+9% YoY) in 2019 and EUR 6.2 bn in 2020 (+4% YoY) mostly on the back of higher upstream production (including newly acquired Abu Dhabi, Malaysian and New Zealand assets), as well as on earnings contribution from ADNOC Refinery.

 

OMV has outperformed the European Oil & Gas benchmark index (SXEP) by around 12% YTD in terms of total shareholder return as a result of its unexpectedly strong cash flow stream fuelled by oil price spike. We note however that oil price surge has exerted so far this year a drag on refining and to some extent on petchem margins as well, which has clearly had a negative impact on integrated energy companies’ valuation on a relative basis. Generally speaking, it seems that the predominant factor for the best-performing stocks among peers so far this year has been the oil price companies realized for their extracted barrels, while cash flow growth, production and dividends have also added to distinguishable performance.

 

OMV is trading at EV/clean EBITDA and P/E multiples based on our earnings estimate for 2019 of 4.5x and 9.1x, in line with its peers’ valuation..

 

 

 

Attila Vago
Senior Analyst

CONCORDE SECURITIES LTD.

Hillside
55-61 Alkotás street, H-1123 Budapest.
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MEMBER OF THE CONCORDE GROUP

 

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