Hellenic Petroleum - A look ahead at 2019 after strong Q3 beat
Hellenic Petroleum (ELPE) demonstrated exceptionally strong margin over-performance ($7.3/bbl) versus the benchmark in Q318, with group adjusted EBITDA at €237m beating Reuters consensus by 11%. Key drivers included high availability, normalised operations and advantageous crude selection. We see several moving parts affecting benchmark margins in 2019, including highly anticipated changes to marine fuel standards (IMO 2020), crude price volatility, Iranian crude sanctions and associated waivers, as well as c 2mmbd of new global refining capacity additions. ELPE’s bias towards middle-distillate yield ensures that it is well placed to take advantage of increased demand for low sulphur shipping fuels and to remain competitive versus emerging competition. Our blended P/E, EV/EBITDA and DCF based valuation moves from €9.0/share to €8.9/share, with FY19e adjusted EBITDA reduced by 6% combined with a sector de-rating. ELPE’s forecast FY19 dividend yield (6.0%) remains supportive, with the potential for a one-off cash return on receipt of DESFA sales proceeds in Q418.Hellenic Petroleum operates in the energy sector predominantly in Greece and the Balkans. Co.'s main activities include: refining and marketing of oil products ("R&M"); exploration, development and production, of hydrocarbons ("E&P"); manufacturing and marketing of petrochemical products; and power generation and trading. Refining, supply and trading are Co.'s core business and its main source of income and profit. Retail trading activities are split into domestic, comprising Co.'s Greek subsidiaries EKO and Hellenic Fuels, and International through local in-market retail subsidiary companies. Hydrocarbon exploration and production (E&P) Co. activities relate to Greece and abroad.
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