ADMIE Holding | Electrifying growth
We initiate coverage of ADMIE Holding with a ‘Buy’ recommendation and a €3.3 PT, while adding the stock in our top picks list.In our note, we deep dive into ADMIE Holding, owner of 51% of IPTO, Greece’s electricity transmission network operator. Facilitated by an underleveraged balance sheet (1.5x 2020e Net Debt/EBITDA, vs. >5x gearing for other European regulated utilities), IPTO has committed to an ambitious €5.0bn network development plan over the next decade. This will drive double-digit RAB growth for IPTO, translating into c. 10% EBITDA CAGR over the next five years given the regulated returns, and will filter through to total dividends of >€130m for ADMIE Holding, namely annual yield near 5% on our estimates.
On valuation, the stock trades at a substantial discount to RAB, despite showcasing superior RAB growth in relation to other European regulated utilities (which are usually priced at a premium to RAB). In ADMIE’s case, the market is not only ignoring any potential future outperformance vs the cost of capital or the growth in RAB, but it also seems to imply a negative ROIC-WACC (cost of capital) spread near 60bps for the coming 10 years, on our estimates.
Our PT is based on a blended valuation (RAB-based, DCF, multiples) and effectively (and conservatively) values ADMIE at 5-10% discount to 2021e RAB.
Holding Company ADMIE IPTO SA is a Greece-based company engaged in the electric utilities sector. The Company, through Power Transmission Operator SA, operates as a Transmission System Operator for the Hellenic Electricity Transmission System (Transmission System). The Company holds a concession for the Transmission System operation, maintenance and development. Its Transmission System mainly transmits electricity from Western Macedonia and consists of overhead, submarine and underground transmission lines.
Eurobank Equities is a Greek-based firm offering research, sales and trading services to institutional, corporate and private clients. The company is wholly owned by Eurobank, one of the 4 systemic banks in Greece.
Research is the backbone of Eurobank Equities' platform, with a team of 4 professionals committed to generating actionable investment ideas by providing timely research products. We are committed to offering value-added services to clients by filtering market noise and providing insights on the multiple sectors that we cover. Our universe includes 26 - large, medium and small cap - companies whose market capitalization amounts to 80-85% of the total market capitalization of the Athens Stock Exchange. Our research team also maintains the capacity to generate ad-hoc research for micro-cap listed companies.
Our team has consistently gained recognition among institutional investors for its quality research, having ranked No. 1 team in Greece at the Extel Surveys of 2013-2016 and 2018. We have also been named Leading Brokerage Firm in Greece over 2014-2016 and in 2018.
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