Gas Natural: All about cash distribution
We are updating our forecasts for Gas Nat following the presentation of its new 2018/22 strategic plan, which we see as a positive but fully expected event. We are also incorporating our new electricity market outlook for Iberia, where we increase ST prices (+7% on avg for 18E/21E due to higher input costs). In our view, the new strategic plan showed the company – now named Naturgy - committed to providing its shareholders with attractive remuneration levels. The company has linked its remuneration policy to FCF generation and plans to distribute all the FCF generated in the 2018/22 period through dividends and also share buybacks if there are no interesting inorganic growth opportunities. As part of its self-help measures Gas Nat plans to reduce OPEX/Gross by 8pp by 2022 (from 38.7% in 2017), which we see as ambitious, although the new mgmt team seemed to be really keen on this front. On the portfolio reshuffling area there was not much news, with the company setting a target of Eur3bn proceeds from asset sales, of which Eur2.7bn had already been achieved in 1H18. We revise our FV to Eur20.5/sh (Eur20.0/sh before) but keep stock at NEUTRAL.Gas Natural SDG is a gas company based in Spain. Co. and its subsidiaries are primarily engaged in the supply, transportation, distribution and commercialization of piped natural gas, as well as the activities involving exploration and developing, supply, regasification, liquefaction and storage of natural gas, and the generation and commercialization of electricity. Co. operates mainly in Spain and also outside of Spain, especially in Latin America, Puerto Rico, Italy, France and Africa (through Maghreb-Europe gas pipeline and integrated LNG projects in Algeria).
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