Naturgy: Too much optionality priced in for us
We see Naturgy as a company where investors seem to be factoring in in advance too much of the optionality value from potential future asset sales whose timing/value is uncertain. We do not dispute Naturgy’s strong execution so far in terms of portfolio reshuffling and cost cutting, and recognize its generous shareholder remuneration policy (returning 31% of market cap in dividends and buybacks until Dec-22). However, we remain sceptical about the possibility of further disposals over the short term in the Spanish gas distribution area (Nedgia) given our perception of regulatory risk about that asset (26% of EV). Valuing Naturgy through a breakup scenario does not make sense currently in our view and, despite increasing our FV to Eur21.0/sh (Eur20.5/sh before), we are cutting our recommendation from Neutral to SELL.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).
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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