Novatek 2Q 20 - Negative FCF driven by WC and higher capex for LNG
Today, Novatek released its 2Q 20 results, which turned out to be close to our estimates and consensus on both revenue and EBITDA. Moreover, the companys net income also came in almost in line with our forecast, while it exceeded the market expectations. More importantly, Novateks net operating cash flow came in considerably weaker than expected at only USD 61 mn mainly due to lower than forecasted cash flows from the companys JV (interest and dividends) as well as negative effect from changes in WC of USD 254 mn, while we anticipated it to be positive. Apart from that, the companys capital expenditures almost doubled yoy in 2Q 20 to USD 851 mn, which was significantly higher than expected, bringing FCF below our estimates to the negative zone. However, the given hike in investments was driven by higher yoy capex for LNG projects, which we incorporate in the valuation separately in projects models. We treat the results as marginally negative, and we do not expect any significant market reaction.Novatek is an independent gas producer and natural gas producer in Russia. Co. is engaged in the exploration, production, and processing of natural gas and liquid hydrocarbons. Co.'s upstream activities are concentrated in the Yamal-Nenets region, which is a natural gas producing area and accounts for a significant part of Russia's natural gas production. Co.'s three core fields are located in the regions of Yurkharovskoye, East Tarkosalinskoye and Khancheyskoye. Co. maintains natural gas reserves of approximately 1,144 bcm. Co.'s total net proved reserves totals around 8,088 million barrels of oil equivalent (boe).
NOVATEK MICROELECTRONICS CORP. is a Taiwan-based company principally engaged in the research, development, design, manufacture and distribution of wafers. The Company's primary products include flat-panel display drive wafers and system-on-chip (SOC) wafers. The flat-panel display drive wafers mainly include large-size panel drive wafers, light emitting diode (LED) drive wafers, as well as mobile communication portable consumer panels drive wafers. The SOC wafers include liquid crystal display (LCD) panel control wafers, digital set top box and multimedia control wafers, digital still camera control wafers, digital video disk (DVD) player wafers, digital photo frame wafers and image sensor wafers. The Company mainly operates its businesses in Taiwan and the Asian-Pacific regions.
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