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NATURGY: FY2020 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'20 vs. 4Q'19 Results:
EBITDA: € 940.0 M (-26.1% vs. -4.2% BS(e) and -12.1% consensus);
Net Profit: € 382.0 M (-23.6% vs. +20.0% BS(e) and +7.2% consensus);
FY2020 vs. FY2019 Results:
EBITDA: € 3.714 Bn (-18.6% vs. -12.5% BS(e) and -14.7% consensus);
Net Profit: € 872.0 M (-37.8% vs. -22.2% BS(e) and -26.8% consensus);
The FY2020 results were in line with expectations if we consider that NTGY has already deconsolidated the EBITDA from the Chilean assets currently being sold (€ 269 M BS(e) in 2020). Thus, the figures stand at € 3.714 Bn of EBITDA (vs. € 3.723 Bn BS(e) ex-Chile and € 4 Bn guidance, which would fall to € 3.731 Bn ex-Chile and € 3.892 Bn consensus) and € 872 M of Net Profit (vs. € 1.09 Bn BS(e) and € 1.026 Bn consensus).
Separately, NTGY has recorded a € -1.02 Bn impairment, which leaves reported Net Profit at € -347 M. This impairment, which we downplay as it is non-cash, stems from € 858 M of conventional generation in Spain and € 152 M in gas distribution in Argentina. Lastly, and to complicate the reading even further, NTGY has changed its divisional reporting. With all this in mind, although the initial market reading has been negative, we think this is not justified and believe we could be looking at results that are very much in line with expectations, bearing in mind the one-offs.
The NFD figure is solid at first glance, coming in -6% below our estimate (€ 13.61 Bn (3.6x NFD/EBITDA) vs. € 14.56 Bn BS(e)) due to the company having deconsolidated (towards liabilities held for sale) the debt from the assets being sold in Chile. The gross cost of debt came in at 2.5% vs. 2.7% in 9M’20, with liquidity falling slightly to € 9.475 Bn vs. € 10.15 Bn in 9M’20.
We understand that these results clearly should take a back seat, as the key to the stock at present is the partial TOB under way by IFM at € 23/sh. Here we do not expect any further details on the TOB to be given in the conference call at 12:oo (CET), although this is purely for legal issues (the TOB has not even been formulated officially with the Spanish market watchdog, which could occur next week). Likewise, we also rule out the expected strategic review of long-term targets, as we believe the company will wait until the TOB has been closed, which could be delayed until well into 2H’21.
Note that since the announcement of IFM’s partial takeover bid for 22.7% of NTGY, the share price has soared +12.5% (even climbing by as much as +16.3% on the first two days). We believe there is significant uncertainty on whether the government will accept the takeover bid and whether it will not block it through the takeover bid R.D. under way in the state of emergency. Our scenario assumes that the possibilities that the government accepts the takeover bid are high if Criteria (24%) remains in the shareholding structure, which also seems logical but is not certain either. Bearing in mind that at current levels there is a limited maximum upside of +4% in the most favourable scenario for retail investors (materialization of the takeover bid and non-sale by Criteria), we believe that the risk does not offset the upside, and thus we would sell. An eventual block to the takeover bid, which will not take place in the short-term either, would mean a risk of losing the ground gained for NTGY (-12%). SELL, T.P. € 17.82/sh. (-16.69% potential).