ENI-ITA - Embedded Expectations Analysis - 2018 10 04
Eni S.p.A. (ENI:ITA) currently trades well below book values relative to a UAFRS-based (Uniform) Assets, with a 0.5x Uniform P/B. At these levels, the market has muted expectations for the firm, while management is concerned about meeting their guidance targets, leverage levels, and upstream production capacitySpecifically, management may lack confidence in their ability to maintain reduced leverage, and to continue driving growth. Additionally, they may be concerned about their ability to sustain strong cash flow growth and to continue paying their interim dividends. They may also lack confidence in their ability to meet their EBIT and customer targets, and to improve their upstream operations to increase production. Finally, they may lack confidence in their ability to reduce their CapEx and maintain strong margins, particularly when considering the increase of raw steel costs
Eni is engaged in the oil and gas exploration and production, gas marketing operations, management of gas infrastructures, power generation, petrochemicals, oil field services and engineering industries. Co.'s operations are divided into three segments; Exploration and Production (oil and natural gas exploration and field development and production, as well as LNG operations), Gas and Power (supply, trading and marketing of gas and electricity, managing gas infrastructures for transport, distribution, storage, re-gasification, and LNG supply and marketing), and Refining and Marketing (supply of crude oil, refining and marketing of refined products). Co. maintains operations in 73 countries.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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