ADNOC Distribution: fuelled by non-fuel (stays BUY)
We maintain our BUY rating on Abu Dhabi National Oil Company for Distribution (ADNOC Distribution), with an updated price target (PT) of AED 4.36 (from AED 5.16), offering upside of 18.6%. We believe that 2023 marks a year when the initial growth strategy, based on site numbers in the UAE, has drawn to a close and the focus is about to shift more to boosting profitability. We expect to see a fleshed-out strategy in the new year, but we can see some of the strands that we believe will be woven into the whole already. Completion of the Egypt deal adds a new market with growth potential, particularly in aviation, but also through refurbishing the retail network. Non-fuel margins are growing already, contributing about 20% of the retail net profit so far this year. Additional revenue streams, like EV charging and car washes, are nowhere near their potential, so we see them driving non-fuel margins in the next few years. The Saudi business has been a little disappointing this year, but still offers potential, if the right opportunities emerge. ADNOC Distribution has a dividend policy of paying out at least 75% of its net earnings from 2023E-onwards. We expect P/Es of 17.5x for 2023E and 16.1x for 2025E, which is a little below the company’s historic levels.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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