Romanian Utilities: Entering murky waters (Electrica stays BUY, Transelectrica & Transgaz stay HOLD – transfer of coverage)
The Romanian utilities sector is trading fairly flat compared to the levels in April 2018, when ANRE indicated that it was reducing the regulatory rate of return (RRR) to 5%, while the reaction to the increase to 6.9% in March 2019 has been fairly muted. Entering the murky waters of the new regulatory period (2019-24E), all three companies are facing payback time, with significant clawbacks from the regulator related to the previous cycle. We find the investment plans of Transelectrica and Electrica unconvincing, but we see Transgaz’s plan as transformational in the medium term, albeit with risks in the short term. Dividends, one of the key attractions of the sector in the past, will no longer be as appealing going forward, with only Electrica maintaining a relatively stable yield. Indeed, the halt in dividends is the key drawback for Transelectrica, in our view. On a relative basis, Electrica stands out as discounted from the sector. As such, we are positive on our valuation for Electrica, while remaining neutral on Transgaz and Transelectrica. Electrica remains a BUY, with a new price target (PT) of RON 13.4 (19.5% upside). We keep our HOLD recommendations on Transgaz (new PT at RON 379.5, 6.9% upside) and Transelectrica (new PT at RON 22.5, 10.1% upside).
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.