WOOD Flash – Gazprom: Feedback from the 2019 Investor Day
Gazprom (BUY, USD 6.5 PT) held its annual Investor Day in Hong Kong today, which will be followed by a similar event in Singapore this Thursday (28 February). We have come away with neutral impressions from the event. We liked some of the changes in the company’s commentary regarding future dividends, with a focus on growing dividends being the base case, although we still lack additional details: e.g. to what extent dividends will rise, especially in relation to the company’s earnings, and over what time period. Also, given the rapid improvement in dividend distributions at other Russian companies, Gazprom’s efforts are seen more as a necessity, to keep up with its peers, rather than something unique, in our view. Its guidance on export prices (USD 230-250/mcm) looks slightly more conservative than we had expected, but is probably realistic, given weakness in spot prices. Comments on the capex programme levelling off are quite supportive for our investment case. In light of the low valuation (2.2x PE on our FY19E estimates), and with falling capex providing a boost to FCF (which we estimate to average c.USD 8-10bn in the next two years, a 15-20% FCF yield), we maintain our positive view on the stock.
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