“Theoretically, after such a fast-paced growth corrections might follow, but the important thing here is that investors are starting to see the company as stable and highly profitable. Transelectrica is still valued at a discount compared with western companies and has a lower indebtedness level than they do,” says Mihai Caruntu, head of the research department of BCR.
“If we take into account the expected dividend yield, 9% for the next year, much higher than the current bank interests, I don’t think the current stock price is unrealistic. The potential is more limited now that it has gone up so much but the stock is not an expensive one, it can generate 10% yield a year again.”
Transelectrica is a different company than it had been until 2012, he added, because it is more professionally and transparently managed now, and the stock market recognized it.
“As proposed by Fondul Proprietatea (FP.RO), Transelectrica is the first state-run company on the stock market where the Supervisory Board gets a performance bonus based on the trend of the company’s shares on the market via an option plan that stimulated its members to be more transparent. The four-year management plan they devised is the best document Transelectrica has released since going public and the company is trying to communicate transparently with analysts,” Caruntu added.
Transelectrica on Thursday announced that the energy market watchdog ANRE approved its ten-year investment plan worth 5.3 billion lei (EUR1.2 billion).
Analysts say the plan is consistent with the company’s projections in the management plan approved by the Supervisory Board of Transelectrica in September 2013, which included higher investments in 2014, more than RON550 million, compared with RON200 million last year.
“Investments as high as possible paid for by tariffs are good news for Transelectrica, as long as indebtedness does not increase too much. (…) We believe Transelectrica can make RON550 million investment a year without significantly raising indebtedness, while keeping the dividend payout ratio at 70%,” Mihai Caruntu says.
Transelectrica got a 4.7% tariff hike at the beginning of the year, and another one of 1.5% as of July 1, which analysts see as very good because they will allow it to boost profitability in 2014.
BCR analysts expect Transelectrica’s profit to go up 19.3% to almost RON240 million this year, following last year’s RON201 million, the highest since going public in 2006.
The company started the year on the right foot, posting RON136.5 million net profit in the first quarter, 48% up on the same time of 2013.
“The rise in the stock price shows investors believe in the company’s capability to generate better results than last year and that last year’s dividend can be replicated. At a 9% dividend yield that it can sustain over the coming years, Transelectrica is looking good because the yield is clearly higher than bank interests, which may be as high as 4% and government bond yields, which are lower than 4%,” Caruntu said.
“Energy stocks generate 5% to 9% yields and when it comes to dividends, Transelectrica rivals Transgaz (TGN.RO) and Romgaz (SNG.RO). Transelectrica is starting to resemble Transgaz in that it pays constant dividends.”
(English version by Loredana Fratila-Cristescu)