Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on EDP-ENERGIAS DE PORTUGAL SA. We currently have 5 research reports from 1 professional analysts.
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EDP-ENERGIAS DE PORTUGAL SA
EDP-ENERGIAS DE PORTUGAL SA
First view: the positive path continues
04 Nov 16
The group has released a good set of 9m figures which confirmed its positive path. EBITDA for the quarter fell 4% to €826m but is still slightly above market expectations, while adjusted EBITDA for the 9m rose 10% yoy to €2,836m mainly driven by improving conditions in Iberia and Brazil. Following the same path, a 13% decrease in net interest expenses has helped adjusted net income to increase by 17% yoy to €667m which is in line with expectations. On a reported basis, consolidated EBITDA fell by 3% yoy to €2,893m but this is mainly due to one-offs such as the 50% acquisition of a hydro power plant in Brazil (+€295m), the disposal of gas assets in Spain and non-recurring items in the renewable business (EDPR). Moreover, on a reported basis, operating profit decreased 7% yoy mainly due to higher depreciation expenses from an increase in the installed capacity. Also, there was a 27% yoy increase in taxes, as the effective tax rate has been raised from 19% to 26%, since the disposals booked in Q3 15 had no impact on taxable income and created a negative effect on the yoy comparison. As a result, reported net income fell by 16% yoy to €615m, while adjusted for one-offs it increased by 17% yoy.
Guidance upgraded after outstanding adjusted first-half performance
29 Jul 16
EDP published half year results which were in line with expectations, with EBITDA decreasing 3% yoy to €2,067m and operating profit reaching €1,327m, down 8% yoy due mainly to €744m of impairment charges. Moreover, higher financial expenses (+12% yoy) and a higher effective tax rate (at 27% vs 18% previously) have plunged the attributable net profit of the group to a 20% yoy decrease to reach €472m, below the €482m expected by the market, which has been partially offset by lower minority interests (specially on the Brazilian side of the business as this decreased 59% yoy). On the other hand, operating cash flows increased by 15% yoy to €2,208m mainly driven by a positive contribution in regulatory receivables, where a 2% decrease in capex, a 7% increase in dividend payment added to a 57% decrease from financing activities have allowed the group to maintain a positive free cash flow during the period, reaching €175m. The positive cash flow results added to lower regulatory receivables have allowed the company to reach a 5% yoy decrease in net debt to €16.48bn. Following the results and just before the conference call, EDP has decided to raise its FY guidance, with EBITDA expected at €3.75bn (vs €3.6bn), net profit of €950m (vs €900m) and a net debt of €16bn (vs €16.5bn). Moreover, it expects a moderate improvement in the 2017 outlook following recent moves on energy prices and credit/forex markets.
A BRL1.5bn capital increase for its Brazilian subsidiary
03 May 16
Doubts about the group’s Brazilian exposure have been confirmed as the company has approved a capital increase for its Brazilian subsidiary EDP – Energias do Brasil (EDPB). The capital increase of BRL1.5bn has been set at a share price of BRL11.5, a 6% discount over the 30-days trading average, by issuing 130.43m new ordinary shares. EDP has committed itself to subscribing the total number of shares it is entitled to (51%), which represents an investment of BRL765m (c.€191m at a 4.0 EUR/BRL exchange rate). The objective of the transaction is to strengthen the subsidiary’s balance sheet, while reinforcing EDP’s long-term commitment with the Brazilian market.
Attractive asset rotation portfolio and receivables transactions for cash generation purposes
21 Apr 16
EDP has reached an agreement with Vortex to sell a 49% equity shareholding stake in a portfolio of 664MW of renewable fully-owned wind onshore assets. Vortex is a fund led by EFG-Hermes, which includes investments from the Gulf Cooperation Countries (GCC); in other words, it is the renewable platform managed by the Egyptian bank’s equity arm. The transaction includes wind capacity within four European countries (Spain, Portugal, Belgium and France) with a 4-year average lifetime. In addition to fully operational wind farms, the agreement also includes 24MW of wind capacity currently under development in France (with the required investment needed for them), which is expected to be completed by Q2 16. EDP has also signed the sale for €700m of the 2015 regulatory deficit linked to the special regime concerning the over-costs paid for energy. The group has been selling the yearly tariff deficit since 2008 under its monetisation of regulatory receivable programme.
Initiation of coverage.
21 Mar 16
Energias de Portugal (EDP) is a vertically-integrated utility company, and the biggest Portuguese industrial group with a €10.9bn market cap. EDP is the largest generator, distributor and supplier of electricity in Portugal with significant operations in Spain. It is the third largest producer of wind energy in the Iberian Peninsula and one of the largest in the world. In terms of market share for electricity in Spain (generation, regulated and retail), EDP is behind Endesa (1st) and Iberdrola (2nd), while it also has a significant presence in the gas sector. The group has a highly regulated business structure as 80-85% of its earnings come from either regulated or semi-regulated activities such as networks, renewables with Feed-in-Tariffs (FiT) and conventional generation with Power Purchasing Agreements (PPA). However, its regulated exposure is expected to decrease in the coming years to around 70% as deregulation starts in Portugal and conventional assets under development and not covered by PPAs are commissioned. The group’s main operations are located in Portugal, Spain, Brazil, and the US with some other renewable projects in additional European countries (France, Belgium, the UK). Overall, the group has a well-diversified generation portfolio, where 70% of its power generation comes from renewable sources (including hydro) and 17% in gas assets to cover renewable volatility, positioning the group within the top ranking companies in the energy transition faced by the European power market. Main drivers The growth objective of the group is quite ambitious as it targets a 5% CAGR on earnings from 2015 onwards and a 7% CAGR on EPS. We apply more modest growth than these expectations due to its exposure to the Brazilian economy (17.5% of revenues, 17% of earnings and 10% of debt), the slowdown in European renewable capacity, and an increasing exposure to power price movements (and its downward trend) as it moves towards a more deregulated model. We believe the next trigger will come from the release of the detailed FY15 accounts and from the capital markets day presentation when we should see the impact of the slowdown of the Brazilian economy on future expectations, and also guidance confirmation of its ambitious growth potential. It will also be useful to know the position of China Three Gorges (CTG) once the lock-up on its holding expires in the same month. We initiate coverage of EDP with a positive view, although with an Add recommendation backed by a limited upside potential as the company has taken a positive path to follow, but some of its top-line growth may be lost due to minorities and dividend payments (especially to its subsidiary EDP Renováveis), in addition to short-term uncertainty on CTG’s position once the lock-up ends.
20 Feb 17
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The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
N+1 Singer - Small-cap quantitative research - New quality style screen + 11 quality focus stocks
09 Feb 17
We introduce our fourth and final style screen representing “quality”. This screens for stocks with the best combination of high returns on capital/equity, EBIT margins and operating cash-flow conversion rates. These criteria should help us monitor how strong underlying returns translate into share price performance over time and under varying market conditions. The screen selects the “best” 25 stocks from our universe of just over 500 stocks and, as usual, we focus on a shorter list of stocks we cover or otherwise know and believe to be particularly interesting. We provide brief investment summaries on these focus stocks on pages 4 – 9. We will monitor performance and refresh the screen in approximately 3-4 months time.
Emerging from the clouds
16 Feb 17
Rolls-Royce’s underlying performance in FY16 was ahead of both its own and market expectations. Media focus on the non-cash £4.4bn headline FX loss is missing what looks to be the basis for optimism. As the civil model starts to move from investment in engines for the A350 and A330neo into the aftermarket delivery phase over the remainder of the decade, we think cash flow is likely to improve, particularly if supported by an eventual recovery in Marine.
15 Feb 17
At the current market capitalisation of £29m, we believe the shares are significantly undervalued. We estimate that the highly profitable Maritime business is alone worth at least £40m. With net cash of £9m at end-2016, this implies that the market is currently ascribing a combined negative value of £17m to the rest of the group, which together account for c.54% of group revenues. This is very harsh given the management actions to transform TP Group to a profit-driven Tier 2 specialist services and engineering company are bearing fruits across the divisions. TPG Managed Solutions is expected to more than double its profits in 2017, while TPG Engineering and Design & Technology are on course to deliver sustainable profits from 2019. Even if we ascribe zero value to Engineering, Design & Technology and Managed Solutions, the shares are worth 9.5p a share, a 38% upside from the current share price. BUY.
Small Cap Breakfast
16 Feb 17
Saffron Energy—Schedule One update. Raising £2.5m, expected Mkt Cap £7.7m. Admission due 24 Feb. Italian Oil & Gas Play Guinness Oil & Gas Exploration—Publication of prospectus. Seeking to raise £50m and invest in 15 exploration companies at launch, with plans to grow the portfolio to 30 positions during its lifetime. Issue closing 23 Feb. Arix Bioscience — Intention to float on the main market from the global healthcare and life science Company supporting medical innovation. Raised £52m in Feb 16 with investors including Woodford Investment Management