Transgaz First Impression 3Q 2010 - Non-recurring gains lift bottom line

Revenues up 3% against estimates: Revenues reached RON 225.2 mn, up 3% on our estimates, mainly on 4% higher than forecast quantities transported. 3Q quantities transported reached 1.77 bcm, up from our estimate of 1.72 bcm and 6% lower yoy.

Salaries and maintenance costs exceed expectations: Material costs (incl. mainly grid losses) stood at RON 25 mn, 12% lower than expected. Their positive evolution was counteracted by 10% higher than anticipated salaries expenses of RON 69.5 mn and 17% higher third parties (incl. maintenance) costs of RON 46.7 mn.

One-off gains boost EBIT: The company recorded additional gains from current assets revaluation of RON 14.4 mn. We estimate that the gains came from cashing in written off receivables, as it happened over the previous quarter, which brought the EBIT to RON 23.7 mn, 2x higher than estimated. The company recorded financial losses of RON 1.2 mn, mainly FX, and the net profit reached RON 18.8 mn, 64% higher than expected.

Over 1-3Q 2010 Transgaz recorded revenues of RON 915.7mn, up 14% yoy and a net profit of RON 284.2 mn, up 50% yoy.

Outlook and recommendation: In our view, higher revenues were offset by higher maintenance and salaries costs, leaving the upside mainly from non-recurring gains (reversal of written off receivables). Therefore we view the news as neutral, and keep our 'hold' recommendation. We will however review our RON 260 target price and estimates to account for the released results.