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Transgaz First Impression 4Q 2010: Dividend yield could climb above 10%

The natural gas grid operator Transgaz reported a strong set of 4Q 2010 results, with the net profit above expectations, due to higher than estimated quantities transported, and thus revenues, and lower grid losses and maintenance expenses.

Higher than expected quantities transported: Quantities transported over 4Q reached 42 TWh, up 4.4% compared with our forecast, on higher than expected consumption in December. Revenues came in at RON 397 mn, 3% above our forecast and 4% below consensus estimates.

Lower operating costs boost operating profit: Materials costs (including mainly grid losses) came in at RON 40 mn, 35% lower than estimated. Grid losses for the year reached 2.9 TWh, 11% lower yoy, which is surprising given that quantities transported increased. The company always states that these costs can not be controlled and are difficult to predict as they come mostly from differences in measurements. Third parties expenses, more than 80% coming from maintenance works, were 19% lower than our forecast. The company recently published its revised 2010 budget, where third parties expenses for the year were augmented from RON 147 mn to RON 194 mn. The company reported these expenses at RON 159.6 mn.

The operating profit came in double than expected at RON 104 mn due to higher revenues and also lower grid losses and maintenance expenses. The net profit for the quarter reached RON 84 mn, 2x higher than our forecast and 6% above consensus.

FY 2010 net profit amounted to RON 368 mn, up 23% yoy, which would translate into an estimated dividend per share of RON 28.1, some 14% higher than anticipated, pointing to a dividend yield above 10%. We remind that the state lifted the minimum dividend pay-out for state companies to 90% from 50%, but, so far, the requirement applies only to the 2010 profits.

Outlook and recommendation: The results are significantly better than expected. However, for 2011, we expect lower quantities transported as the allowance for chemical producers to use only domestic gas was withdrawn. Grid losses are volatile and were at an exceptionally low level in 2010 therefore we see them higher in 2011. Plus, the maintenance works planned for this year exceed last year's plan. Hence we do not believe that the performance of 2010 will be repeated into 2011. We will review our estimates and RON 285.5 target price but for the moment we keep our 'hold' recommendation.

Sursa: http://www.rciro.ro

Tags: higher lower above losses expenses quantities profit dividend transported