BNE: Romania: Without Nabucco, better chances for higher pay-out for Transgaz

This year's tariffs revisions are better suited to protect the company for the drop in gas consumption, thus we see lower risk of unrealized revenues. In the medium term, we expect transit revenues would contribute with ca. RON 180 mn annually to the company' EBITBased on the 2013 budget we kept the pay-out at 52% in 2013. Going forward, with Nabucco no longer in the equation, we believe an 85% pay-out would be easily attainable. We reinitiate coverage with a Buy recommendation and a 12-month target price of RON 239

Despite the write-down for the investment in Nabucco and the lower pay-out approved by the shareholders for 2013, we remain bullish on Transgaz. On one hand, the regulatory methodology allows now for better protection against potential weakness in consumption coming from domestic gas price liberalization and thus provides room for Transgaz to realize its domestic transport regulated revenues. Secondly, we see only low chances for any changes to the transit business in the medium term, meaning that transit would continue to contribute around RON 180 mn annually to the company's EBIT. Furthermore, a new CEO with extensive experience in the private sector was recently appointed at the helm of the company. Our DDM points to a 12-m target price of RON 239, thus we reinitiate coverage with a "buy" recommendation.  MORE