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Research: Energy & Resources
Hellenic Petroleum reported Q4 adjusted EBITDA of €149m, a 35% decrease y-o-y but 1% ahead of consensus. This reduction was primarily due to lower benchmark margins (down 16% y-o-y), a weaker US$ (down 16% y-o-y) and an increase in CO2 costs. Refining sales volume at 4,102m metric tonnes, record utilisation and margin over performance of 5.7$/bbl partly mitigated these negatives. Our blended P/E, EV/EBITDA and DCF valuation stands at €9.0/share and we expect a projected 4.9% dividend yield to provide share price support.
Written by
Hellenic Petroleum |
Lower benchmark margins and FX affect Q1 |
Q118 results |
Oil & gas |
1 June 2018 |
Share price performance
Business description
Analysts
Hellenic Petroleum is a research client of Edison Investment Research Limited |
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Hellenic Petroleum reported Q4 adjusted EBITDA of €149m, a 35% decrease y-o-y but 1% ahead of consensus. This reduction was primarily due to lower benchmark margins (down 16% y-o-y), a weaker US$ (down 16% y-o-y) and an increase in CO2 costs. Refining sales volume at 4,102m metric tonnes, record utilisation and margin over performance of 5.7$/bbl partly mitigated these negatives. Our blended P/E, EV/EBITDA and DCF valuation stands at €9.0/share and we expect a projected 4.9% dividend yield to provide share price support.
Year end |
Revenues |
Adjusted |
Adjusted |
Net debt |
Dividend yield (%) |
12/16 |
6,680 |
731 |
522 |
1,761 |
N/A |
12/17 |
7,995 |
833 |
644 |
1,802 |
4.9 |
12/18e |
7,947 |
789 |
607 |
1,301 |
4.9** |
12/19e |
7,944 |
748 |
566 |
1,043 |
5.6 |
Note: *Adjusted numbers account for inventory movements and other specials. **Dividend forecasts exclude potential shareholder returns from DESFA sale.
Higher sales, utilisation and lower capex in 2018: with minimal maintenance planned for 2018, Hellenic is well placed to benefit from strength in the domestic auto fuels market given its high middle distillate yield, as well as the uptick seen in benchmark margins in April 2018. Capex guidance of €120-150m is materially below 2017’s €209m, which should offer some protection to FCF (prior to working capital adjustments) despite negative margin and FX impacts.
Strategic transactions: DESFA sale proceeds are expected to be received in Q119 totalling €284m (excluding a €16m dividend to be paid in FY18) and are to be used for deleveraging as well as shareholder returns. Finance charges were 17% lower y-o-y and should fall further over 2018 due to the reduction in gross debt and refinancing, which has driven down the average cost of debt by c 2%. The sale of 50.1% of Hellenic has received initial interest from five parties, which will be invited to submit binding offers.
Valuation and forecasts: we currently forecast adjusted EBITDA of €789m for FY18, which will be revised over the course of the year as we actualise for benchmark margin and FX. Currently our forecasts and €9.0/share valuation remain unchanged.
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Disclaimer
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Disclaimer
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Key near-term value drivers include newsflow from partnered assets savolitinib (AZN globally) and fruquintinib (LLY in China). By year end, we anticipate the China FDA to approve fruquintinib (3L CRC). The molecular epidemiology study (MES) data on savolitinib in PRCC could support a US NDA submission (possible breakthrough therapy designation, BTD). Both products have blockbuster potential; as combination therapies in cancer drive overall uptake of targeted therapies. Beyond this we expect progression in Hutchison China MediTech’s (HCM) wholly owned late stage oncology assets to reach value inflection points over the next few years. We have extensively reviewed our financial forecasts and increase our valuation to $47.9/ADS or $6.4bn.