REPSOL: BOOKING +32% ABS
We initiated a position in February on the back of the potential renewable IPO and our believe that the vaccine roll-out will help boost the oil price as the global economy restarts.
Both catalysts have had sizeable impacts on the share price. The IPO still has no specific date so we will book our profits here and look to re enter ahead of the spinoff if see value in the trade at that point.
See the website for further ideas and the rest of our oil exposure
BUY Repsol – Spreading its wings, +40% upside, PT EUR 12.5
Monday • 08 February 2021 • 13:42
*Renewable IPO which could be as early as June should provide a nice catalyst as the margins on the refining side
*Last week we saw a report in El Confidencial saying that REP SM has hired JPM for a spin-off of its renewable business as early as June for as much as EUR 4bn versus Repsol’s current market cap of EUR 14bn – almost 30%
*The report said that Repsol could aim to float just under 50%
*Back in November the CEO said he aims to sell the stake in the renewable arm within 18 months
*With the increased focus on renewable we believe that a separate listing would help boost the overall valuation of the company’s assets
*We also believe that as the vaccine roll-out will help boost the oil price in the next months as travel etc restarts
*The 12 month dividend yield is 8.9% – the company aims to keep this >7% – also plans to implement a buyback from 2022 and expect dividend to grow thereafter
*Our peer valuation comes in around EUR 10.6 while long-term DCF comes in at EUR 12.5 leaving between a +20-40% upside with the oil price around the current USD 60 per barrel
*The company is set to report results on the 18th February