Raiffeisen estimates that Transgaz will distribute 50% of the profit to dividends

Raiffeisen Research, part of Raiffeisen Bank, estimates that the natural gas carrier Trangaz Mediaş will grant 50% of last year's profit as dividends, as stated in the latest report published on the BVB Research Hub portal, signed by Daniela Popov.

"According to the media, the Government of Romania intends to introduce a dividend payment rate of 90% for state-owned companies, with the exception of lower payments in justified cases. Like last year, we expect Transgaz to be exempt from the obligation to distribute 90% of its net profit due to its massive investment program. We assume a distribution rate of 50%, which would imply a dividend per share for 2023 of 0.46 lei, with a yield of 2.4% based on the current market price," the report reads.

Raiffeisen Research has a price target for Transgaz shares of 21.6 lei over the next twelve months, 13.7% above the company's closing price last Thursday of 19 lei.

For this year, according to the company's budget, Transgaz's revenues are expected to increase by 15% compared to last year due to: (1) higher transported volumes, which are estimated to reach 18.1 bcm (billion cubic meters of natural gas), in 17% increase and (2) fare increase.

"Despite the increase in revenues, the net profit for 2024 is expected to be similar to that of 2022, of 173 million lei, against the background of higher operating expenses (+15% in annual dynamics) and a lower financial result (- 29% in annual dynamics)", the report states.

According to the document, an important category of expenses is that of royalties, because the rate has increased from 0.04% to 11.5% of revenues starting on October 30, 2023. "The royalties expenses are not included in the regulated revenues for the current gasification year . According to the management, it is likely that these costs will be included in the regulated revenues of the next gasifier year, namely October 2024 - September 2024. In addition, the company has an ambitious investment program. One of the most important projects is the transportation of natural gas from the Black Sea coast," the report reads.

In the fourth quarter of last year, Transgaz's revenues increased by 46% in annual dynamics, mainly due to: (1) higher tariffs for domestic transport against the background of the increase in regulated revenues for the gasification year October 2023 - September 2024 and (2) volumes larger transport. Net profit rose 60% year-over-year, with a margin of 19% versus 18% in Q4 2022. For last year, the company reported a preliminary net profit of 172.4 million lei, down 50% compared to 2022.

The Romanian State, through the General Secretariat of the Government, owns 58.5% of the gas carrier.