CEPU - Central Puerto S.A.

[Guest MarkS]

Hi everyone,

 

I just picked up a few shares of CEPU, an Argentine power generator.  Paid a little over $9.00 a share.  There is certainly plenty of country risk and currency risk.  But its a relatively small position and its very cheap on an earnings basis.  Some data from Merrill:

 

Table 14: Central Puerto          2018E -2020E Estimates

2018E 2019E 2020E

US$ (in millions)                      Old New Ch.              Old New Ch.                    Old New Ch.

Net Revenue                            387 372 -4%            419 389 -7%                  647 610 -6%

Operating Income                      212 215 1%            241 246 2%                    336 338 1%

EBITDA                                    329 329 0%            356 356 0%                    460 457 -1%

EBITDA Margin                          84.9% 88.5% 4%    85.0% 91.7% 8%          71.0% 74.9% 6%

Net income b/f extraordinary      465 406 -13%          211 197 -7%                  297 282 -5%

Net income                                542 482 -11%          234 220 -6%                  345 330 -4%

EPS b/f extraordinary (P$)          3.07 2.68 -13%        1.39 1.30 -7%                1.96 1.87 -5%

EPS (P$)                                  3.58 3.18 -11%        1.54 1.45 -6%                2.28 2.18 -4%

Source: BofA Merrill Lynch Global Research estimates

 

Table 15: Central Puerto 2018E -2020E Estimates

                                                2018E                    2019E                            2020E

P$ (in millions)                    Old New Ch.            Old New Ch.                    Old New Ch.

Net Revenue                        9,418 11,056 17%    12,673 17,230 36%      22,115 30,125 36%

Operating Income                5,153 6,387 24%      7,297 10,904 49%        11,473 16,706 46%

EBITDA                                7,995 9,783 22%      10,770 15,798 47%      15,704 22,572 44%

EBITDA Margin                      84.9% 88.5% 4%      85.0% 91.7% 8%        71.0% 74.9% 6%

Net income b/f extraordinary 11,309 12,072 7%      6,384 8,731 37%        10,161 13,946 37%

Net income                          13,167 14,345 9%      7,070 9,736 38%          11,774 16,278 38%

EPS b/f extraordinary (P$)    74.70 79.70 7%        42.20 57.70 37%          67.10 92.10 37%

EPS (P$)                              87.00 94.80 9%          46.70 64.30 38%        77.80 107.50 38%

Source: BofA Merrill Lynch Global Research estimates

 

Buy rating supported by significant growth potential

We remain positive on Central Puerto’s equity, given: (1) expected strong earnings

trends from recently implemented, sharply higher prices for energy from legacy plants;

(2) a 16% increase in new generation capacity over the 2018-2020 period from the

start-up of already awarded new projects at attractive prices; (3) we expect a large

opportunity to add new projects to fuel additional growth in a tight Argentine electricity

system (via government auctions, M&A, etc.); and (4) inexpensive valuation vs. peers,

when adjusted for FONINVEMEM receivables. Risks are further deterioration in the

Argentine economic/regulatory environment, Argentina/emerging markets volatility and

greater competition for new electricity projects in Argentina

[Guest MarkS]

When I posted this earlier it looked fine in the preview version, but the columns got screwy in the final posting without my noticing the flaw.  Sorry.