All the components of the Ibex 35 have the potential to rise on the stock market, all except one: Naturgy. The gas company has remained the only stock in the index that is listed as overvalued, that is, above the theoretical price at which analysts assess its fair valuation on the stock market based on its past business data and future prospects. With margins falling and the expectations of its shareholders rising, the search for a boost for the company’s management has gained momentum after the stalling of the Gemini spin-off plan that was announced in February 2022.
Financial sources explain to ‘La Información’ that the company is accelerating the process for the incorporation of a councilor delegate who assumes part of the executive functions of Francisco Reynes, president of the company that now brings together all the executive power. Naturgy declined to comment on the matter.
International governance regulations have gradually forced large companies to take this step, although in the case of the gas company it is coupled with the need to change course, as a coincidence between shareholders and shareholders. The blackout of quarterly results from January to March has left both without visibility to press the health of the business after a record profit in 2022, and after the board’s decision to renew Reynes’ term for four more years.
turn to russian gas
The gas company once again faces a complicated scenario for its business margin with the renegotiation of the supply contract with Algeria as the main headache, after an ‘in extremis’ agreement was signed in 2022 just before the filling of reserves for the winter in Europe. Twelve months later, the change is relevant in the diversification of supply sources. In fact, Naturgy owns one of the largest methane tanker fleets in the world and is one of the largest LNG transport operators on the five continents.
The importation of liquefied natural gas (LNG) from Russia from the Yamal field owned by the Russian company Novatek, Total and two Chinese partners has grown in importance to account for 14% of Naturgy’s total gas in the whole of 2022. Spain has tripled its purchases of Russian gas up to half of the year, according to official data from Cores and Enagás. In the same way, the use of the gas pipeline that connects Cádiz with Africa has made a 180 degree turn, going from importing gas until the end of 2021, disuse and from the end of 2022 as a point of export to Morocco.
The Maghreb-Europe infrastructure is controlled by the Spanish company, a Portuguese consortium and the Moroccan operator. By contrast, the Medgaz pipeline maintains supply levels thanks to the balance of power between state energy company Sonatrach and the consortium formed by Naturgy and Blackrock. According to data from the Ministry of Foreign Trade, in 2022 Spain spent around 26.5 billion euros buying gas from other countries, with Algeria and the US accounting for just over half of this historical volume.
Overvalued but underweight in the Ibex 35
The situation of stagnation and exposure to gas risk have positioned the company as the only stock on the Ibex 35 that is listed as overvalued compared to the consensus of analysts who follow the action. They give it a target price of 24.3 euros compared to the more than 27 euros in which it is listed on the stock market, that is, 11% less than its value on the stock market. 16 of the 21 analysts who follow the stock recommend selling. Naturgy ranks as the red lantern of the index in this classification. The next four stocks on the stock market are Amadeus (+1%), Iberdrola (+1%), Inditex (+3%) and ACS (+4%), which are practically at the level of their potential.
According to the analysts’ target prices, the Ibex 35 could reach 11,039 points over 12 months if the weighting of its components is taken into account, which would represent an increase of 15%. If all the values weigh equally in the index, the potential would still be higher, up to 20%, and the target level of 11,505 points. Although it is expensive on the stock market, Naturgy’s influence on the movements of the Ibex 35 is much lower than what it would be due to its total market capitalization.
The BME wise committee that prepares the Ibex 35 applies a reduction coefficient for its low free-float (free shares outside the control of stable investors) of up to 80%. Therefore, only 20% of the 26,600 million euros that the company is worth is taken into account. For this reason, the gas company only weighs 1% in the index instead of the 5% that would correspond to it. Criteria Caixa (26.7%), CVC Partners (20.7%), Global Infrastructure Partners (20.4%), IFM Investors (14%) and Sonatrach (4%) control on a stable basis more than 85% of the Actions.
In addition, the first four maintain control of the board of directors after the remodeling that gave entry in 2022 to the Australian firm IFM with one chair, while increasing the power of Criteria Caixa with another seat, up to 3 directors, to balance the highest governing body of the group. This change has been essential for Naturgy’s main partners to raise the proposal to reinforce the management of the group with a CEO together with Reynes.
