From closing to reopening. Ence has started February with news that completely changes the future of the company after several years of vicissitudes and uncertainty around one of the two main production plants. The shareholders of the group headed by Juan Luis Arregui (29%), José Ignacio Comenge (6.3%) and Víctor Urrutia (6.2%) are celebrating the vertical on the stock market. On the other hand, there are investors who have thrown their hands up in the face of the change of scenery.
The ‘hedge fund’ Praxis Alpha, which has been making movements on the ence share since mid-November, has been trapped with a significant short position in the envelope that the price has drawn. According to CNMV records, from February 2 to 9, the fund had built a short on 0.73% of the capital that would be behind the violent escalation of the company led by Ignacio Colmenares.
Ence shot up 27% in the stock market last week after learning of the ruling of the high court that endorses the extension of its license in Pontevedra and amended the different sentences of recent years in the National Court in a case promoted by Greenpeace and an NGO local. The initial resolution, dated January 20, 2016, granted a 60-year extension (it would end in 2073) of the concession to occupy a strip of public domain for the pulp mill in Pontevedra.
In order to liquidate this bearish investment -which appreciates when the share falls and depreciates when it rises-, the fund has to repurchase the shares if it has opened the short with them or, if it is a financial derivative, it must be the broker with whom you contracted the one that deals with that operation. In either of the two cases, Praxis is in the worst of situations to undo the position due to the low liquidity of Ence, which is listed on the Continuous Market and barely moves 1 million titles per day.
Praxis declares that it has 1.8 million shares under its control, valued at market prices at around 6.5 million euros. His first entry into Ence occurred in November 2022 when he declared 0.59% of the group, while his peak was reached on December 13 with 1.1% of the capital. On February 2, the ‘hedge fund’ liquidated the entire position up to 0.01% but rebuilt it to reach 0.73% on February 9.
For Ence, the resurrection of its biofactory in Pontevedra represents a before and after in the progress of the company. According to the data estimated by the company itself, the reversal of asset impairments and expense provisions made in the 2021 financial statements, as a result of the National Court rulings, will now have an estimated positive impact of 169 million euros on the profit of 2022.
In this way, the company will break the streak of annual red numbers for 2021 (-190 million) and 2020 (-26 million). But it is not just about the extraordinary, but rather that ence recovers a large part of its productive capacity when it comes to generating pulp. During these last years of crisis, the group had redirected its focus to its La Navia plant in Asturias. The company will present its annual accounts on February 28 and, the following day, will make its presentation to analysts. Investor Day is also set for March 17 with the new strategic guides.
The extraordinary by the surprise of the supreme can become an additional payment to the shareholders in the form of an extraordinary dividend. In 2022, the company distributed 0.274 euros per share despite massive losses in its accounts. Only the 169 million of the reversal of impairments is equivalent to 0.68 euros per share, almost two and a half times this figure.
In addition, the paper company modified its dividend policy in such a way that the payout (percentage of profit allocated to dividend) was allowed to be raised above the limit of 50% that it had before. The estimates prior to the Supreme Court resolution pointed to a distribution of up to 0.31 euros just for the recurrence of its paper and energy business.
The ‘Bloomberg’ consensus gives it a twelve-month potential of more than 20%, up to 4.48 euros. Firms such as GVC Gaesco, Mirabaud or Grupo Santander are some of those that have raised their valuation, in contrast to Bestinver Securities, which appears as the only one that recommends selling, compared to 70% that advises buying. The price is far from the 8.75 euros that it came to be worth in 2018 that led to the Ibex 35.
