A CATCH-UP EFFECT OF RESULTS IN Q2-20
An expected recovery in activity after a Q1-20 below expectations :
In our report released on May 28th 2020 (Cf. TAQA Morocco - Q1 2020 results), we forecasted an upturn in TAQA Morocco's activity starting from Q2-20 following the catch-up effect of the availability rate of Units 1 to 6. Indeed, the Group stabilized its revenue in Q2-20 at MAD 2,133 Mn, after an exceptional decline in activity of -20.7% in Q1-20. In this context, the operator's revenue show a limited drop of -11.0% in H1-20 to MAD 4,016 Mn.
In terms of profitability, the operator’s NIGS stood at MAD 428 Mn, down -15,6%. This takes into account on the one hand the major revision of Unit 5 and on the other hand a stable financial income at MAD -258 Mn. Recall that the Group drew down a debt in order to finance the additional right of possession of MAD 1.5 Bn related to the extension of the Supply of Electrical Energy for Units 1 to 4 with ONEE. In addition, TAQA Morocco recently issued a bond loan of MAD 2.7 Bn through a private placement on the financial market.
Maintain of our growth forecasts for FY 2020 :
Following our analysis of TAQA Morocco’s mid-term achievements, we maintained our forecasts unchanged for FY 2020:
- A -4.7% drop in revenue, lower than that observed in H1-20 ;
- A NIGS of MAD 929 Mn, down -11.8% compared to 2019 ;
- A stable payout in 2020, i.e. a DPS of MAD 32 reflecting the strength of the operator's business model during this period of health crisis.
A stock to HOLD despite the risk of a dividend decline
With a correction of -5.8% since the beginning of 2020 against -17.3% for the MASI index, TAQA Morocco confirms its status as a defensive stock. This quality of the stock lies in the nature of the "Take or Pay" contract which binds the Group to ONEE with visibility going until 2044.
In a sustainable context of low interest rates, TAQA orocco offers a real investment alternative for risk averse investors. Despite the expected drop in DPS 20E of -11.1%, the stock's D/Y remains at 3.7%, offering a spread of 160 PBS compared to the 5-year TB.
