June 2020

Italgas equity story remains intact, despite the strong volatility of the stock price experienced in this early part of 2020, when uncertainty about Covid-19 fallout has dominated the performance of equity markets.
Healthy fundamentals, combined with the visibility of long-term growth provided by the investment plan and the digital transformation underway, feed an attractive shareholder remuneration through dividends.

With an average brokers target-price of 5.8 euro (28 May 2020), against recent prices around 4.8 euro, the stock price has potential for growth.

At Italgas, shareholder remuneration continued consistently with the Business Plan targets, even though the new scenario prevented many companies from distributing net earnings. The 0.256-euro dividend, paid from 20 May 2020, indicates a 4.68% yield if divided by the 2019 year-end official price.

In the early weeks of 2020, in line with the performance of the entire utility sector in Europe, Italgas stock price followed an upward trend, as valuations benefitted from the ongoing contraction in yields. Several equity portfolios have been set up to play the theme of full decarbonization of the EU by 2050 through the increasing use of renewable energies and the parallel development of electrification of consumptions. Gas is also seen to play a crucial role as a transitional energy source.

In such a context, Italgas stock price – whose price at 2019 year-end was 5.4 euro – reached a new high at 6.3 euro on 19 February 2020. From that date, the outbreak of Covid-19 triggered a sharp correction in the stock indices involving the same Italgas stock, with fears of a deep economic crisis that would have been inevitable as a result of the restrictions imposed to curb the spread of the virus.

After 12 March 2020, generally stock prices began to recover. Investors have welcome the significant measures that Central Banks have taken to support economies and appreciated the fiscal stimulus put into play by several Governments; more recently, even the contents of the Recovery Initiative of the EU are reshaping investor expectations on the future evolution of both economies and corporate earnings.

In the case of Italgas, two Company-specific factors supported the recovery from the price lows recorded at the beginning of March, i.e. a regulatory framework that provides high visibility and a confirmed set of solid fundamentals, following the release of the 2019 Annual Report and the first-quarter 2020 earnings.

Precisely on the basis of healthy financials and visible growth prospects, the BoD could propose to the AGM to approve a dividend of 25.6 euro-cents, 9.4% higher than that of the previous fiscal year, thus sticking to the dividend policy set in the 2019-2025 Business Plan.

The Italgas stock continues to enjoy a broad and qualified analyst coverage. Currently the stock is covered by 20 brokers. Among them, one – Goldman Sachs – does not allow any disclosure for their recommendation and target price on Italgas. Concerning the other 19 brokers, as of 28 May 2020, 10 of them have buying recommendations (Buy/Outperform/Accumulate), while 7 are neutral (Hold/Equal weight). The average target price has not significantly changed, as at 2019 year-end it stood at 5.84 euro, while presently it is 5.76 euro.