1H11 results came in, in line with expectations, portfolio optimization is on track and the dividend pay-out strategy is confirmed. We continue to rate GDF Suez Accumulate with a € 28/sh TP. As expected management confirms its policy fora stable or increased dividend in 2011. On November 15, 2011 GDF Suez will pay an interim dividend of 0.83/sh (equal to the interim paid in 2010). Our forecasts indicate a full year dividend yield of 7.6% at the current share price.
GDF Suez reported 1H 11 results broadly in line with forecasts. Revenues came in at € 45.7bn (45.7bn css, 45.7bn kbcs), EBITDA at € 8.9bn (8.8bn css, 8.7bn kbcs), and adj. net income at € 2.3bn (2.4bn kbcs). While D&A was broadly in-line with forecasts, financialexpenses came in lower and Associates and one-offs higher. On the contrary, minorities (200m) and income taxes (100m) had a more adverse impact vs. our numbers.
The 2011 EBITDA guidance of € 17.0-17.5bn was re-confirmed and remains conditional on weather impact and regulatory changes. The implicit guidance hence stands at € 16.2-16.7bn (16.5bn kbcs) and accounts for a € 465m 1H11 bad weather and € 340m 2H11 regulatory impact.
Portfolio Optimization Program
The Group delivered on 60% of its 3-year disposal program, which will bring net debt / EBITDA to 2.5x (below 3.0x sector avg.). Management also remains committed to its dividend strategy which calls for a stable to positive dividend evolution y/y.
At a 7.6% gross dividend yield, the shares should have reached bottom, especially as management sticks to its 2013 EBITDA targets. We value the company on SoTP, which points to a fair value of € 28/sh. Although we acknowledge the political headwinds and adverse macro environment, we believe the solid balance sheet, above sector average eps growth and attractive dividend yield warrant an Accumulate rating. GDF Suez trades at a FY13 P/E of 9.1x while our EBITDA forecast stands short of guidance. We believe such a multiple doesn’t reflect the Group’s diversified portfolio, its healthy balance sheet and growth opportunities in emerging markets.