Solid 2011 performance
GDF Suez reported 2011 EBITDA of € 16,525m and underlying net profit of € 3,310m (after € 144m Belgian nuclear tax), which is 1% and 6% ahead of our forecasted € 16,328m and € 3,120m. Dull 2012 guidance Management for the first time provided guidance on the net income level and sees weakness on the back of lower power prices, negative spark spreads (€ -500m combined), uncertainties in the macro environment (€ -300m) and the impact of disposals closed in 2011 (€ -500m). We have accordingly adjusted our EBITDA numbers downwards to € 17.4bn (from € 18bn) and our underlying net income to € 3.8bn from € 4.1bn. We are still above guidance, although believe the new CFO has build in some prudence.
Management also provided guidance on 2015 where it expects ~ € 5.0bn in underlying net income and ~ € 21bn in EBITDA. We believe this guidance is mainly intended to still present GDF Suez as a growth company, and to divert attention from the near term 2012 guidance.
Energy policy revisions in Belgium
The Belgian government is dedicated to tackle high electricity and gas prices over 2012, and is proposing to freeze tariffs over 2012 and moving to more spot gas indexation vs. the current oil-based formula. Furthermore, the energy regulator CREG is again proposing to increase the nuclear levy to € 1.2bn in order to create a better level-playing field and to increase competition. The Belgian government still seems to stick to the agreed € 550m for the whole sector.
GDF Suez remains a dividend play
We lower our rating to Hold (from Accumulate) and downgrade our TP to € 21/sh (from € 24/sh). At our TP, the company trades at an underlying P/E 2012 of 12.6x and EV/EBITDA of 6.9x.
Management remains committed to its policy to keep the dividend stable to growing over the coming 4 years. At a 2011 dividend of € 1.5/sh this implies a gross dividend yield of 7.6%. We believe this should at least create some support. The conservativeness in setting short-term guidance, and comments regarding its balance sheet (want to keep net debt / EBITDA below 2.5x) and mid-term capex make GDF Suez more of a dividend stock than a growth stock, we believe. The 2015 guidance is likely set to act as a red flag for more growth oriented investors, although we believe this is set too far in time to bank on for now.