Thursday, January 27

Three reasons to distrust Ence’s actions


Ence’s Stations of the Cross in the stock market so far this year does not take a breath. Its share has been down 33 percent since January and despite his low price, 2.25 euros, investors refuse to enter the security.

Neither does the decision of the S&P risk rating of, against all expectations, maintain its rating on the BB- due to the improvement in pulp and energy prices and its “strong liquidity position” it convinces investors.

And is that the agency has given the listed one of lime and another of sand. The latter comes from has changed its outlook from stable to negative due to the risk that the extension of the concession of the plant that the paper mill has in Lourizán (Pontevedra) will be annulled.

Ence had the concession until 2018, but in 2016 it was extended until 2073, to which Greenpeace and the Pontevedra City Council appealed. The National Court agreed with them and annulled this extension in two sentences and, now, the possibility that the Supreme Court ratifies them is punishing value.

More benefits, but insufficient

Added to this are the latest results presented by Ence, which have not satisfied investors despite the fact that they improved compared to the previous year. In the third quarter of the year made a profit of 2.2 million euros, compared to losses of 16 million registered in the same period of 2020.

its ebitda reached 26.9 million compared to the 13.7 it obtained in the third quarter of 2020.

For Filipe Aires, Bankinter analyst, the results have been well supported by the high prices of pulp and electricity, but “are weighed down by the effects of hedging, worsening even more the negative sentiment that has prevailed since the decision of the National High Court to annul the extension of the concession of the land of its Pontevedra plant “.

In negative bias

These three reasons make the bin “keep its negative bias weighed down by the problems it drags,” he says, Dario Garcia, XTB analyst.

The most serious, in his opinion, is related “to the law of coasts and the environment that put the price in check since its highs in 2018, to finally resolve against the listed.”

He considers that “since then, the impediment to increasing the scalability of the business due to its factory in Pontevedra continues to mark a negative expectation also in its fundamentals “.

Junk bonds

It also doesn’t help that the major credit rating agencies keep your bonds ‘high yield’ or ‘junk’ grade and that the perspectives of these entities on the paper mill have been revised downwards, from “stable” to “negative”.

“The risk that the extension on the Pontevedra concession will be annulled is the main factor that is being taken into account to make this assessment,” says García.

Too Pablo Fernández de Mosteyrín, an analyst from Renta 4, alerts to the long-term risk of the stock, which is why it has its target price under review.

Healthy balance

Ence is the largest biomass operator in Spain with 170 MW of installed capacity and a project portfolio of another 140 MW RTB between the first and fourth quarters of 2022.

Another positive aspect of the company is its net debt, which fell 8 percent in the third quarter of the year, up to 162 million euros.

It maintains “a very healthy balance sheet”, in the opinion of analysts, with a net debt of 18 million euros in its pulp business and 144 million in the renewable energy business.



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