ANALYST VIEW - UBS upgrades Hungary's MOL, ups target price
http://www.portfolio.hu/en/cikkek.td...
UBS has on Friday upgraded Hungary's oil and gas group MOL to ‘Buy' from ‘Neutral' and raised its target price to HUF 12,500 from HUF 11,000.
UBS said the changes were applied as the market:
- is over-estimating the Hungarian macro risks to MOL;
- has undue concerns over MOL's liquidity and balance sheet position;
- is ignoring the high quality of the assets and growth potential in the business. (UBS also labelled longer-term, unconventional gas as “very exciting".)
UBS expects “significant organic growth" from MOL's upstream business, new gas storage facility, and in particular from the integration of INA, which has “considerable growth potential"
“We see considerable upside potential in INA's earnings from the sale of the gas trading division, liberalisation of Croatian gas prices, upstream production growth outside of Croatia, the reduction of marketing subsidies and the modernisation of refineries."
UBS upgraded its EPS forecasts for the Hungarian fuels group by 18% in 2009 to HUF 1,543.8, largely as a result of the much weaker forint. From 2011E onwards, UBS upgraded EPS by more than 50% per annum, as it also factors in the INA contribution. UBS expects MOL to show EPS CAGR of 29% in 2009-12E vs. the European refiners' average of 18%.
They target price of UBS on MOL is based on an average 40% discount to our sum-of-the-parts and DCF valuations, which the investment bank believes is fair “given the corporate governance issues and the perceived emerging market risks."
