Redeia (REE) “loses attractiveness”: less dividends in the new regulatory period

Redeia (REE) “lose attractiveness in a context of rising bond yields and lower dividends in the new regulatory period,” he says. Aránzazu Bueno, Bankinter analystin a note.

The results of the first months of 2022 met the expectations of the consensus and the BNA remains at a level very similar to that of the previous year.

However, in the next few years “REE se faces a less favorable period in results”, says the expert. On the one hand, “assets prior to 1998 will stop receiving remuneration in 2024, which means a lower base of regulated assets and lower results for the group.” According to Bankinter calculations, the group’s BNA will go from around 700 million in 2022 to around 500 million by 2025.

Regarding shareholder remuneration, “the successful sale of 49% of Reintel allows REE to maintain the DPA in 2023 at €1.0/share compared to the €0.80/share initially planned in the Strategic Plan”. For 2024 and 2025 the floor DPA indicated by the management team is €0.80/share. At current prices, the dividend yield stands at 6.1% with DPA of €1.0 and 4.9% with DPA of €0.80/share.

Bankinter analysts have reduced Redeia’s target price to 17.60 euros, from 20.20 euros per previous share, “to reflect the application of a higher discount rate”. They maintain the recommendation of neutral. The reasons are “lower results and dividends in the new regulatory period due to cuts in regulated income; less attractiveness of regulated companies based on a fixed financial return in an environment of rising bond yields; and limited upside potential at our Target Price”.

“On the positive side, the attractive dividend yield stands out despite the foreseeable cut in DPA expected for 2024-25,” concludes Bankinter.

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