Genesis Energy Limited

GNE Details

Genesis Energy Limited (NZX: GNE) is a New Zealand-based energy company. The company sells electricity, reticulated natural gas and liquified petroleum gas (LPG) through its retail brands, Genesis and Frank Energy.

Financial Results for FY22

• Revenue in FY22 declined by 12% to NZD 2,834.1 million YoY. Net profit in FY22 rose to NZD221.90 million YoY. Rise in net profit was primarily due to revaluation of derivative contracts.
• GNE declared the final dividend of 8.9 cps, taking total FY 2022 dividends to 17.6 cps. This represents continued value for the shareholders while, at the same time, retaining capability for the future investment.

Outlook

GNE raised its FY23 EBITDAF guidance from NZD 455 million to NZD 500 million. The company stated that favourable trading conditions in Q1 FY 2023, primarily because of higher hydro inflows as well as thermal generation flexibility led to better EBITDAF performance in Q1 FY 2023 than expected.

Key Risks

Changes in government regulations and compliances pose major business risk to the company. Climate changes, Changes in price of electricity, etc. are some other risks.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Stock Recommendation

Over the last three months, the stock has given a return of ~0.35%.

The stock has been valued using EV/Sales multiple-based illustrative relative valuation, and the target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average), considering the risks associated, material adverse events, etc.

Considering the current trading levels, it is prudent to sell this stock at the current levels.

Hence, a ‘Sell’ rating has been provided on the stock at the closing price of NZD2.840 per share, up 2.16% as of 26^th October 2022.

Technical Overview:

Daily Price Chart

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for share price chart and all other data such as stock price performance is based on October 26, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Disclaimer

Kalkine New Zealand Limited is a Financial Advice Provider (“FAP”) and is authorised by a Transitional FAP license issued by Financial Markets Authority (“FMA”) to provide financial advice. Kalkine provides only general financial advice through its research reports following a person becoming a member. The reports contain buy/sell/hold and other recommendations in relation to equity financial products. The recommendations and opinions [on this website] / [in this report] do not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions. If you act on the advice in the research reports, you may have to pay fees, expenses or other amounts (but not to Kalkine).  Further information about the complaints and dispute resolution process, as well as information about Kalkine’s duties are available on Kalkine’s website.  Please read our Financial Advice Provider (FAP) disclosure statement and Complaints Handling Guide, which are available on the website.