December 2019

Despite the correction that has characterized most equity markets over the last few weeks, Italgas shares continue to post positive performance year-to-date.

Recent stock price levels, around 5.5 euro, indicate there is decent room for appreciation when considering that consensus target-price today is 5.9 euro.

Despite a slowing global economy scenario in 2020, Italgas still represents for investors a play that can leverage on a visible cash flow generation, high quality of earnings and attractive dividend remuneration.

The positive year-to-date return of Italgas shares has been driven by the favorable moment for utility stocks and Company’s solid fundamentals.

After reaching a peak at 6.2 euro at the closing of 15 July 2019, from August onwards the share price moved in a 5.5-to-6.0 euro range. In the last few weeks – after reaching a new period-high of 6.0 euro on 13 November following the release of sound 2019 nine-month results – Italgas price dropped in line with the general market downtrend. So, it went back to levels around 5.5 euro.

Recently, markets have expressed concerns about a global economic deceleration, as a result of the uncertainties coming from the development of international trade negotiations, Brexit choices that will follow the UK elections and future decisions of governments concerning fiscal policies.

Since mid-summer, utility stocks have been penalized by the effect of a broad industry rotation. While in a first phase, with very low interest rates and high volatility in the stock markets, investors kept buying utilities, and overweighed them because of their defensive features and attractive dividend yield. Yet, once utility stocks reached multiples at their highest over the last 12 years, investor have taken profit, at least on part of their portfolio positions, in light of the high returns earned during the year.

At the current price levels, around 5.44 euro, Italgas share price still shows a 9% gain over 2018 year-end levels and offers a 4.8% expected return on the consensus estimate for 2020 dividend.

The stock is covered by 21 brokers. Among them, one – Goldman Sachs – does not allow any disclosures for their recommendation and target price on Italgas. Concerning the other 20 brokers, four of them have buying recommendations, while the vast majority (14) is neutral. The average target price, which in October was 5.84 euro, has been further upped, also following the release of the results of the first nine months of 2019, on 8 November 2019; now it is 5.93 euro. More specifically, the gap between the high (always at 7 euro) and the low (now increased up to 5.2 euro) of analyst target-prices was reduced, as the following graph shows.