RBC downgrades REN as higher inflation, interest costs hit returns

REN Redes Energeticas Nacionais SGPS SA

20/07/2022 09:05

** RBC downgrades the Portuguese energy firm REN  RENE.LS 
to "underperform" from "sector perform" as it expects rising
inflation and interest costs to offset returns
    ** The broker notes the company's rate of return (RoR) and
Regulatory Asset Base (RAB) are rising after years of decline
    ** "However, we believe this is fully offset by the impact
of inflation or interest cost for a company with limited
inflation protection which is trading almost in line with peers
with lower growth," it says
    ** The broker expects the company's EPS to be flat until
2025, and to start growing only in 2026 supported by the
elimination of the Portuguese extraordinary energy tax
    ** RBC adds it doesn't believe the company can afford to
increase its dividend per share until 2026 when it anticipates
the removal of the extraordinary tax
    ** The stock is down 2.7%, the worst performer of the
Portuguese main index PSI20  .PSI20 
    ** Out of eight analysts that cover REN, ​one rates the
stock "strong buy", two "hold", and five​ "strong sell" or
"sell"
        
    
    

 (Reporting by Mariana Ferreira Azevedo)
 ((Mariana.ferreiraazevedo@thomsonreuters.com))