IENova Rally Stoked as Deutsche Bank Says Buy: Mexico City MoverJonathan Levin
Infraestructura Energetica Nova SAB, the Mexican unit of U.S. natural-gas utility Sempra Energy, rose to a record as Deutsche Bank AG recommended buying the shares.
IENova, as the Mexico City-based company is also known, advanced 2.3 percent to 44.81 pesos today. It has rallied 32 percent since its initial public offering in March, or about 35 percent in dollar terms, exceeding returns for all 144 stocks on the MSCI Emerging Markets Latin America Index, according to data compiled by Bloomberg.
The company will get a boost from contracts to build pipelines in northern Mexico, helping fuel a projected 14 percent compound annual growth rate in earnings, Deutsche Bank analysts including Curt Launer wrote in a research report dated today. Two projects in the state of Sonora, which borders Arizona, will cost $925 million and generate $105 million in earnings before interest, taxes, depreciation and amortization in their first year of operation, according to Deutsche Bank.
IENova “has contracted out virtually all of the capacity of its assets across its business segments under long-term contracts which require its customers to pay regardless of whether they actually use their contracted capacity,” Deutsche Bank said. “This helps provide the company with steady and predictable long-term cash flows. Substantially all of these contracts are with stable, creditworthy, private counterparties or with state-owned entities.”
The benchmark IPC index of 35 Mexican companies fell 0.9 percent today.
Deutsche Bank has a price target of 48 pesos for IENova, and it estimates a dividend yield of about 3.4 percent, implying an 18 percent total return over the next year, according to the report.