Next Thursday, October 18, the Madrid Stock Exchange Palace will dress in red. He will celebrate that an old acquaintance, Cepsa, returns to the market after his first shareholder, the sovereign fund of Abu Dabi, has decided to take the Spanish oil company on the Stock Exchange in a year that is not conducive to the markets and with few and uneven debuts. Not in vain, the Ibex leaves 11.37% in the year. The company piloted by Pedro Miró stopped trading in 2011, when Abu Dhabi launched an exclusion bid after agreeing to purchase the 49% that was in the hands of French oil company Total. Before, in 2009, the emirate acquired the shares in the hands of Santander and Fenosa, although its entry into the capital of the company dates back to 1988.
Can retail investors buy Cepsa shares?
In principle, Cepsa's IPO is not a pure IPO – as defined in article 11 of the Capital Companies Law – as it does not have a specific section for retailers. It is reserved for large investors. The scandal with the Bankia IPO in 2011 closed the window to this type of operations and only Aena, in 2015, has allowed to buy small savers. The oil company will allow its employees in Spain to go to their network with a discount of 10%, as long as they open an account at Banco Santander and do not sell the securities in six months. Nothing will prevent the rest of mortals, of course, buying shares of Cepsa in the market, a second after the bell rings on the parquet floor in Madrid.
At what price will your shares come to quote?
The company has not yet revealed what will be the exact price at which it will return to trading. It will fix it this Tuesday, October 16, through a relevant event that will be sent to the CNMV. For the moment, in the brochure of exit to stock market it has established a guide price range, from 13.1 to 15.1 euros, between which the exit price should be found except catastrophe. This supposes to value 100% of the company between 7,010 and 8,000 million.
On Friday, at the close of this edition, it still did not have the order book covered, two weeks after the army of investment banks that coordinate the operation started the road show round the main world financial centers: London, Frankfurt and New York. Financial sources tell CincoDías that Cepsa has more than 70% of the demand necessary for the premiere to be a success. The delay in completing the order book and the weakness shown this week by the global stock markets – the Ibex has fallen by 3.8% – and by oil (yields 2.42%) suggest that the final price will be at the lower part of the fork.
Is it more or less attractive than other oil companies like Repsol?
It depends. From Cepsa they use their successful strengths as their greatest strengths, their good commercial position (the second in retail in Spain, after Repsol) and their strength in the petrochemical industry. Some elements that make it less vulnerable than others to the swings of the Brent price. In fact, the reports issued by Santander and Morgan Stanley (two of the coordinating banks of the placement) place the price of a barrel of oil at 30 dollars, from which Cepsa is already profitable. Another argument in its favor is that it will reach the market at multiples more attractive than its competitors. It will quote for up to 1.7 times the 1,030 million EBITDA recorded in the past year. Repsol does it 3.6 times.
However, there are also doubts concerning the business of Cepsa. Fundamentally, around their indebtedness. In the first semester of the year Cepsa increased its liabilities by 3,000 million to add a gross debt of 13,000. And, according to the prospectus on the stock market, pacts with creditors (covenants, in the jargon) allow you to borrow for 500 million more, as long as you maintain the debt-to-EBITDA ratio below 2.5 times.
Does it offer an attractive dividend?
It is one of the main weapons with which the investment banks in charge of this IPO have tried to convince potential investors. As promises in the brochure itself, Cepsa will distribute 450 million in dividends in 2019, which means increasing the payment by 5% over this year and keep the pay out (the percentage of the profit distributed to its shareholders) above 50 %. With charge to 2020 will pay 475 million and with respect to 2021, about 500 million. In the set of the three exercises will pay 1,425 million euros. As for the dividend yield, it will be between 6.4% and 5.6%. Its main rival, Repsol, will raise this parameter to around 5.8%, provided that it fulfills its promise to raise the dividend to 1 euro per share.
Will Cepsa enter the Ibex?
Everything points to yes, although probably have to wait at least until April 2019. Mubadala, the sovereign fund of Abu Dhabi, will come off 25% of the capital of Cepsa, which can be extended to 28.75% in the case that they take to the market the 20 million additional shares (green shoe, in the jargon) that are reserved by investment banks. This will mean that, according to BME's calculations, Cepsa will weigh 60% and have a weighted capitalization of between 4,206 and 4,848 million. The rules that govern the Technical Advisory Committee establish that for a company to enter the Ibex, this data must exceed 0.3% of the total stock value of the index and in six months move more than a certain amount of cash. With these figures, Cepsa will be on the verge of being able to bypass this last rule by remaining close to entering among the 20 listed with higher weighted capitalization.
What plans does the company have for the future?
To begin with, in the brochure itself, Cepsa recognizes that it has reached an agreement with its first shareholder, Mubadala, to sell 42% of its shares in the Medgaz gas pipeline in Algeria. It will use the 500 million that is embolse in this operation to reduce the debt. At the same time, it plans to invest 1,350 million to improve its refining capacity and 700 million in the chemical and marketing segments. It also opens the door to debut in the bond market, once successfully completed the IPO.