Verbund ist einer der Top-Picks der Erste Bank

Chart comment:

The stock has just broken its long-term downtrend and is about to test the 200d moving average, which is now at approx. EUR 18.5. The MACD has also just given a buy signal.

Fundamental arguments:

According to newspapers articles, Verbund and E.ON will officially announce the asset swap (hydropower plants for Turkish joint venture EnerjiSA) on Dec. 3. The additional installed capacity of 380 MW hydropower could generate additional EUR 60-80mn cash flow per year.

Verbund had an above-average water supply already in 1-3Q12, with a hydro-coefficient of 1.07. After heavy rainfalls in October, the water hydro-coefficient increased to 1.10 YTD.

Verbund’s FY12 figures should come in significantly above the guidance of a EUR 380mn net result. For 4Q, only EUR 42mn is missing, and this should be easily achievable, given the strong water supply.

We expect Verbund to change its long-term strategy and to increase the payout ratio. We also expect the company to exit France next year.