In this situation, We believe that commodities -which serve as a safeguard of value- will continue to be in demand with historically high prices, which could favor the economies of the countries that produce them, including Argentina.
At the local level, negotiations continue with the International Monetary Fund (IMF) for the 45 billion dollar debt contracted in 2018. At the same time, we are days away from legislative elections that, if the results of the elections are repeated, STEP, they will form a Congress with a much more balanced power equation than in the first two years of the current government.
In this context, we believe that Argentina could take two directions. The optimistic scenario would be that the ruling coalition has greater incentives to agree with the main political forces of the opposition on the country’s roadmap for the next two years. On the contrary, a more negative scenario would be one of greater confrontation, where the ruling party and the opposition try to impose a single vision over the other, to the detriment of a predictable agenda for the productive sectors.
But, apart from the above, there are sectors where consensus seems to exist, and one of them is energy and its key role for strategic development for the country.
In terms of market and investments, at AdCap we lean towards Pampa Energy (PAMP AR), since the company participates in the entire Argentine energy matrix. In addition, the company has a healthy debt profile, with a net debt / EBITDA ratio of 1.7x, and obtains most of its income from the electricity generation segment (52% of the firm’s global EBITDA). , and these revenues are tied to the evolution of the official dollar exchange rate. For its part, in the E&P segment (exploration and production), 90% is explained by gas production, which is remunerated at a price of $ 3.9 per million BTU, 95% more than a year back, thanks to the incentives of the Plan Gas program.
But also, For those investors inclined to dollarize, we believe that Aluar (ALUA AR) and Ternium Argentina (TXAR AR) they are still undervalued, despite having risen 82% and 151% in pesos in the year, respectively.
These two companies have a large part of their income in dollars because they export part of their production. In the case of Aluar, we estimate that it will continue to benefit from the good prospects for the international price of aluminum, which already rose 30% during 2021.
For its part, Ternium has published a record result of 43 billion pesos, and exported 11% of its steel shipments in the third quarter of the year. In addition, it has a 29% stake in Ternium México and a 6% stake in Usiminas (Brazil).
In a more defensive scenario, we believe that Mirgor (MIRG AR), which has been registering a performance in pesos of 150%, will continue to benefit. Being reached by the industrial promotion regime, the engine of Tierra del Fuego’s economy that will govern at least until the year 2023, the company enjoys tax and customs benefits to carry out its industrial activities. Furthermore, we consider that Mirgor, by having a healthy financial position (it does not have financial debt), can capture market share from competitors that had more financial difficulties to go through the year.
Finally, we believe that Bank stocks are the most correlated to the evolution of negotiations with the IMF and the country risk rate.
Faced with a favorable debt resolution scenario, we consider Banco Macro (BMA AR) as the stock with the highest potential return. Only in the last month, the paper had a performance of 11%, which is lower than the 17% average registered by its three competitors that are listed in the leading panel. In addition, the entity has a business with low leverage, low arrears and a large excess of capital. For this reason, we believe that, in a scenario of recovery in credit demand, it could be the bank with the greatest muscle to lend quickly and also capture inorganic growth opportunities.
Equity Sales Trader de AdCap
Source From: Ambito
