After the election results that confirmed Javier Milei as new elected presidentalthough macroeconomic and implementation risks persist, the paradigm changed for the investors.
Therefore, it is important to evaluate the entire situation and carefully select assets by industry and by company when thinking or rethinking the investment strategy.
We believe that local macroeconomic risks are less likely to affect manufacturing industries. Oil and Gas, Agriculture and Power Generation (only renewable), while the sectors of Energy Generation (non-renewable), Public Services, Telecommunications and Retail They are the most vulnerable to currency devaluations, economic recession and loss of purchasing power caused by inflation.
On the other hand, the regulatory policies They are more likely to affect the Oil and Gas and Agriculture industries, due to the significant participation in the collection of foreign currency that these sectors have.
The credit situation Utilities, Oil & Gas, Telecommunications, Agriculture and Power Generation overall ratio is adequate, with cash coverage for short-term debt of around 1.1x, according to ratings agency Moody’s.
However, the foreign currency exposure of the Public Services, Telecommunications and Energy Generation (non-renewable) sectors could weaken their leverage, which despite the exposure will remain at acceptable levels, of less than 2.5x debt/EBITDA. These sectors do not have significant maturities in 2024.
Where to invest?: it’s time to select carefully
Within Oil and Gaswe believe that the best option is YPFsince it faces maturities of only 628 million dollars next year, and we consider that this is very easy financing to obtain in the local market.
Additionally, we believe that the midstream projects recently put into operation could increase the company’s production levels and net exports. However, it is important to note that refinancing risk may increase in 2025.
Another company we like is Southern Gas Carrier (TGS) because, although it is a regulated company, there is an important part of the business that is not regulated and is clearly exportable.
In the regulated part, TGS has had the best rate increases: 95% in April 2023 and 60% in March 2022. Likewise, in June of this year, TGS obtained a contract to operate the Néstor Kirchner Gas Pipeline during 5 years.
We also like the renewable energy generation sector, including YPF LUZ already Genneia. We consider that the industry has a lot of room to grow, considering that in 2022 the Secretary of Energy announced a plan to expand the capacity of transmission lines by 36% by 2035.
This expansion will allow companies to increase their income. The capital investment for expansion is 10 billion dollars, and if Milei’s paradigm works, it should be easier to finance than before.
The companies of renewable energy They will also complete renewable projects during 2024, decreasing their capital investment needs and increasing their EBITDA.
Finally, another credit that also seems like a good option to us is that of Aeropuertos Argentina 2000, since the company should not be affected by devaluations, since it generates 85% of its income in dollars.
Institutional Sales Trader of Adcap Grupo Financiero.
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