UBS analysts reiterate BUY recommendation on DEWAAE'20 which looks attractive vs TAQAUH'19 and TAQAUH'21 given sizable pick up in mid price, offer yield and mid Z spread. The analysts note that DEWAAE is lower levered than TAQAUH, with Net leverage of 2.9x vs Net leverage of 5.1x for TAQA as of 1H12.

Solid set of 1H12 results

In 1H12 (IFRS), DEWA saw Total revenues increasing 4.0% y/y to US$1.9 bn, driving EBITDA up 3.4% y/y to US$984.1 mn. The company reported 4.7% y/y decline in 1H12 Operating profit to US$661.4 mn. 1H12 Net profit grew 12.8% y/y to US$493.7 mn mainly due to 13.8% y/y decline in Net interest expense to US$218.1 mn and Foreign exchange translation gain of US$13.0 mn in 1H12 compared to loss of US$64.3 mn in 1H11. In 1H12, Cash and equivalents, including bank deposits and cash on hand, grew 19.7% to US$250.7 mn. This coupled with a bank overdraft of US$328.7 mn, resulted in negative cash in cash-flow statement of US$78 mn. It is preferred for cash to be positive, but would expect the shortfall to be easily covered via local banks. H12 Net leverage stood flat on FY11 level at 2.9x.

(Source: Bloomberg)