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Snam Is A Best-In-Class Gas Transmission Player

Aug. 04, 2020 12:19 PM ETSnam S.p.A. (SNMRF), SNMRYENGGF, ENGGY4 Comments
Mare Evidence Lab profile picture
Mare Evidence Lab


  • Snam delivers an unsurprisingly resilient Q2, demonstrating the low business volatility of regulated utilities.
  • Snam continues to expand on its assets in new geographies, presiding over more valuable gas ‘toll roads’.
  • With flexible assets to deal with a potential hydrogen transition, there’s option value in that too.
  • With a yield above 5%, Snam remains an attractive income vehicle.

Snam (OTCPK:SNMRF) continues to be our favorite gas transmission pick into Q2. Not only have they continued to expand their asset base, setting up for a more geographically diversified stream of 'toll road' income, but their efforts to expand on the ESG side of things continue. With discrete efforts to get more involved in the energy transition, as well as their higher asset flexibility for the transportation of hydrogen should it become an essential fuel, they position themselves as a long-term player well entrenched in the EMEA utility infrastructure. With a dividend yield above 5% under-girded by reliable cash flows, Snam is an excellent income pick for the current environment.

H1 Looked Good

Snam performed for the quarter in a manner befitting a regulated utility. Sales went up slightly due to minor commodity effects as well as growth in the RAB, and EBITDA remained in line.

Immagine che contiene screenshot Descrizione generata automaticamente

(Source: Snam HY Results Presentation)

Moreover, 111 million EUR was spent in investments in Mieci and Evolve to further position Snam in businesses related to the energy transition. These additions to the SnamTec portfolio give Snam access to businesses in infrastructure and energy efficiency management.


Another critical stake was taken by Snam this quarter as well. Abu Dhabi has sold its stake in its natural gas pipelines, ADNOC, to a consortium of infrastructure and private equity investors including Snam and the Singaporean Sovereign Wealth Fund GIC. About $8 billion of the $10 billion ticket was financed by debt. Snam, which was the only strategic sponsor in the transaction, had an outlay of $250 million. This gives them equity in yet another important gas transmission infrastructure in EMEA. ADNOC's network spans thousands of kilometers, again benefiting from the attractive 'toll road' economics that exist for pipeline assets.

Immagine che contiene screenshot Descrizione generata automaticamente

(Source: Snam HY Results Presentation)


This article was written by

Mare Evidence Lab profile picture
Buy-side hedge professionals conducting fundamental, income oriented, long term analysis across sectors globally in developed markets. Please shoot us a message or leave a comment to discuss ideas.DISCLOSURE: All of our articles are a matter of opinion, informed as they might be, and must be treated as such. We take no responsibility for your investments but wish you best of luck.

Analyst’s Disclosure: I am/we are long SNMRF, SNMRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

Hugo Stiglitz profile picture
I wonder if less gas volumes coming from Russia will mean more business for SNAM in the form of North African gas
Veritas1010 profile picture
Thank you for the follow-up.

An excellent foreign addition to one’s portfolio for income and incremental growth- even with foreign taxes and in SNAM’s case as an “F” registered stock on probably the Pink Sheets the exchange rate cost from €’s to $’s at dividend time instead of an outright ADR fee - if memory serves.

Alternatively one could invest simply in the “Y” listed unsponsored ADR, which is what my small holding is presently.
What are the significant differences between F and Y - I can't find any good descriptions of this on the web?
@Jop88 For this company and generally. Last letter of symbol identifies the US clearing of OTC stocks based abroad. Ends in Y: Usually an ADR settling in USA with minor costs yearly. Ends in F: Actual share as traded in its home market, the basic stock without ADR costs but more limited liquidity in the USA. Exchange-listed stocks may be ADRs without either letter ending their symbol. ALWAYS check valuation and--especially--liquidity of each kind as there is often not any 1:1 relation and F shares can be hard to buy and sell with their often lower volumes of trading.
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