Is Scatec (OB:SCATC) Undervalued As Its New Green Bond Reshapes Its Capital Structure?
Why Scatec’s latest green bond issue matters for the stock
Scatec (OB:SCATC) has issued a NOK 1.5b senior unsecured green bond and is using the proceeds to redeem and buy back existing SCATC04 and SCATC05 bonds, tightening its capital structure within the company Green Financing Framework.
The green bond issue and planned redemption of SCATC04 and SCATC05 come after a mixed share price run for Scatec, with a 30 day share price return of 5.98% contrasting with a year to date share price decline of 9.64% and a 1 year total shareholder return decline of 5.06%. The 3 year total shareholder return gain of 45.20% signals longer term momentum that investors will weigh against the recent refinancing and project updates.
Scan beyond Scatec and compare its latest refinancing move with other renewable and infrastructure stocks in our curated 39 power grid technology and infrastructure stocks to see how funding and balance sheets stack up.
For Scatec, the bullish story leans on growing power production and access to green capital. The bearish view focuses on recent losses and refinancing risk. Which side looks more compelling once the valuation work starts?
Most Popular Narrative: 24.9% Undervalued
Scatec closed at NOK97.5 while the most followed narrative anchors fair value at NOK129.89. That gap rests on some punchy growth and margin expectations.
Investor optimism appears high regarding Scatec's expansion into emerging markets like Egypt and South Africa, where the company has secured record project backlogs and near-term growth, but this strategy exposes the company to heightened geopolitical and currency risks, potentially increasing future cash flow volatility and impacting earnings and net margins.
Want to see why this narrative still lands on a higher fair value for Scatec despite those pressures? The story leans heavily on faster revenue compounding, wider margins, and a very different earnings profile a few years out. The exact assumptions behind that shift might surprise you.
Result: Fair Value of NOK129.89 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Scatec's reliance on government tenders and long dated PPAs in emerging markets, along with its exposure to interest rate sensitive project financing, could still challenge this upbeat narrative.
Find out about the key risks to this Scatec narrative.
Another view on Scatec’s valuation
Analysts see Scatec as 24.9% undervalued at NOK129.89, yet Simply Wall St’s DCF model paints a very different picture. On that framework, the estimate of future cash flow value is NOK10.89 per share, which would imply Scatec is trading well above intrinsic value. Which narrative do you trust more: the earnings story or the cash flow maths?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Scatec for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 265 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
If the mixed signals around Scatec leave you unsure, move quickly from headlines to the underlying data and weigh the trade off between risk and opportunity. To see how the pros and cons stack up in a single view, review the 2 key rewards and 1 important warning sign
Looking for more investment ideas beyond Scatec?
If Scatec has sharpened your focus on risk, return and valuation, do not stop here. Broaden your watchlist and give yourself more options.
- Explore companies that combine quality fundamentals and attractive pricing by checking the 265 high quality undervalued stocks.
- Review businesses that feature healthier finances through the list of solid balance sheet and fundamentals (437 results).
- Scan the 614 high quality undiscovered gems to identify potential future leaders at an earlier stage.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com