Pair Trade: Long Repsol - Short Total Wednesday, October 17th 2012Companies Description Investment Case Repsol (REP SM): After the expropriation of YPF assets, Repsol decided going into a restructuring process. The company has to reduce debt to retain its IG rating. It has already made good progress on its non-core asset disposal program. Repsol sold its Chile LPG business for $54m and a 20%Market Price Data stake of its Ecuador upstream assets to Sinopec. Repsol has receivedRepsol (REP SM) non-binding offers for its LNG business. The company seems to beLast Price (€) 15.855 prioritizing this approach over more dilutive options to EPS. But, theYTD Change -33.20% conversion of the preference shares into mandatory convertibles isMkt Cap (€ bn) 19.917 still a risk.Total (FP FP) Total (FP FP): At its interim strategy update, Total announced a smallLast Price (€) 39.97YTD Change 1.19% downgrade to 2015 production target. Growth is skewed to postMkt Cap (€ bn) 94.534 2015. Growth is expected to accelerate in 2016/7.Source: Bloomberg The Company aims to sell $15-20bn of assets over 2012-14 toAnalysts Recommendations: balance its cash cycle and maintain gearing within 20-30%. Increased cost efficiencies/synergies were targeted in downstream. Total is going through a heavy capex phase of investment, which could penalize the company’s returns and free cash flow generation. The Long Repsol (REP SM) Short Total (FP FP) ratio has a current value of 0.3967. We’ll define as our target 0.4168 and use 0.3852 as our stop-loss level. Moody’s has today confirmed Spain’sSource: Bloomberg government bond rate at Baa3 (still investment grade). This could give some price momentum to Repsol’s stock price.Market Multiples P/E EPS DY Net Debt/ Technical Comment 2013 2011/13 2013 EBITDA Est. CAGR Est. Est. Est. 2012Repsol 9.27 -1.99% 5.56% 2.06Total 7.31 3.75% 5.98% 0.54Source: BloombergNext Report DateRepsol Q3 Results November 8th (bef-mkt)Total Q3 Results October 31st (bef-mkt)Source: Companies Websiteswww.fincor.ptwww.facebook.com/FincorAnnouncement: Fincor—Sociedade Corretora, S.A. provides services of reception, execution, and transmission of orders. The contents men-tioned in this document do not constitute (nor should they be interpreted as to form) any kind of counselling, or investment recommendation, or arecord of our trading prices, or an offer or solicitation to trade in any financial instrument. Fincor—Sociedade Corretora, S.A. Will not accept anyresponsibility resulting from any use referring to said content or about any resulting effect that could have occurred.