Empresa Nacional de Electricidad Chile: Utility Value in a ‘Green’ Generation Play

Paul Price submits:

Endesa Chile (EOC) is an electrical power producer in Chile that handles 36% of the installed base capacity covering 9% of the Chilean population. They also operate in Argentina, Peru, Columbia and Brazil. Production is environmentally friendly with hydroelectric production at 70.7% , geo-thermal at 28.9% with the small remainder coming from wind. eoc-logo
2009 proved to be a record year with earnings rising from $3.11 to $4.11/share. In fact, last year was the seventh consecutive year-over-year improvement. Here are EOC’s per share (except revenues) numbers as reported by Standard and Poors:
Year
Sales($Billions)
Earnings
Dividends
Book Value
Avg. P/E
2002
1.366
0.01
0.03
7.55
NMF
2003
1.331
0.48
0.08
9.41
27.5x
2004
1.699
0.55
0.08
10.43
27.5x
2005
2.012
0.73
0.14
11.69
33.5x
2006
2.522
1.27
0.31
12.39
24.0x
2007
3.308
1.35
0.58
13.88
32.5x
2008
4.787
3.11
0.79
13.55
13.5x
2009
4.310
4.11
1.02
16.62
10.5x
As EOC’s fundamentals have improved their valuation has contracted. At yesterday’s close of $49.04 their multiple is < 12x trailing earnings and less than 11.6x consensus views of $4.24 – $4.39 for 2010. Preliminary estimates for 2011 now run $4.74 /share.
While I don’t expect to see 20+ P/E’s again I do think it’s likely that EOC can command at least the 13.5x multiple that was the previous low before the late 2008 – early 2009 market meltdown. A rebound to even that conservative level could bring these shares back up to $57.24 or 16.7% above the current quote.
Add in the $1.02 dividend and its 2.08% yield and this regulated utility play could see a total return of almost 20% by year end. While not spectacular, it looks pretty good in a world where short term rates are near zero.
Is my $57.24 goal attainable? EOC shares traded as high as $56.20 already in 2010 and peaked at $57.45 in September of 2008. If the expected growth continues into 2011, a thirteen and a half multiple would bring a share price of about $64 by early 2012.
Empresa Nacional de Chile looks like an environmentally sound play that can ‘generate’ solid total returns.
Disclosure: Author is long EOC shares.


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categories Investing, Long Term Investment, stock market | February 24, 2010 | comments Comments (0)

Church & Dwight: Positive and Consistent Price Momentum

Jim Van Meerten submits:

Last week I sold ScanSource (SCSC) and needed a replacement. When I’m on the hunt, I first go to Barchart and screen for the stocks having the most frequent price appreciations in the last 20 sessions, take the top 10 and then do some additional screening to see what should be eliminated. The stock I had left was Church & Dwight Company Inc (CHD). The name didn’t ring a bell with me and I was surprised to find that it was the name of holding company that owns Arm & Hammer – products I’ve been using for years.

First let’s see why it came up on my list. The stock had a price appreciation in 14 of the last 20 trading sessions and was 5 for 5 recently. It has enjoyed a 7.97% price increase in the last month. On Barchart’s 13 technical indicators the stock has a buy signal on 12 of the 13 indicators. This stock has the positive and consistent price momentum I like.


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Waste Management Invests in Waste-to-Biofuels Company

Houston, Texas-based Waste Management, Inc. (NYSE:WM) announced its participation in the latest funding round for Enerkem Inc., a waste-to-biofuels company.

Enerkem’s proprietary thermo-chemical technology helps convert waste materials into biofuels such as ethanol. Its technology is able to process diverse carbon-based feedstocks, including sorted municipal solid waste, construction and demolition wood, as well as agricultural and forest residues.


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Consumer Confidence Pressures Return

Zachary ScheidtZachary Scheidt submits:

Yesterday, the market dealt a disturbing blow to frustrated bulls who were riding the recent rebound in equities. Before the market opened, futures were a bit weak after a report showed German business sentiment was not as strong as expected. (Remember, Germany is one of the primary countries which is expected to be responsible for bailing out Greece). But while the pre-market futures were relatively tame, the market quickly turned lower after the US consumer confidence numbers were released at 10:00 AM EST.

Economists were surprised to see the confidence index drop to 46 which is the lowest reading since 2009. At issue was the continued absence of employment recovery and a frustratingly lower reading in the “future expectations” category. It seems that while the market has been pricing in a robust recovery, the average American is not quite assured. Since consumer spending is a major part of our economy, weakness in consumer confidence is particularly troubling.


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Chicago Bridge: Buying Opportunity With Eye on 2011

George Fisher submits:

This week, Chicago Bridge and Iron (CBI) announced 4th quarter and full year 2009 results that were pretty much in line with expectations. As one of the premiere energy infrastructure engineering and construction (E&C) companies, CBI holds lots of promise going into 2011 and beyond. Just look at their year-end ’09 backlog of $7.2 billion worth of projects, which are waiting to be completed and billed. The current backlog is only 7% below record levels set at the end of 2007.
I advocate using current market weakness as an opportunity to add or to initially establish a position in CBI. The catalyst to higher share prices will be steady levels of new awards and improving earnings later in 2010, along with better visibility for 2011. For more details on CBI, review my instablog dated 2/2/10.
(Click chart to enlarge)
Founded in 1889, CBI designs and builds oil refineries, storage tanks, LNG terminals and other infrastructure projects. As overall energy consumption increases globally, the need for additional infrastructure and upgrades/expansion of existing facilities will continue to grow.
CBI is very active in the water and wastewater business along with power generation. Hidden inside CBI is nuclear power plant E&C expertise, as CBI constructed 75% of containment vessels currently operating in the US. With the economic downturn and temporarily depressed energy prices in 2009, many construction projects were put on hold. Some of these are starting to come out of mothballs, and CBI is getting a nice bump in business. Project awards over the past 6 months will generate revenue and earnings growth in late 2010 and 2011.
CBI’s backlog of projects awarded has grown impressively from $4.2 billion at the end of June ’09 to $7.2 bil at year-end. It is not uncommon in the E&C industry to operate on substantial lead times from contract award to completion and billing. To give some prospective on the significance of the current large backlog, below is a year-end comparison for the past few years, in billions:
2005 2006 2007 2008 2009
$3.1 $4.5 $7.7 $5.7 $7.2
New awards in 2009 totaled $6.1 bil, 90% of which are outside the US. This represents significant growth from 2008′s $4.3 billion total of new awards. Only 25% of the total current project backlog is in the US. Over the past few years, the percentage of revenues derived from North America has been declining, in favor of projects in developing countries, such as New Guinea and Columbia.
EPS in 2009 was $1.79 and revenues totaled $4.5 billion.
Management offered their thoughts for 2010, and it is tepid. CBI issued guidance for EPS between $1.60 and $1.85 on revenues of $3.9 bil to $4.2 bil. The street consensus is anticipating EPS of $1.83 with revenues of $4.46 billion (see earnings transcripts here upon availability).
Management has been conservative with its guidance, exemplified by their exceeding street earnings consensus estimates every quarter in 2009 by 5% to 13%. The big impact of the recent torrent of new business will be in 2011. Individual broker EPS estimates for 2011 range upwards of $2.50, with the distinct possibility of being revised higher over time.
CBI is coming off of 2 years of earnings losses in 2007 and 2008, mainly due to cost over-runs and weather delays on a fixed rate contract to build the now-completed South Hook LNG terminal in England (final write-off in the 4th quarter ’09 of $12 mil). This contract decimated both earnings and street confidence. Meeting ’09 guidance for revenue and earnings, coupled with the recent success with new awards, is helping to rebuild investor faith in CBI’s outstanding long term prospects.
CBI has an excellent balance sheet, with $326 mil in cash and debt of $120 mil. Stock capitalization is $2.1 bil with 99 million shares outstanding. Over the years, CBI has made several acquisitions to augment organic growth. Management may find a tempting stock-deal acquisition, or may desire higher levels of working capital to support increasing contract work, and a small secondary offering may be preferable.
As a mid- to late-cyclical company, with long lead times between booking an order and realizing profits, CBI should offer above average capital gains potential for patient investors. CBI also offers great exposure to international business as the vast majority of projects are not in the US.
The current share price weakness on management’s lower-than-expected guidance should provide a buying opportunity in the $18 to $22 range, with a 24 month price target of $30, or 13 PE on $2.30 EPS estimates. A great place to start your due diligence would be their investor’s presentation dated Feb 22, 2010 found on their website, with a specific focus on pages 5, 6, and 7 outlining the scope of CBI’s international projects (site registration required).
Disclosure: Author long CBI and has been a shareholder since 1997.


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33 Companies From the 2010 Dividend Stocks List

Dividends4Life submits:

Last year I introduced the Stock Ideas list and it has proven to be immensely popular. The list consists of Dividend Aristocrats, US Broad Dividend Achievers and U.S. Dividend Champions. Duplications in the above lists are eliminated and stocks are crossed out when I learn that they have either cut their dividend or fail to raise it. Here are some highlights on this year’s changes:


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Is Cleveland BioLabs Ready to Move Higher?

M.E. Garza submits:

Yesterday, we alerted our subscribers to Cleveland BioLabs, Inc. (CBLI). The company announced earlier this week that it will hold a press conference today and while the stock has already seen some gains, it may be poised to move higher.

Cleveland BioLabs’ stock has already seen some gains during the last two trading sessions, but I wanted to put it on everyone’s watch list because after the company hosts it’s Press Conference on Radiation Countermeasure Developments for National Security and Oncologic Safety today (February 24, 2010) at 12:30 pm EST in New York, there is a feeling among analysts that the stock may begin trading at higher levels in the days and weeks ahead.


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Opportunities in Recovery Investing: A Seeking Alpha Panel

With some data now emerging that suggest stabilization in the macroeconomic picture, investors are increasingly interested in finding the stocks and sectors that will outperform when a broad recovery from this deep recession finally arrives.

We thought it would be helpful, therefore, to convene a virtual roundtable with four fund managers to discuss (1) how the brighter macro picture impacts their methodology for stock selection, and (2) what specific stocks or ETFs their methods yield as top opportunities at this time.


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High Conviction: This Stock Pick Won Cara Goldenberg Dinner With Warren Buffett

Cara Goldenberg submits:

At Seeking Alpha, we’ve long believed that sharing your investment ideas and process with sophisticated investors is one of the most powerful methods available to money managers interested in advancing their careers and practices. We built our editorial platform upon this very opportunity, sourcing rigorous research from worthy investment professionals and placing those contributors’ ideas before a knowledgeable community.

No case in recent memory demonstrates the upside of this approach as strongly as Cara Goldenberg’s. Ms. Goldenberg, 29-year old co-founder of hedge fund Permian Investment Partners, took the initiative to send Warren Buffett her ten top investment ideas in November. Buffett liked the unsolicited research so much he invited Goldenberg to Omaha to join him for a discussion and dinner. As Frank Betz of Carret Zane Capital Management said to Bloomberg, "She hit the jackpot. It’s praise from Caesar, of course. Boy, it must’ve been one heck of a letter."


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Coal Companies Heating Up in the Cold Winter

andrew horowitzAndrew Horowitz submits:

Volatile yes, but the companies in the coal industry have a great deal of opportunity ahead of them. Aside from the recent cold-snap and the fact that there are a backlog of ships waiting to load in ports around the world, coal is still one largest sources of electricity generation in the world.

Several companies, including Patriot Coal (PCX), Consol Energy (CNX) and Peabody (BTU) have been showing some excellent trends when it comes to earnings, even with coal prices still being depressed. (Coal Spot pricing is $51.75 for March Contract at the time of publish)


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Celsius Holdings: Despite Volatility, I’m in for the Long Term

VFC submits:

When I last posted about Celsius Holdings (CELH), the company was still trading under the ticker CSUH.OB on the OTCBB market, and investors were anticipating some dramatic price action after the implementation of an expected secondary offering that was to take place in conjunction with a move to the NasdaqCM.

Today, Celsius Holdings trades on the NasdaqCM for roughly $3.50/share – not as much as the drastic price drop as many were expecting, but there was also no news released to cause a spike in price, as many others would have liked to have seen.


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A First Look at J.G. Boswell

Brian Griffin submits:

One of the most fascinating companies I’ve come across in my investing lifetime is the J.G. Boswell (BWEL.PK) company. It trades under the ticker BWEL on the pink sheets.

Why is it so interesting? Well, for one, they don’t provide financial statements to the public. You must be a shareholder to have a look under the hood. And, even then, they don’t do much more than provide you with a set of audited financial statements.


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Introducing Pure Technologies: Making Water Systems More Efficient

tom konrad Tom Konrad (AltEnergyStocks) submits:

A reader caught my attention with his description of Pure Technologies (PUR.V, PPEHF.PK), a company that can find leaks in water systems without shutting down the system. Since I was intrigued, I thought my readers might be as well. Here’s what he has to say.

Tom Konrad: Tell us a little about yourself and your involvement in environmental investing.

Sam Healey: I invest largely in the cleantech sector. I look for companies solving problems that already exist, rather than companies attempting to create new markets. I’m particularly focused on energy technologies and conservation. I see a lot of money going into new systems when the cheaper and more effective use of those same dollars would be to improve the existing systems.


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Diana Shipping: Numbers Look Compelling

Dan Wieman submits:

I’ve had Diana Shipping (DSX) on my radar for a while. I’m taking a closer look today after the company announced fourth quarter earnings. Diana shipping reported net income for the year of $121 million, and it has a market cap of about $1.1 billion. One could argue that the company is at the depths of the market for shipping, and the company is priced at 9x earnings.

Operating cash flow looks to be even stronger than earnings as depreciation and amortization of its boats and other assets clocked in at $45 million. Add this back to earnings, and the company has cash flow of around $166 million and is priced at 6.6x annual cash flow.


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