Wednesday, December 1, 2010

Valener Inc

This stock used to be called Gaz Metro (TSX-GXM.UN), but it is now Valener Inc (TSX-VNR). The company has also changed to a corporation. This occurred on 1st October 2010. This stock has a financial year that end on 30th of September of each year. So the financial statements for 2010 (that is 30 September 2010) are in.

It is hard to figure out what past information to compare with the current information. Gaz Metro was owned only 29% by the public and Valener Inc is to hold the public shares. The other 71% was owned by gas distributors and Caisse de dépôt et placement du Québec.

The company certainly does not have a great recent record with dividends. This company first shocked the market in 2006 when it lowered its distributions. This company was supposed to be a very stable, very conservative stock. Since it originally reduced their dividends in 2006, they reduced them also in 2007 and then kept them flat.

With the change to a corporation, dividends are being reduced again. A lot of partnerships and income trusts changing to corporations have reduced their dividends. This is true. However, the reduced dividend is coming in at $1.00 per share and this company is only expected to earn $.84 to $.85 per share over the next few years. Estimates for cash flow are also low. Certainly, this is stock is currently not a great dividend paying stock.

If anyone made any money on this stock, it would only be over the past 10 years. The thing is that the stock peaked in 2005 and it has yet to recover. It is not just the current recession where this stock has been losing money for shareholders. The total return over the past 10 years has basically been all dividends. Less than 1% of the total return over the past 10 years is from capital gain. 99% of the total return has been from dividends. I must admit that income trusts generally paid out most of their earnings in distributions, so this structure of the total return is not surprising.

The only place where this stock seems to have done well in the past 5 and 10 years is on Return of Equity. The 5 year average ROE is 16% and for the financial year ending September 2010, the ROE was 19%. None of this seems to have helped the shareholders as the Book Value has hardly changed over this time. (However, this has been true of many income trusts also.) Now Valener Inc says that the Book Value for its shareholders is $589,000, which would imply that the book value has doubled for the public shareholders. This does not seem plausible for me.

Tomorrow, I will review what the analysts currently think about this stock.

Valener is a company whose core business is the distribution of Natural Gas in Quebec. It is also, indirectly, the sole shareholder of the Vermont Gas System (VGS), and the Green Mountain Power Corp (GMP), the second largest electricity supplier in Vermont. Its web site is here Valener. See my spreadsheet at vnr.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

1 comment:

  1. love reading your posts, keep up the good work! Another way to own this company is via Enbridge.