Tuesday, June 14, 2011

Veresen Inc 2

I own this stock (TSX-VSN). This stock used to be called Fort Chicago (TSX-FCE.UN). It has come through the change to a corporation well. I first bought this stock in December 2008 and then bought some more in March 2009. I have made a return of 49.7% per year on this stock. Probably around 8% per year was in distributions. However, this is a pipeline utility company and what you would normally expect to earn is 8% per year, with 4% dividends. I bought this company low, so I did make good capital gains.

When I look at the insider trading report, I find that there was some $1.2M insider selling my two officers who had a lot of shares in this company. One sold about 34% of his shares and one sold 22% of his shares. The problem with insider selling, you do not know why, the officers might just have needed money. So, this basically tells us nothing.

What seems to be good is that seems to be little in the way of stock options granted to insider for this company. Another good item is that there has been some insider buying under a company’s plan. Also, some 30% of this company is owned by52 institutions. Over the past 3 months they have increased their exposure to this company by just over 8%. Please note that the above insider trading report just covers this company since January 2011, when the company converted to a corporation.

When I look at the 5 year median Price/Earnings Ratio, I find a low of 15.3 and a high of 19.9. However, the high and low P/E for 2010 ranged from 33.5 to 46.5. I find that the 10 year median P/E Ratios are only slightly higher than the 5 year median P/E Ratios. The current P/E ratio of 24.3 is at the high end of P/E ratios for this company.

I get a 10 year median Price/Book Value Ratio of 1.85. The current P/B Ratio is 2.62, which is some 41% higher than the 10 year median ratio. The thing is that the P/B Ratio has been steadily increasing because the book value has been going down.

I get a Graham Price of $8.08. The current stock price is $13.60, which is some 68% higher. The 10 year median high difference between the Graham Price and the stock price is 40%. So, by this measure, the stock price is high.

The current dividend yield is 7.35% and the 5 year median is 8.68%. This shows a relatively high stock price. The 10 year median low Dividend yield is 7.29%. This is a bit lower than the current one, but not by much.

For people that would still like to look at distributable cash, the 10 year median Price/Distributable Cash Ratio has a low of 8.90 and a high of 11.75. The current P/DC Ratio of 11.24 is towards the high end. The conclusion is, of course, that the current stock price is high by any measure I have.

When I look at analysts’ recommendations, I find Strong Buy, Hold and Sell. The consensus recommendation would be a Hold. (See my site for information on analyst ratings.) Most Hold recommendations come with a 12 months stock price slightly lower than the current stock price.

I note that a lot of analysts call this a stable stock. No one thinks that the dividend will be cut. Few think that the stock price will move up, because it is fully valued. One sell recommendation came with the fact that other pipeline companies were preferable at the present time. Better current buys mentioned were Enbridge (TSX-ENB) and TransCanada (TSX=TRP).

Currently I am holding on to the shares I have. However, I do not expect to earn much from this stock this year. I agree that it is probably fully valued. The stock market has a tendency to have shares that are over bought or oversold.

Veresen Inc. is a publicly traded dividend paying corporation based in Calgary, Alberta, that owns and operates energy infrastructure assets across North America. Veresen Inc. is engaged in three principal businesses: a pipeline transportation business comprised of interests in two pipeline systems, the Alliance Pipeline and the Alberta Ethane Gathering System; a midstream business which includes ownership interests in a world-class extraction facility near Chicago and other gas processing facilities energy infrastructure; and a power business with renewable and gas-fired facilities and development projects in Canada and the United States, and district energy systems in Ontario and Prince Edward Island. Its web site is here Veresen. See my spreadsheet at vsn.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.

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