Thursday, October 25, 2012

Innergex Renewable Energy 2

On my other blog I am today writing about the Money Show in Toronto for 2012. I will be putting my notes up as I transcribe them...continue...

I do not own this stock Innergex Renewable Energy (TSX-INE), but I used to. I bought it in 2006 because it was a utility company that was into alternative energy. TD Newcrest rated it highly. Then it was an income trust called Innergex Power Income Fund (TSX-IEF.UN). I sold it in 2008. It was still an income trust, but it was not increasing its dividends. It was not doing well and I also notice that although it is still followed by some analysts, it is not as well followed, as it was when I first bought this stock.

The insider trading report shows that there is no insider buying or insider selling over the past year. Insiders retained options granted late last year and early this year. Insiders have options and options like vehicles called Rights d'actions liées au rendement (Rights of Performance Shares).

There are a lot of outstanding options and other option like vehicles, but some insiders do own a fair amount of shares. For example the CEO owns shares worth around $6.6M. A director owns shares with around $1.6M.The CEO shares and options are worth approximately the same amount. The CFO and officers have more options than shares. The directors do not have options of any sort.

Caisse de dépôt et placement du Québec bought around 12% of this company starting in July 2012. These shares are worth just over $100M. I cannot find much in the way of institutional ownership outside of the Caisse de dépôt et placement du Québec.

Because there are a number of years of negative earnings I cannot get a fix on Price/Earnings Ratios for the last 5 years. The 9 year low, median and high median P/E ratios are 9.78, 10.73 and 11.69. The current P/E is 136. The P/E for 2013 is expected to be around 57. This test gets you nowhere.

I get a Graham Price of $3.12. The 10 year low, median and high median Price/Graham Price Ratios are 1.20, 1.34 and 1.49. The current P/GP ratio is 3.50. This suggests that the current stock price is high. However, the Graham price is trending down as the stock price is trending up. Usually, the Graham Price trends up because on most stocks, earnings and book values are tending up. Graham Price is down 50% over the past 8 years. I am not sure how useful this test is.

The 10 year median Price/Book Value Ratio is 1.54. The current P/B Ratio is 2.02, a value some 31% higher than the 10 year ratio. This suggests that the stock price is relatively high. The Book Value has been trending down. (Basically this is because of years of no earnings and they are still buying dividends.)

The current dividend yield is 5.32% and the 5 year median dividend yield is 7.85%. So the current yield is some 30% lower than the 5 year median yield. The problem with this is that this company went from an income trust to a corporation. It was expected that companies going from income trusts to corporation would have lower dividend yields and that they would be between 4 and 5%. On this basis, it has a good dividend yield.

If you look at Price/Cash Flow per share Ratios, the one using cash flow per share for the past 12 months is 12.12. The 5 year median P/CF Ratio is 12.05 and the 10 year P/CF ratio is 12.60. By this measure, the stock price is reasonable.

When I look at analysts' recommendations I find Strong Buy, Buy and Hold. The consensus recommendation would be a Buy (but just barely). This is the most common recommendation format for any stock. The 12 month consensus stock price is $11.40. This implies a 12 month total return of 9.91%, with 4.59% in capital gains and 5.32% in dividends.

A number of analysts thought that this company was well managed. One analyst with a Hold said that there is not much upside for the company, but the dividend was good. A couple of analysts thought that the company was fully valued. A few mentioned that they only expect modest growth going forward.

There is an article about Caisse de dépôt et placement du Québec putting $100M into this company. See Montreal Gazette. (To tell you the truth, I have never been much impressed with Caisse de dépôt et placement du Québec's investment skills. Their investments seem more political than anything else.)

My personal stance is that I am never impressed with a company that cannot make money.

Innergex is involved in Canada's renewable energy industry. The Company develops, owns and operates facilities located in North America, leveraging run-of-river hydroelectric power generating facilities, wind farms and photovoltaic solar parks. Its web site is here Innergex. See my spreadsheet at ine.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 or StockTwits.

No comments:

Post a Comment