Wednesday, May 13, 2015

Veresen Inc. 2

On my other blog I am today writing about my investment accounts at TD continue...

Sound bite for Twitter and StockTwits is: Stock price is relatively expensive and risky. I look at a number of values, and most point to a very high relative current stock price. Jordan Cove project seems to have a lot of outstanding risks at present. See my spreadsheet at vsn.htm.

I own this stock of Veresen Inc. (TSX-VSN, OTC- FCGYF). I bought this stock in 2008 as Fort Chicago Energy Partnership. At that time it was a publicly traded limited partnership with increasing and high dividends. In 2010 the company changed to a corporation.

Outstanding shares are not being increased for stock options. It is not that there are no stock options, but they are in the form of Performance Share Units and Restricted Share Units.

There is not much insider ownership. The CEO owns shares worth around $0.4M, the CFP owns shares worth around $0.5M and the Chairman owns shares worth around $0.9M. This all add up to very little. When I look at insider trading over the past year, I find $0.8M of insider buying and no Insider Selling.

The 5 year low, median and high median Price/Earnings per Share Ratios are 42.93, 47.89 and 52.85. These are a lot higher than the corresponding 10 year values of 20.71, 25.47 and 30.38. All these P/E Ratios are rather high for a utility. This stock used to have more reasonable P/E Ratios until the stock price started to climb in 2011 with no corresponding climb in EPS. The current P/E Ratio is 59.48 based on a stock price of $18.44 and 2015 EPS estimate of $0.31. This stock price testing, of course, is suggesting that the stock price is relatively expensive.

I get a Graham Price of $9.12. The 10 year low, median and high median Price/Graham Price Ratios are 1.35, 1.64 and 1.93. The current P/GP Ratio is 2.02 based on a stock price of $18.44. This stock price testing suggests that the stock price is relatively expensive.

If we look at Distributable Cash the Price/Distributable Cash Ratios are 10.42, 11.71 and 13.01. The current P/DI Ratio is 17.56 based on a stock price of $18.44 and 2015 DI estimate of 1.05. The $1.05 is lower than the 2014 DI by some 6.3%. When we look at 12 month ending at the first quarter compared to the 12 months ending in 2014, DI is down by 4.5%. So a decline for 2015 is not unreasonable. This stock price testing suggests that the stock price is relatively expensive.

The 10 year Price/Book Value per Share Ratio is 1.92. The current P/B Ratio at 1.55 is some 19% lower. The current P/B Ratio is based on a stock price of $18.44 and BVPS of $11.93. This stock price testing is suggesting that the stock price is relatively reasonable and heading for relatively cheap.

The lowering of debt has affected the book value. Over the past few years the debt ratios have improved as the Book Value has grown. Debt ratios are currently quite good. A few years ago debt ratios were not good at all.

I cannot do any dividend yield testing. The yields used to be much higher than they are today, and the dividend rate has not changed since 2008. This stock used to be a Limited Partnership before changing to corporation. Because of this change the yield is declining. It was expected to decline to 4 or 5%, but the yield is still 5.42%. This would imply that the stock price can still climb or that dividends will be cut. The Payout Ratios are high.

The 10 year median Price/Cash Flow per Share Ratio is 7.76. The current P/CF Ratio at 14.10 is some 105% higher. The P/CF Ratio is based on a stock price of $18.44 and 2015 CFPS estimate of $1.16, an increase of CFPS of around 12%. The difference between the CFPS for the 12 months to the end of the first quarter and the end of 2014 is an increase of 1%. I think that this stock price testing is suggesting that the stock price is relatively expensive.

When I look at analysts' recommendations I find Buy, Hold and Underperform recommendations. Most recommendations are a Buy and the consensus recommendation is a Buy. The 12 month stock price consensus is $19.10. This implies a total return of 9% with 5.42% from dividends and 3.58% from capital gains. You have to wonder about Buy recommendations and capital gains of only 3.6%.

This article in the Financial Post talks about Veresen Inc.'s Jordan Cove project. The CEO calls this a high-risk game. This article in Hydroworld talks about Veresen's first quarterly results for 2015. This Newswire article talks about Energy Fundamentals Group's recent win in court re its options on Jordan Cove Energy project.

This is the second of two parts. The first part was posted on Tuesday, May 12, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

Veresen is a leading diversified energy infrastructure company that owns and operates energy infrastructure assets across North America. We are engaged in three principal business lines of Pipelines, Midstream and Power (gas-fired and renewable facilities). Its web site is here Veresen.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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