RusHydro traded just half its equity
Stock: RusHydro PJSC ADR RG2A, Federal Hydro-Generating Company RusHydro PAO (RSHYY.PK)
RusHydro, a €4.6 billion Russian renewable sources energy producer, traded at half its book value while having also having attractively delivered a trailing dividend yield of 6.1%.
According to its filings, RusHydro operated in the hydropower industry since 2004 and now produces 12.95% of Russia’s electricity.
In its recent six months of operations, RusHydro delivered 3.7% revenue decline and an unattractive 17.5% drop in profits. Profit dropped more secondary to the company’s increased financing costs in the period.
In the past three years, RusHydro averaged 6.05% revenue growth and 26.7% profit growth.
From December, RusHydro increased its debt by ₽82 billion leading to a debt-equity ratio of 0.23x (vs. 0.13x in December). Shareholder equity, meanwhile, increased by ₽47 billion to ₽694 billion.
In its recent six months of operations, RusHydro generated a healthy ₽5.9 billion in free cash flow, while having raised ₽7.4 billion in financing activities (net repayments including dividends).
In the past three years, RusHydro reduced its overall debt by ₽9.3 billion (net issuances) and provided ₽25 billion in dividends despite having generated a hefty free cash outflow of nearly ₽20 billion in the period.
Nonetheless, analysts have an average overweight recommendation on RusHydro’s ADR shares (RSHYY) with a target price of $1.86 (vs. $1.34 at the time of writing), or a possible 38.8% upside.
Applying a 35% discount on its equity and a 10-year growth rate at its outstanding shares resulted in a per share figure of $1.87.
Disclosure: I have shares in RusHydro.
Significant value as stock is trading just a third of its equity
Stock: Korea Electric Power Corp ADR KEP, 015760.KS
Korea Electric Power, a ₩24.4 trillion power transmission and distribution of Korea’s energy, caught my attention as it just traded 66% discount to its equity as of December 3, 2017. Korea Electric also has a trailing dividend yield of 4.92%.
As of December 31, 2016, Korea Electric Power and its generation subsidiaries owned approximately 74.7% of the total electricity generation capacity in Korea (excluding plants generating electricity primarily for private or emergency use).
In addition, the Korean electric company is 51.1% owned by the Korean Government, as mandated by its country’s laws. This stipulation makes the company an even more secure bet for conservative investors out there.
As for its recent six months of operations, however, Korea Electric showed 3.1% revenue reduction year over year and a not so impressive 69% drop in profits.
In contrast, the electric company recorded 3.62% revenue growth and 390% profit growth averages in the past three years.
In the recent six months, the company also took in more debt in the same period net repayments and other financing activities having added ₩662.8 billion from last year resulting to a total liability to equity ratio of 1.52x (vs. 1.56x a year earlier).
In the recent six months, Korea Electric also generated a free cash outflow of ₩2.3 trillion compared to positive 1.5 trillion a year earlier.
In comparison to its three year period, the utility company reduced its overall debt by nearly ₩9 trillion, raised ₩853 billion in share issuances, and provided ₩2.7 trillion in dividend payouts out of its ₩4.6 trillion free cash.
Analysts have an average overweight recommendation on the company with a target price of $22.39 per ADR share (vs. $17.57 at the time of writing) indicating a possible 27.4% upside.
Sticking on the conservative side and placing a good 35% off its book value provided a value of ₩36,309 per share or $33.51.
Minus the possibilities of having a war being brought by its country’s neighbor and having returned total losses of 4.9% so far this year, Korea Electric Power is of definite value.
Disclosure: I have shares in Korea Electric Power.
Applause for debt reduction
In the midst of the net neutrality scuttle, investors should consider adding?
As of its recent nine months operations, Comcast, a $170 billion Comcast Cable and NBCUniversal operator, generated 61.6% of its business revenue from its cable communications (excluding eliminations).
According to filings, Comcast’s Cable Communications consists of the operations of Comcast Cable, which is one of the nation’s largest providers of video, high-speed Internet, voice, and security and automation services to residential customers under the XFINITY brand; Comcast also provides these and other services to business customers and sell advertising.
The cable communications also reported an operating margin of 24.8% compared to 24.85% a year earlier.
Comcast’s NBCUniversal cable networks business, meanwhile, generated about 9% revenue has delivered more profitability at 31.5% (vs. 28% a year earlier).
Overall, Comcast reported revenue rise of 4.2% year over year for its nine months of operations to $48.7 billion along with a 20.8% increase in profits to $7.7 billion.
From December, the media company also increased its cash by $813 million to $4.1 billion as of September. This is despite its responsible $5.1 billion reduction as a result of financing activities (includes $2.1 billion dividend payouts and $4.2 billion buybacks).
The company, nonetheless, has a debt-equity ratio of 1.17x (vs. 1.13x a year earlier).
In addition, Comcast had 818 thousand more total high-speed internet customers to 25.5 million as of September.
Comcast’s video and voice customers, meanwhile, lost 118 thousand and 122 thousand, respectively in the same period.
In the past three years, Comcast generated $25.7 billion in free cash flow and allocated $23.3 billion in dividends and share buybacks. The company also raised $8.9 billion in debt (net repayments).
Analysts have an average buy recommendation with a target price that is 23% higher than today’s price of $36.32 to $44.83.
Using historical growth rates and multiples with a 15% margin on the company’s revenue figures indicated a per share figure of $33 a share.
Disclosure: I have CMCSA preferred shares.
Skirmish has begun a while back
Even the smiley Federal Communications Commission (FCC) chief Ajit Pai failed to simplify for viewers to understand ‘what is net neutrality.’
But one thing is clear, he does not like net neutrality.
Net neutrality was a rule created in 2015 that prevents internet service providers from blocking or discriminating against internet traffic.
To simplify, wireless, cable firms can affect the quality of videos being streamed to customers by increasing or slowing one’s (like Netflix’s) internet traffic unless Netflix (or customers?) pay up to the service.
This event is not a possibility. It has already happened.
Some two or three years ago, Comcast slowed down Netflix’s streaming until Netflix and the former agreed to an arrangement.
On July 2017, Verizon ‘tested’ and slowed down YouTube, Netflix, and other video streaming services.
Meanwhile, Verizon, AT&T, Comcast, and Charter altogether value to about $660.5 billion, while YouTube operator alone is now valued at $725 billion. Netflix is valued at $85 billion, on par with Charter Communications.
As a former lawyer for Verizon, some of Ajit Pai’s accomplishments were as follows:
- Stopped nine companies from providing discounted high-speed internet service to low-income individuals
- Withdrew an effort to keep prison phone rates down
- Scrapped a proposal to break open the cable box market
Anyhow, all these findings may be to make Mr. Pai’s image look bad as the source is the New York Times.
In 2014, Mr. Pai also hit Netflix with allegations of the video streaming company was working to “effectively secure” Internet “fast lanes” for its content. Netflix pacified this later, saying that its tools do not advantage its content.
Nonetheless, FCC rolling back net neutrality rules should interest even a less discerning internet user. December 14 is a critical date as the FCC votes on this critical issue.
Disclosure: I have shares in Verizon, AT&T, Comcast, and Google.
Investors should prepare for any backlash spoiled Philippine oil giants may have
Philippine Stocks involved: Petron (PCOR), Pilipinas Shell (SHLPH)
The Philippines’ Department of Energy has identified Petron, Pilipinas Shell, and Chevron as the major oil companies in the country.
As of June 2017, Petron held a market share of 28.6% of total petroleum products, Pilipinas Shell with 20.7%, and Chevron with 6.6%.
At the time of this writing, Petron has a full market value of 90.8 billion pesos, and Pilipinas Shell at 96.7 billion pesos. Talking about some overvaluation for Shell, but this could be further dissected at a separate time.
Chevron Philippines, meanwhile, is not publicly listed but operates nearly 700 Caltex service stations in the country with other business interests including its 45 percent non-operated working interest in the Malampaya gas-to-power project, according to the company’s website.
Using historical data, there was actually an asymmetric pattern response in Philippine retail gasoline price response to crude oil price changes. This was found in a study made by Jaewook Kim in 2012 whereby oil price information was gathered from 2005 to 2010.
Kim stated that rather than using WTI or Brent oil price in comparison, Dubai crude oil is more fitting when comparing to the Philippines retail gas price.
In a more recent period, Dubai crude price has climbed 4.1% to $55.58 a barrel since January to October 2017, but the Philippine retail gas price has risen 300% more than Dubai’s or at a rate of 12.4% to 48.85 pesos per liter in the same period.
In the United States, where latest oil & gas technologies are being applied, retail gasoline price has risen 4.4% to $2.59 per gallon.
Are these local refiners grinding more and therefore need to raise their prices this much? Or these unified price hikes are just a market manipulation managed by the big oil players in the Philippines?
To boot, the Philippines has not suffered like what Texas to Louisiana areas have to deal with the hurricanes Harvey and Maria recently this year where refineries were shut down and refined products drop afterward.
Nonetheless, one thing Filipinos should hope for and also vigilantly follow is the newly re-assembled investigative team, the Department of Energy and the Department of Justice Task Force, in determining if there are market abuses being employed by the oil companies.
If proven, painful penalties could be a result.
Disclosure: I do not have shares of any of the companies mentioned.