Tuesday, June 12, 2012

Veresen Inc 2

I own Veresen Inc. (TSX-VSN) stock. I first bought this stock in December 2008 and then some more in March 2009. I got it at a good price and have made a return of 33.3% per year. Some 13.2% of this total return is in dividends and some 20.1% of this return is in capital gains.

There is $1.3M of insider selling and net insider selling at $1.1M. There is, of course, a bit of insider buying. There seems to be no options for insiders. Most of the buying is by the company plan. There are 61 institutions that hold 30% of the company. Over the past 3 months they have increased their shares by almost 25%. This is a positive.

When I look at 5 year low and high Price/Earnings Ratios, I find them at 17.05 and 24.87. I think that these are rather high for this type of stock. The current P/E Ratio is 28.74 on a current stock price of $12.40 is even higher. This shows a high stock price and a high relative price. However, they were not low either when I bought my shares in 2008 and 2009. I bought it when it was still a Limited Partnership.

The 10 year median Price/Graham price ratios for low, median and high stock price are 1.07, 1.19 and 1.46. The current P/GP Ratio is 1.76 on a current stock price of $12.40. This relatively high P/GP Ratio points to a rather high relative stock price. The Graham price takes into consideration the Book Value and EPS. It is interesting to note that the Graham price has not grown at all over the past 10 years.

The 10 year Price/Book Value Ratio is 1.89. The current one at 2.41 is some 28% higher. This also points to a relatively high current stock price.

The current dividend yield is 8.06% and the 5 year median is 8.92%, a yield that is almost 10% higher than the current one. This also points to a current relatively high stock price of $12.40.

The only test that shows the current stock price as not relatively high is the Price/Adjusted Funds from Operation Ratio. The 10 year low and high P/AFFO Ratios are 8.90 and 11.75. The current P/AFFO Ratio is 10.97. This shows the current stock price a little high, but not unreasonable.

The analysts’ recommendations are all over the place with Strong Buy, Buy, Hold, and Underperform. The majority of the recommendations are in the Hold category and this would be the consensus recommendation.

On this stock, analysts seem to be lowering their estimates, but upping their recommendations from Underperform to Hold or from Hold to Buy.

One Buy analyst has a 12 month stock price of $16.50. He likes the growing importance of the power business for Veresen as it diversifies the company’s asset base. The Buy is because the analyst thinks the company is currently underpriced. The consensus 12 month stock price mean is $15.50. This would be a total return around 33%.

A number of analysts feel that the dividend will be stable. One Hold recommendation came with the concern that there will be less volume flowing in their pipelines. One Buy analyst said that the DPR for cash flow is less than 75% and therefore should be sustainable.

Forbes thinks this stock is oversold. See their article. (By the way, oversold, means that the stock is low; that is because too many people have bailed out of it.) Also, Pat McKeough talked about what he likes about this stock in November of 2011. There have been no changes in the valuation of this stock since then. See TSI Network.

Personally, I do not expect much increase in this stock’s price. I think that the stock price is currently a bit high. I do expect to earn the dividend and an 8% return for me if what I basically expect going forward. I think that the Dividend Payout Ratio for cash flow is very important and because this is in the 60% to 70% range I think it is sustainable.

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.

3 comments:

Mike said...

Thanks Sue for the info on vsn. I have helsd the stock but have suffered a loss because of the recent selling. I wondered if you had any idea who has been selling and who has been buying. Is it instutions. Thanks, Mike.

SPBrunner said...

The market is pretty opaque and it is difficult to tell who is buying and who is selling. However, the stock is treading down. But according to the recent insider trading report, insiders have been buying while the stock has been plummeting down.

When I looked at Reuters on Institutional holding when writing my recent report, the site said that there were 61 Institutions holding 29.42% of the shares and now it says 64 Institutions holding 32.5% of the shares.

I see no particular reason for the sell off.

Mike said...

Thanks Sue, i'll hold on to it for the 8% div for sure even if the stock price goes sideways its a reasonable return. Great Blogs thanks I look everyday.