Centrica today announced the sale of its 3 Texan gas fired power stations to Blackstone for £420m. See the link below for the full details (as still no live RNS on Stockopedia yet, although I gather it may be coming soon).
http://www.investegate.co.uk/centrica-plc--cna-/bus/disposal/20131218091500Z1713/
They are going to return the proceeds by extending their share buy back, which at these levels seems like a good idea. The stock has come down by about 20% since September (under performing the market by about 18%) on the back of the political furore surrounding energy prices and recent small downgrades (3 to 5% in the last 3 months) on the back of the IMS released on the 14th November 2013.
This appears to be a classic case of being able to buy a good quality business (Stockopedia Q rank =98) at a reasonable valuation (Stockopedia Value Rank = 91). It is also on the Screen of Screens (5)
here: http://www.stockopedia.com/screens/the-screen-of-screens-171/?highlight=LON:CNA
Other basic valuation metrics etc.
P/E 11.5x, yield 5.3% for 2013 growing at 5% (forecast and historically more than that) covered 1.5x by eps and cash flow & EV/EBITDA 5.5x. The balance sheet also seems fine with interest cover of 18x according to the Stock report.
Technically it is just coming out of an over sold situation on the RSI and has bounced off the 200 day moving average. It should also be supported by the on going share buy back. There is also a gap on the chart at just under 400p (theory is that these get closed) which is a level I think this one could get back to at some point in the next year or so which would give a reasonable 20% capital gain and possibly 25% total return if you have picked up 2 dividends by then - not too shabby for a boring utility.
The obvious downside is the political risk bit I note after Centrica's recent agreement to import Shale Gas from the US - Prime Minister David Cameron added: “I warmly welcome this commercial agreement between Centrica and Cheniere."
“Future gas supplies from the US will help diversify our energy mix and provide consumers with a new long-term, secure and affordable source of fuel.” See this article for more details:
http://www.scotsman.com/business/energy/centrica-deal-to-import-us-shale-gas-for-uk-homes-1-2856785
Looks very sensible to me; like the yield , just need to find something to sell! On the watch list for now.
