Companhia Paranaense de Energia - year end results
The company listed above, more commonly called COPEL (ELP: 19.86 +0.23 +1.17%) released 4th quarter and 2007 year end results yesterday. I have not seen anything yet on Yahoo Finance, so I went to the website and dug out the earnings report press release. Fortunately, they have an English version, unfortunately all results are in Brazilian Reals, so the only numbers that make a lot of sense are the percentage changes.
As background, COPEL is the power company for the Brazilian state of Parana, in the southern part of the country. The state government owns 58% of the common stock. This company is an infrastructure play on a growing area of Brazil. Past growth has been explosive, but the company seems to be settling into a more stable growth pattern.
Here are some of the figures I pulled from the earnings press release:
- Net operating revenue (total revenue minus a bunch of acronyms) was up 10.9% for the year. Q4, 2007 was up slightly over Q3.
- Total energy consumption for 2007 was up 6.8% over 2006, driven by an official 6.6% employment increase in the state.
- Net income for the year fell 10.9% due to a 16% increase in operating expenses, primarily due to a 13.3% increase in depreciation and a 26.4% increase in “financial compensation for the use of water resources and concession charges – Aneel grant.” ANEEL is the national electric energy agency.
- Net income in the 4th quarter was up 15.7% over Q3 and 0.6% higher than Q4, 2006.
- The net per share for the year was R$4.0, giving a trailing PE of 7.3 based on today’s Brazilian market price of R$29.50.
- The proposed dividend works out to 24% of net income, or 3.2% of the current share price. The dividend will be submitted to the shareholder in April 2008.
COPEL is happy to point out in the news release that the share price increased 29.5% (NYSE) for 2007. I believe this is a steady way to partake in any growth in the Brazilian economy.
Note: I currently do not have a position in ELP.
Russia infrastructure play: KHD Humboldt
KHD Humbolt Wedag, International, Ltd. (KHD: 26.86 -1.61 -5.66%) has announced two new concrete plant contracts signed with Russian concrete companies worth $119 million. This is a pretty nice addition to the company’s reported order backlog of $925 million.
KHD provides industrial equipment like concrete plants primarily in developing nations, with a significant amount of their business in Russia and India. As these countries work to improve their infrastuctures, KHD will have lots of opportunities for increased orders, revenues and profits.
From what information I can find, this company has had very little following in the financial world. KHD is Hong Kong based and in 2007 divested itself of a financial services arm, that had up until that time defined the company. They now are focused 100% on the equipment business, and growth prospects are excellent there.
The share price has fallen significantly recently on no news. The press release today (link below) has had a positive effect on the shares. I think the company has huge longer term potential and the stock could double or triple in the next few years. KHD is a component of this site’s hypothetical 20 Stock Portfolio.
KHD Humboldt Wedag International, Ltd. - News Release
Note: I have a long position in KHD.
Stock Review: AFP BBVA Provida
It took me half the day just to figure out what to call this company. The actual company name is Administradora de Fondo de Pensiones Provida. It is a pension fund administrator, known in the Spanish speaking world as an AFP. The company is majority owned by the Spanish banking giant ($85 billion market cap) BBVA (BBV: 19.23 +0.21 +1.10%) so the name gets condensed into BBVA Provida (PVD: 24.95 -0.37 -1.46%). BBVA has banks and AFPs in at least nine Latin American countries and as far as I can tell PVD is the only subsidiary trading as a separate stock and ADR.
BBVA Provida is the largest of the six major AFP’s in Chile. In 1981 Chile privatized their social security pension plan system, so now all employees have mandatory payroll deduction pension deposits that go to an AFP such as BBVA Provida. Almost 70% of Chilean workers pay an mandatory 10% of their pay into their individual social security accounts. They can voluntarily increase the contribution another 10% of wages. An additional 2.4% of wages is taken to cover the administrative costs of the plan.
The 2.4% cut is the primary revenue stream for the AFP’s. About 0.65% is for life and disability insurance, the rest is administrative charges, i.e. revenue for the AFP. From my research, it appears the company gets an additional 0.50% management fee on the assets under management.
BBVA Provida, as the largest AFP in Chile, has approximately $36 billion under management. The company has a market capitalization of about $800 million. Stock in BBVA Provida trade in the U.S. as and ADR with the symbol PVD. I like the stock for a couple of reasons:
- Assets, revenues, and net profits have been growing at a 20%+ rate for the last 3 years. The shares currently trade at a 7.7 trailing PE. This is near the bottom of the historical PE range for PVD.
- Healthy, if somewhat variable, dividends are paid twice a year. Averaging the last 3 years dividend into the current share price shows a 3.2% yield.
- The company give a broad exposure to the growth of the Chilean economy. The revenue streams are constant and profit margins should stay firm.
Negatives would be recent market down turns reducing assets under management and possible contribution levels. A remote possibility is that social security laws are changed in Chile that negatively impact profit margins.
BVA Provida will now become the 19th component of this site’s 20 Stock Portfolio. With this portfolio I am following growth and income opportunities that I find attractive.
Note: I currently do not have a position in PVD.
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