Opinions
Steve DiGregorio
EnerCare Inc
ECI-T
HOLD
Oct 30, 2015
Stock price when the opinion was issued
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They have a very stable business. They rent their water heaters to consumers and when the heaters fail people normally rent another one. This stability allows Enercare to pay a high dividend. Rising interest rates are the enemy of yield stocks, including Enercare but the dividend is likely to rise and the stock has gone down too much. (Analysts' price target is $24)
He has been very interested in it based on the news today of Brookfield acquiring it. Brookfield are an astute buyer. There is a 53% premium attached to this transaction based on yesterday’s close which is roughly the gain today. The strategic process has been open for a few months. Brookfield normally make an offer at a lower price and hope the target management team takes it. Are there likely other buyers? He does not think there are. Brookfield may be the only game in town. If hold stock, will hold to see if Brookfield sweetens the pot but once gets close to offer price, would be selling.
Shareholders are having to decide to wait for the BIP-T shares after the recent acquisition or sell near the $29 offering price – should they wait? He thinks the market is clearly expecting the deal to proceed. This offers investors less downside and more upside. He would recommending waiting for the conversion and taking the BIP-T shares.
A really boring business. Water heaters, water furnaces, rentals with almost a door-to-door sales style of business. This generates a lot of free cash flow. What is really interesting is their meter system. They go to large apartment blocks and install meter systems, and get a meter feed for every person on a monthly basis. That has a lot of torque to the upside. This is a new part of their business and you should see this coming in over the next 4-6 quarters. He likes the stock here. He doesn’t own it, but does own their debt. Dividend yield of 5.5%.