Opinions
Gajan Kulasingam
Transalta Corp
TA-T
COMMENT
Mar 31, 2015
Stock price when the opinion was issued
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We reiterate this Canadian based developer of renewable energy as a TOP PICK. They recently announced the startup of a 200MW wind project in Oklahoma that is fully contracted - their 30th successful wind project. Shares trade at 12x earnings and support a robust 33% ROE. Quarterly cash reserves are growing again, while debt is retired and shares bought back. We continue to recommend a stop at $8.50, looking to achieve $13.00 -- upside potential of 26%. Yield 2.2%
(Analysts’ price target is $13.75)Ton of drama for many years. Exciting play when it separated out RNW, but then they put them back together. Underperformed since then. Not a bad name, but doesn't have the nice dividend that others in the space do.
Not the first place he'd put money. Dead money absent other catalysts. On a really sharp pullback, you could add. If you own it, it's a fine hold.
Our PAST TOP PICK with TA has triggered its stop at $16. To remain disciplined, we recommend covering the position at this time. Combined with our previous guidance, this will result in a net investment gain of 46%.
He's looking at it. It's softened up considerably. Decent dividend payer, cut a few years ago but now back on track. High-quality company with share price having sold off. An opportunity, but he hasn't pulled the trigger yet.
Spike on chart due to strong earnings and a bunch of analysts giving it a "Buy". Got ahead of itself. Disappointment recently. He doesn't like buying at all-time highs, where there's often more downside than upside.
A bit of a tough story in the near term. Balance sheet is a little bit levered up and they need to de-lever it. They spun out Transalta Renewables (RNW-T) which unlocked some value. Have a significant amount of assets that they need to drop-down into Transalta Renewables. They’ll take that cash back and de-lever the balance sheet. He thinks they are committed to maintaining an investment grade balance sheet. It is going to take some time for them to work through this cycle, so you are going to have to be patient.