That's my best prediction of what would be a recorrent net income for ELPL. And dont't forget the huge demand of Eletrobras, about 1 billion.
What Parisotto would say?
Friday, April 13, 2012
ELPL4 - Eletropaulo
Market is indeed very crazy! It was so in love by dividends and energy companies that just now they realized that the price revision would have a great impact on earnings! If revenue drops 10%, earnings will fall a lot more!
That's my best prediction of what would be a recorrent net income for ELPL. And dont't forget the huge demand of Eletrobras, about 1 billion.
What Parisotto would say?
That's my best prediction of what would be a recorrent net income for ELPL. And dont't forget the huge demand of Eletrobras, about 1 billion.
What Parisotto would say?
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8 comments:
Well, we saw this coming for months. Fortunately I sold it for 37,00, althought reluctantly. I did the same with COCE3. It was so obvious ot was going to happen, it was annunciated for so long, and why only now Mr. Market reacted.
I will wait for the next earnings reports or for a huge drop in price of ELPL4 to buy it back from Mr. Market.
About the 3rd revision adjusment: The numbers released by AES were for the whole semester, not only the 4th quarter. Shoudn't you multiply for 2 instead of 4?
Oh, I checked the 4Q11 release. The adjustment for the 3rd revision should in fact be of BRL 708M!
Based on your assessment, and considering a Capex equal to the depreciation and subtracting 1B from the pending itigation with Eletrobras, I would buy ELPL4 for BRL 27,00.
Base FCF: 500M
first 10 years growth: 2%
growth perpetuity: 0%
discount rate: 6.5% (i'm reducing my discount rate from 7%)
Present value: 9B
Present value less litigation: 8B
upside required: 80% (steady business, no competition, good administration)
Present value less litigation/1,8 = 4.44B
4.44B/4.79B = 0,93 x 28,61 (closing priceyesterday)=>my price is 26,51.
Considering there's a chance ELPL wins the litigation with Eletrobras, I rounded my target up to BRL 27.00.
The weakness of my calculations is the base FCF, because we can't be sure about the impact of the 3rd revision and the size o the capex from now on.
I have a target of 27.30, not considering the 2 first years of dividends, because of Eletrobras.
In fact I think my premisses are a little too optimistic. ELPL's 2011 capex was 738M vs 682M in 2010. My analysis is for a 500M capex, equal to depreciation. I also started with a 500M profit, wich is more than your numbers tell. More importantly, I think it's not possible to include growth in the DCF analysis, because the ROE will be further reduced in the next revision. I also don't know if the capex will remain high for the next years, because there's growing pressure for ELPL to improve it's services.
So my price is BRL 26.00.
In 2012 ELPL is planning to invest 800 mi. I think that the high capex came to stay a long time.
My best guess says that recurrent yield would be about 8%. It's not much, but the real fixed income rate is falling. Remember that we have FII yielding also 8%.
I think that at 27.00 I'll take a chunk.
Eletropaulo pode rever investimentos
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