Those looking into some
catalyst might want to ponder over these names for the week. I have done research on few of them, the other I
have read online, on Barron’s and other publications. These are def. is worth a serious look.
Utility sector: As usual, people think this is a boring sector to
dwell into. However, as power plants switch from coal into a more renewable
energy mix, there might be an potential M&A opportunities in this sector,
specifically with those firms that are into renewable space. This is not the
time for huge LBO’s of buyouts especially In the sector that’s regulated on the
revenue side. However, some small and mid cap names are worth a look, at they
not only bring a client base but help the acquirer reduce cost and increase
margins. Some names do come to mind : Hawaiian Electric (HE) - Approx 5% yield
and capturing and generating solar energy in addition to non-renewable. Portland
Intuit (INTU): This technology company might be poised for a huge
dividend increase. The firm just sold its financial services unit to Thomas
Bravo for USD 1bn and plans to sell its healthcare business. With USD 2bn in
cash and USD 500m in debt, the completion of second divestiture, might either
propel the firm o return cash to shareholders of make accretive acquisition.
Its worth a look!
Maple Leaf Foods (MFI): IN light of the recent Canadian M&A, this firm
might be worth taking a look at. The company has not only been cited repeatedly
as a takeover target, there were rumors it was
looking to divest. If not for takeover, the fundamentals of the firm
support organic growth in food sector, given the demand and consumption. Also,
33% owned by M. McCain, the CEO and 11.4% owned by canadian activist - west
face capital. There is a chance, the firm might get sold in the future.
Citigroup (C): There was a good article this week on Citigroup (C) , which I believe is worth a read . Some in industry believe the stock is worth USD 70s to low-USD 80s: Some of the key points it made were as follows:
· Management change : 17-April-12, Chairman Michael O'Neill, a former Marine known for turn around in banks and a new CEO, Michael Corbat, a former banker.
· Truly global franchise, which is almost
impossible to replicate: Citi is in 160 countries. All told, about 58% of
Citigroup's revenue comes from outside North America .
In contrast JPMorgan Chase (JPM) gets just 19% , while Bank of America
· Bank is sitting on USD55 bn in
deferred tax assets, or future tax write-offs, which will be increasingly
valuable in using its capital more effectively. Helps improve earnings and
create leeway for future stock buybacks and dividend increases.
· Citi has received permission to buy
back USD1.2 bn of its shares through the first quarter of next year, a
relatively modest amount but an important symbolic victory.
· Corbat plans to lift return on assets
to 90 to 110 basis points from the 62 basis points recorded in 2012 (a basis
point is one-hundredth of a percent). He's aiming to boost ROE to more than 10%
from 5% in 2012, and to attain an efficiency ratio at Citi in the mid-50% range, compared with 60% in
2012. Keeping with his promise, CEO has cut 11,000 jobs worldwide, sold or
scaled back consumer-lending operations in Turkey ,
Romania , Paraguay , Uruguay ,
and Pakistan , and sold a
consumer-finance unit in Brazil
· Many believe the bank is
overcapitalized. Additionally, Latin America contributes 13% to overall revenue --
Citigroup's corporate and retail banking revenues are increasing at
double-digit clips compared with domestic growth that's been flat, excluding
Citi Holdings.
· The level of problem assets in Citi
Holdings , a.k.a. the bad bank stands at USD149 bn, well off its peak of about
USD800 bn in 2008. Just unlocking the capital connected to Citi Holdings could
add as much as USD10 a share to his price target of USD60.
Personal Note: I am still long HES CALLS expiring in Jan-14. In addition, I have
still held on to my DELL LEAPS.
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