After creating the Tarik.ca Sustainable Renewable Power Index i’ve decided to further analyze and compare all the companies within the index to find the best investment opportunities.
The Income Trusts in the index (demonstrated by the .UN ticker) provide much better value than the 2 non-trusts, which include Canadian Hydro Developers (TSX:KHD) and Plutonic Power (TSX:PCC). Canadian Hydro Developers is expensive relative to it’s earnings and it’s cash flow. Furthermore Plutonic Power does not have cash flow from operations.
Great Lakes Hydro (TSX:GLH.UN) is the most efficient company in the group with cash from operations yielding roughly 21% on equity. However it’s higher P/B ratio dilutes the benefits of having the highest internal returns.
Boralex Power and Income Fund (TSX:BPT.UN) provides the best value out of all the companies within the index. The over reaction to lower water flow in 2007, the one time income trust tax, temporary increases in biomass lumber prices and higher rates of goodwill amortization has resulted in shares declining over 50% in the last year. It is trading at 7.7 times Cash Flow from operations, equating to roughly two third of the average trust in the group which is around 12. At 7.7 times cash flow Boralex is trading at a multiple more akin to an oil company, not making justice to its safe assets. Furthermore Boralex roughly trades at 12 times earning, which is a steep discount relative to the group. I personally feel Boralex, just like CrestStreet is a takeover target due to the fact that it’s assets are very attractively priced at these low prices.
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