Operating a regulated business in Brazil is no picnic, as investors in companies as diverse as Cosan (CZZ), Petrobras (PBR), AES (AES), and CEMIG (CIG) can attest. It's no less of an issue for COPEL (Companhia Paranaense de Energia) (ELP),
as concession expirations in 2015 threaten both the generation and
distribution businesses, and there are no guarantees that Brazilian
authorities will continue to be reasonable with tariff adjustments for
operators in the electrical utility sector.
It is not as though
these risks are going uncompensated, though. COPEL is priced to yield
about 5% today and does look meaningfully undervalued on the basis of
2014 EBITDA. What's more, Brazilian auctions are often predicated on
construction costs and COPEL has a pretty good record of spending less
than they initially expect. Couple that with an under-leveraged balance
sheet and an underlying growing market that needs more power, and I
think the combination of potential capital gains and higher dividends
merits a closer look.
Please follow this link for more:
This Brazilian Company Offers Good Dividend And Cap Gains Upside , But Mind The Risks
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