ene : reiterate buy ; believe leadership still intact ene : reiterate buy ; believe leadership still intact
* ene has underperformed its peer group of energy merchants . stock
price down 39 % from 52 - week high ( $ 90 on august 23 ) vs . peer group , up 1 . 9 % .
* we reiterate our buy rating on the stock , and believe the weakness
is largely due to concern over ene ' s group - high p / e multiple and peg ratio
of 27 x and 1 . 3 x , respectively ( group average 19 x and 1 . 0 x ) , coupled with a
series of concerns over various parts of enron ' s business : bandwidth , india ,
etc .
* our sense is that the bandwidth unit is performing on target , and is
likely to beat the strong numbers posted last quarter . india , while a
significant issue , remains a small part of enron ' s asset base ( about 4 % ) .
it is a legacy business , in our view , and does not materially affect our
overall view of the company .
* we see ene ' s business fundamentals intact , and in fact , improving .
growth rate expansion to 25 % from 20 % ; growing returns on capital ; bandwidth
trading all good reasons to own stock - - justify premium valuation .
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raymond c . niles
power / natural gas research
salomon smith barney
( 212 ) 816 - 2807
ray . niles @ ssmb . com
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- ene 5 - 18 - 01 reiterate buy . doc
- ene 5 - 18 - 01 reiterate buy . pdf