Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Z Best Place to Talk Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Mark Adams who wrote (49981)	1/10/2004 7:16:30 PM
From: Mark Adams	Respond to of 53068

I happened to discover that SSB has some research on NGG, which can be accessed by all after a free registration process. They went to a buy rating 11/14 then lowered to a hold on 12/5, based partially on concerns about 'the way forward'. Which includes the potential divestiture of some LDCs in the UK/Scotland. I spent a good amount of time listening to an NGT presentation which included a segment on this, leaving me with some of my own unspoken questions. But I'd offer an opposing view of what I understand to be SSB's concerns. To summarize, perhaps with error, SSB feels that if NGG divests a portion of their UK LDCs, using the funds to invest in US transmission would 'bad' and buying back shares/paying down debt would be 'good'. This is due to SSBs perception that NGG may not be able to deliver a decent ROIC on US investments. What I'd suggest, is that there are moving parts here- +consolidation in the US might depend to some extent on congressional action re PHUCA; +the declining USDollar is making US assets cheaper to overseas investors, and likewise- Euro/UK assets dearer; +time horizons; On the latter, if you're focused on the next year (most of us are naturally performance driven and looking at the track just before the engine) then share repurchase/debt paydown may create short term gains. Longer term, consolidation of a fragmented T&D network with fair & regulated returns, may create a niche company of much value to income investors with a long time horizon (ie widows and orphans). I don't know that longer term, paying down debt or reducing equity is a bad choice, but until a bit more time passes and moving parts move, NGG seems 'willing to explore options'. They'll divest if they can work a deal that works, without committing beyond that today. It seems appropriate that mgmt make the appropriate strategic choices at the appropriate time, rather than let the analysts take the helm. I like SSBs work, for the amount of detail and thought it appears they've delivered. FWIW smithbarney.com