The Zacks Analyst Blog Highlights: Dominion Resources, Rogers Communications, Vodafone Group, TELUS and BCE
CHICAGO, Sept. 16, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Dominion Resources (NYSE:D-Free Report), Rogers Communications Inc. (NYSE:RCI-Free Report), Vodafone Group Plc.'s (Nasdaq:VOD-Free Report), TELUS Corp. (NYSE:TU-Free Report) and BCE Inc. (NYSE:BCE-Free Report).
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Here are highlights from Friday's Analyst Blog:
Dominion Finally Going the MLP Route
After a decade long deliberation, Dominion Resources (NYSE:D-Free Report) has finally decided to form a Master Limited Partnership (MLP). The timing is immaculate given Dominion's high quality assets and the recent Department of Energy (DoE) approval to export natural gas.
In fact, selling natural gas in the overseas market could be a cash churning business for these energy companies. DOE's approval was well accepted in the market with Dominion shares gaining nearly 2% in a day's trading, closing at $59.78 yesterday.
MLPs have become an important investment vehicle for energy companies since the first MLP was launched in 1981. MLPs have indeed gained prominence over the last three decades due to tax advantages and lower cost of capital. MLPs generate ample cash flow, which are regularly distributed among unitholders in the form of cash distribution.
What an MLP Means to Dominion?
Dominion will form an MLP comprising its natural gas assets that is scheduled to begin operation in 2014. The MLP will initially include the Cove Point liquefied natural gas terminal in Maryland and Dominion's interest in Blue Racer Midstream LLC. This is expected to generate $1 billion of earnings before interest, taxes, depreciation and amortization (EBITDA), annually. Dominion also has plans to add another group of assets which will generate another $1 billion of EBITDA.
Dominion is presently involved in a number of development projects and will require ample funds to carry out these activities. The projects in which this proposed MLP will be involved in will generate free cash flows. Moreover, the predictable and stable revenue streams of the MLP will attract investor attention.
Dominion will require a capital investment of nearly $3.4 billion to $3.8 billion to add liquefaction capability at the Cove Point plant. Though Dominion will not find it difficult to secure funds from other sources, the MLP structure will make it all the more convenient to raise fresh capital from the markets. In this low interest rate environment, we believe the Dominion MLP will attract investors looking for assured returns in the guise of cash distribution.
The MLP will also allow Dominion to enjoy a special tax exemption, which the partnership can pass on to its unitholders. Also, the cash distributed from an MLP to its unitholders is not subject to taxes, thereby saving it from double taxation. This is generally not applicable for companies and their shareholders at the time of dividend payouts.
Rogers Hires New CEO
Recently, Rogers Communications Inc. (NYSE:RCI-Free Report), a leading Canadian telecom and cable TV operator, has assigned Guy Laurence as the next president and Chief Executive Officer (CEO) effective Dec 2, 2013. Guy Laurence aged 51, will replace Nadir Mohamed who plans to quit later this year.
During Nadir's 13 years tenure, the company witnessed consistent growth with both revenues and earnings per share (EPS) growing at a three-year (2009-2012) compounded annual growth rate (CAGR) of 2.6% and 12%, respectively.
Management believes that Guy's 30 years of experience in telecom, pay-TV and media will certainly benefit Rogers Communications in the long run. Guy headed Vodafone Group Plc.'s (Nasdaq:VOD-Free Report) Netherlands division from 2000 – 2005, before he was shifted to the company's U.K. division. He also held important positions in many corporate firms which includes MGM studios.
In the recently concluded second quarter of 2013, Rogers posted mixed financial results with the bottom line missing the Zacks Consensus Estimate whereas the top line surpassed the same.
At present, Rogers has expanded its superfast LTE network to 60% of Canada and expects to achieve a 100% foothold by late 2013. Hence, we believe that the appointment of the new CEO will be crucial to the company's future.
Currently, Rogers Communications has a short-term Zacks Rank #3 (Hold).
Other Stocks Outlook in Related Industries
Other stocks in this sector like TELUS Corp. (NYSE:TU-Free Report) and BCE Inc. (NYSE:BCE-Free Report) are set to gain from the extensive/increasing LTE deployment in the upcoming days. Currently, both TELUS Corporation and BCE Inc. have a Zacks Rank #3 (Hold).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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