According to the latest yahoo headline for NRGY, ten (10) companies have been acquired by NRGY in 2004. Is this what is holding the unit stock price down? Does anybody know how many more companies NRGY will acquire in 2004? While the price is down a bit, this price does seem to hold its value, along with paying a nice dividend. I think this company is on the right track for sucess. Now is a good time to acquire more, IMHO.
You may never hear much more about them! Timing is bad, and I don't know if these things are going to make it to IPO or not. Plus, there are real concerns about the tax structure. In any event, the selection of businesses is not stellar, in my opinion. The IDS was meant to be a US answer to the Canadian business trust, but so far it has been a pretty anemic answer.
I note that Alaska Comm spun off its directories business as a CanBiz trust. ACS Media. A company I'm very much interested in.
"Is this what is holding the unit stock price down?"
I hope not. This is what NRGY does. They are a roll-up artist. They grow the distribution by making acquisitions.
It's profitable because the idustry is so fragmented.
NRGY's strategy is to buy existing local brands that serve mostly retail customers in areas with high population growth. Then they leverage their wholesale ability and existing employees to make those purchases accretive.
So yeah, I expect NRGY will do their darnedest to purchase 10 or more companies in the second half of the year. Or in the 2nd half of this quarter, if they can.
"I think this company is on the right track for sucess."
That was probably the best post on the whole board. Sums up NRGY perfectly.
Inergy indeed is a roll-up MLP. They acquire small (often family owned propane distributors) for what usually amounts to 6x-8x cash flow. They are simply arbitraging the difference in the price they pay and the cost of capital, be it debt at 6% or equity at 7%(ball park numbers). The difference is then spread over the new unit float. Obviously, the distributable cash flow or DCF per share(ok, actually unit if you want to use MLP lingo) better be more than before the acquisition. If it is, then the deal is accretive and allows for an increase in the distribution. Obviously as they grow, it becomes harder and harder to make accretive acquisitions that are meaningful. This is why the General Partner or GP gets incentive distribution rights that give the GP an incentive to continue to grow the distribution.
Inergy is very small relative to alot of the other propane MLP's and this is a tremendous advantage in terms of being able to make accretive acquisitions. In addtion they have a fairly strong distribution coverage ratio as well as an industry low debt to cap. Inergy has a talented management team with alot of skins in the game and has pulled talent from some of the best MLP's(Kinder Morgan, Ferrell etc.). I think they can easily grow the distribution at 10% a year for the next few years without any difficulty whatsoever. Just gotta stay disciplined.