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CenterPoint Energy, Inc. Message Board

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  • rds51 rds51 Feb 21, 2000 5:24 PM Flag

    Oil on Sidewalk

    cum. 44 what do you think of this 2.1 bil.
    purchase!! will it affect stock price or div. thanks. rei
    off about 33% over a years time $33 to 52 weeks
    low!!! Looks to me rei having hard time keeping up with
    what they already own. Good for my drip plan.

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    • I am certainly glad to hear the opinions of
      several other knowledgeable people about the Sithe
      purchase. That adds a lot of value to this board, and helps
      me a lot!

      First of all, if this is such a
      great deal today at $2.1B, I am troubled that it did
      not seem such a great deal 1-1/2 years earlier at
      $1.6-1.7B. This is assuming that what GPU sold, is what REI
      bought -- if there has been any value added (like that
      hypothetical 2700 MW of brand new gas turbines), REI would be
      highly remiss to not point that out quite
      clearly.

      I am far more confident of investing in a company
      which knows what it wants, and doesn't change its mind
      all that often. In 1-1/2 years time we have gone from

      "South America is the place we will concentrate and make
      great profits", to
      "South America is what we DON'T
      WANT, instead the best oppotunities are in North Europe
      and America".

      The rather frequent change of
      direction seems contradictory to me, rather than showing
      ever-more-brilliant new opportunities. You will notice most other
      utilities staying their course rather more
      consistently.

      Before, REI claimed it expected to grow earnings
      8-10%/year, which would be most applaudible if they could do
      it. Now they have a new direction and a claimed
      target of 10-12%/year, which would be extremely good.
      But what strategy is going to take them to this level
      of EPS growth? The experience with Argentina,
      Brazil, and Colombia already shows that REI can misjudge
      opportunities.

      We will be in great shape if REI does not misjudge
      current opportunities, and they deliver on that 10-12%
      growth target. The stock price should treble if that
      becomes reality. But I will have to trust somebody else
      to judge their financials, because they already have
      mutated their income statement beyond the ability of the
      normal investor to understand it.

      It would be
      prudent to remember the experience of CMS Energy
      (NYSE:CMS), which also set an ambitious 10% earnings growth
      target, missed it and has to cut its dividend in order to
      maintain financial health. Supposedly CMS will recast
      itself as a higher-growth company with a far smaller
      dividend. Mr. Market hated that -- CMS shares are now down
      almost 60% this year.

      Let us hope REI will get us
      better results, even if it doesn't really know how it
      will get there. -- C44

 
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