Utilities are always heavily favoured when it comes to periods of economic stagnation or indeed volatility. The argument goes that people will still need water, sewage, power and heating, regardless of what else is going on in the world. Indeed, power and heating have become something of a political football in the UK at the moment.
But not all utility companies are created equally – some are complete duds, and managed with little regard for shareholders, or have lazy state level investors on their shareholder registers. In this article we look at five of the best of the best in this area, including am interesting South American power company.
1. Australia: Genex Power
Genex Power [ASX:GNX] has a reduced cash flow rating and its PE ratio makes it look a tad expensive from our perspective, but it has a superb assets and liabilities picture. According to latest data we see AUD 770m on its balance sheet with AUD 556m in liabilities. This is an Australia-based company that focuses on renewable energy generation and storage projects. It is the only remaining listed company on the ASX which is solely focused on this area. AND it just announced an AUD 1m net profit driven by a significant jump in revenue from two operating 50 MW solar farms.
2. USA: SJW Group
SJW NYSE:SJW is a US water utility that is listed on the NYSE and measures up very well against peers like American States Water and American Water Works. It sits on top of a portfolio of regional US water companies like the Connecticut Water Co and Maine Water Co. It announced an increased dividend of 38 cents cash in January, so things seem to be looking up in the US water game. This is the largest investor-owned pure-play water and waste water utility in the US with 1.5m Americans currently relying on it for their water. It doesn’t get more secure than this in our view.
3. Japan: Tokyo Gas
We continue to like Tokyo Gas [TYO:9531]. This is an incredibly cheap Japanese energy play with a PE of 5.1x. It has published a strong set of financials for Q4. It boasts a strong balance sheet and seems to have some momentum behind it. Shares spiked briefly to 2868 yen on the latest numbers. Tokyo Gas is currently still off its 52 week high of 2877. Shares have been in recovery mode since October 2021. This stock looks like it has the following winds to take it past the 3000 yen mark. Investors in Japan were not happy with its news that it will start using a considerable chunk of its profits to slash its carbon emissions. But this too shall pass.
4. USA: Brookfield Renewable Corp
Listed on the TSX in Toronto, Brookfield Renewable Corp TSX:BEPC is looking very cheap for what you’re getting, with a PE of 9.1x. The company posted some very exciting Q4 results with sales of USD 956m. Yahoo Finance called this their Bear of the Day today but that’s just looking at the technicals in the share price. UBS Group has been buying into this stock big time according to SEC filings. Brookfield Renewables represents one of the largest pure play renewable energy platforms with a huge portfolio of wind, solar and energy storage projects.
5. Chile: Colbun SA
I like to include an emerging markets stock in these lists for the more adventurous out there. Colbun is a Chilean company active in the renewable power market. It is also the third largest operator in the National Electric System of Chile (SEN). It put out some impressive results at the start of this month, which has reinvigorated investor enthusiasm for the company. Looking at the income statement, we saw a growth of the ROE ratio (return on equity) of 10.7, that’s +202%. EBITDA is also up 393%. We can only hope they offer investors an ADR soon!
