Energy Action Group (ASX: EAX) is rare among environmentally positive equities in that it is profitable and is able to pay regular dividends. It was listed on the ASX in October 2011 at $1.00 per share. EAX provides energy retrofitting services to government and private organisations. It also owns the Australian Energy Exchange where energy retailers bid to provide the best energy prices to organisations and those organisations are able to re-sell excess energy already contracted. Both services provide substantial savings to their customers and have environmental benefits.
At the current $2.45 per share, the dividend yield is 2.94%, but this is covered twice by the internal earnings yield of 6.1% (PE 16.3). The Cashflow yield is even higher, at 7.6%. ROE after tax is an impressive 34.8%. This is a typical profile for a growth stock, but unlike some growth stocks EAX’s balance sheet is extremely healthy. At 30 June 2012 EAX had no significant borrowings and there was $6.8M cash in the bank. Since then they have taken over a similar business, Ward Consulting, for $4.2M.
Energy Actions’ business growth is impressive. We have examined pre listing accounts back to 2008. Comparisons are difficult, but there is an obvious pattern of growth in profits and assets. In February 2012 the Federal Government’s announced that energy saving measures taken by small manufacturers will be subsidised on a 1:1 basis, compared to the previous 1:3 basis. This should bring more business Energy Actions’ way. A negative is that a large proportion of shares on issue are held by pre-listing investors, management and staff. They may be tempted to sell at share prices well above their pre-listing entry price.
Research provided by
August Investments Pty Ltd
(August Investments holds shares in EAX)
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