Today the bad news on markets caused the TSE to slip nearly 80 points in midday trading. Commodity prices sank on reports of slower growth in the euro zone and China, which fueled concerns over the demand for Canadian resources. This was exactly the good news I was waiting for, as my order for 100 shares of Husky Energy (HSE) was filled at $25.49 per share.
As mentioned in my previous weekly lineup, I was waiting for a pull-back in the price of Husky, so today I was delighted to wakeup and see the TSE in the red.
Husky Energy is a stock I’ve been watching and wanting to own since I started dividend investing, but never seemed to actually buy. It was one of my 2011 Stock Picks, I chose it for the Dividend Growth Index, and again recommended it in my 2012 Stock Picks. Now I’m an owner in this company, and plan to hold this one for the long term. I’ll be buying more of Husky on the dips, and gain a nice 4.60% dividend yield while I’m waiting. With a modest 100 shares I’ll also be able to DRIP one share per quarter, and slowly build up my new but small core holding.
Husky Energy founded in 1938, is now one of Canada’s leading oil and gas producers, based in Calgary, Alberta. Husky is listed on the Toronto Stock Exchange (TSX), under the symbol HSE. The company has the majority of its production in western Canada, where it has extensive conventional oil and natural gas assets, as well as heavy oil production, and interests in the oil sands. The company owns drilling platforms, refineries, upgrading facilities, pipelines, as well as retail gas stations. Husky also owns interests in China, with the producing Wenchang oilfield, and is currently developing the Liwan Natural Gas Project in the South China Sea under its CAPEX (capital expenditures) Program. The company also holds exploration rights offshore Indonesia, has a refinery in Lima Ohio, and holds a 50% ownership in the BP Refinery in Toledo Ohio (Info courtesy of Wikipedia). In fact there are a few Husky gas stations here in Vancouver. If you rent a truck for moving, you will likely be fueling the diesel from a Husky pump. According to Wikipedia, Husky produced an average of 307,000 barrels (48,800 m3) of oil equivalent per day in 2010.
It’s hard to believe Husky was over $50 per share before the 2008 and 2009 financial crisis. Its 52 week trading range is currently between $20 and $30 per share. Husky is a $25 billion dollar company, with over $23 billion in annual revenue, and a profit margin of 9.52%. It has its debt well under control with a reasonable debt-to-equity ratio of 22.19. The sweet spot for Husky of course, is the 4.60% dividend yield. The annual dividend is $1.20 per share, with earnings per share of $2.40. This gives Husky a 50% dividend-payout-ratio. The basics for Husky are quite attractive and appear to be quite solid.
The New CEO
In June 2010, Asim Ghosh became the new CEO of Husky. Asim is an all-star CEO who has served on the boards of companies like Procter & Gamble, and Rothmans International. He is the former Managing Director and CEO of Vodafone Essar Limited, became a Senior VP of Carling O’Keefe, and later became founding CEO of Pepsi Foods’ start up operations in India. He served in senior executive positions and as Chief Executive Officer of the AS Watson consumer packaged goods subsidiary of Hutchison Whampoa (from his corporate bio).
Asim has a stunning corporate background, and his appointment to Husky Energy is an interesting one. Hutchison Whampoa is a flagship company of Hong Kong billionaire Li Ka-Shing. In December 2010, Li Ka-Sing became the majority shareholder of Husky Energy with his purchase of 14.1 million shares ($345 million dollars) in a private placement. The point being, the predominant shareholder in Husky is one of the richest men in the world, and the company is currently under management from an all-star CEO.
Capital Expenditure Program (CAPEX)
As well as good management, successful companies are also those that pay a reasonable dividend yield to their shareholders, but also reinvest their capital back into infrastructure and expansion. In fact Husky has been pursuing a very aggressive CAPEX program this year. Much of this CAPEX appears to be funded through new issues of common shares, preferred shares, and unsecured notes. In a recent press release of their 2012 Capital Expenditure Program, Husky states the following:
“Approximately 60 percent of the Upstream gross capital expenditure program is directed towards the Company’s growth pillars. Investment in the Sunrise Energy Project more than doubles to $610 million as construction activity ramps up and the project advances towards planned first production in 2014. Just over $1 billion is budgeted for the Asia Pacific Region as fabrication of deepwater and shallow water facilities for the Liwan Gas Project accelerates. Liwan remains on target for first production in 2013/2014.”
I’m glad to be a share-holder in Husky before these projects come online, and one of my goals was to purchase Husky before 2013 and 2014. In my opinion, with solid financials, an aggressive CAPEX program, international assets, and an all-star CEO at the helm, Husky may represent good value at its current price. I believe Husky Energy may be a sleeping giant for current investors in the future. 😉
Readers, what’s your take? Are you an owner of Husky Energy? Do you see this as a turn-around company with future potential?