Just Energy Group Inc. (Canada) JENGQ

Here is a take on the news...

[longondmx]

 "The retailer of natural gas and electricity said the acquisition will "significantly" improve its balance sheet but lower its base EBITDA, with 25% coming from National Energy."

"After the repayment of NHS debt, the buy out of the royalty interest, taxes and transaction costs, the Company expects to utilize the net proceeds from the sale to reduce its debt. The total debt reduction following Closing is expected to be approximately $400 million."


If EBITDA is decreased 25%, and it resulted in a net $400Million realization, would it not stand to reason that the balance of the company (ie. the remaining part that makes 75% EBITDA) would be worth $1.2 billion (3 times $400 million) - if we were to value the company as a function of EBITDA?

With this reasoning, the company's stock should be worth about $8.33  ($1.2 billion divided by the outstanding number of shares).  Discount slightly and we should easily see $7-7.50 leaving the NOW MUCH SAFER dividend yielding between 6.5 - 7% going forward.

I think this may be the reason we are seeing the company rise in value...improved balance sheet, realization of some of its assets that has been put towards reducing debt and a greatly improved outlook wihout the overhang of an unstainable divident.

 So, one has to ask themselves if the upside ofthe company at $6.50 exists...and I think the way the market is reacting today it is suggesting it does.