CONSOL Energy’s CEO, Jimmy Brock, and CONSOL’s CFO, David Khani, join The Stock Podcast to describe the CONSOL investment thesis and the business of mining coal. CONSOL is one of the premier coal producers in the country. Tune in to hear management talk about the outlook for the business, the industry, and one of the most valuable coal assets in North America, the Pennsylvania Mining Complex.
Corporate Access
Wouter van Kempen is the Chairman and CEO of DCP Midstream, the largest natural gas gathering and processor company in the United States. Tune in to hear Wouter describe DCP‘s operational footprint, the game-changing technological advancements his company is implementing, and a truly compelling investment story.
DCP Midstream is one of a few MLPs that can boast of having consistently delivered on the inherent agreement between shareholder and management. The agreement relates to the cash the company distributes to investors via the dividend. Sure, one could argue that DCP is a troubled investment story, evidenced by the lack of dividend growth since the commodity price collapse of 2014. However, Wouter van Kempen and his team have done a phenomenal job steering DCP through a very uncertain period of the North American energy cycle and has delivered on one of the most critical components of the MLP investment thesis – stable distributions to shareholders!
Bahir Manios is the CFO of Brookfield Infrastructure, one of the largest diversified infrastructure companies in the world. Tune in to hear Bahir discuss BIP‘s asset portfolio, investment philosophy, and a very compelling investment story.
Will Eglin is the CEO of Lexington Realty Trust (LXP). Tune in to hear Will describe Lexington‘s portfolio transformation from a commercial REIT to an industrial REIT, the outlook for the LXP dividend, and the most important insider’s perspective on the value in LXP stock.
Lexington Realty is a REIT that has been around for years. But the business model has changed over time. Today is one of those times of change, especially as management sees the writing on the wall with respect to commercial real estate values and rents. LXP has already started the process of transitioning from a commercial REIT to an Industrial REIT. In order to achieve this goal, management has plans for re-rating the LXP dividend to a lower level.
Despite the dividend pause, there appears to be value in LXP stock. At the time of this interview, net debt is down to a manageable 4.3x EBITDA, and the company has completely repaid its revolver. Management has committed to buy back shares, while at the same time determined to transform itself into an industrial REIT by acquiring industrial properties – potentially up to $200M of industrial assets this year alone.
Assuming the company can execute on their plans, the LXP dividend could be resumed at 55-65% of 2019 FFO. I’ll note that consensus pegs the LXP dividend at $0.40-$0.48/share. That’s down meaningfully from 2017, but still juicy enough for The Stock Podcast and rationale real estate investors to Lexington Realty’s shares.
Tom O’Flynn is the CFO of AES Corporation (AES). Tom provides a great overview of AES Corporation’s business model. He also discusses some really interesting catalysts for the company and highlights a compelling investment case for the shares of AES’ stock.
AES is a power company, but it’s different from regulated utilities, IPPs, and yieldcos, yet at the same time has similar characteristics. The asset portfolio includes traditional generation facilities, renewables, and a lot of the essential infrastructure required to produce and transmit electricity. Since the current management took the reins in 2011, they’ve pruned the portfolio, with more than $5B in asset sales over the past 7 years and exited 13 countries. During that time, management reduced parent level debt by $2B, cut costs by $300M, and they’ve returned almost $3B of cash to shareholders.
Part of the return to shareholders has been through dividends, and AES has also bought back about 16% of their stock since 2011. Another interesting fact is that the company has reduced coal generation capacity by about 20% over the past three years, and they’ve replaced a large portion of that capacity with renewable energy. De-risking the business has also been a key priority. Management has reduced AES’ FX exposure to around 15% from 40%.
Maybe one of the most interesting facts about AES Corp is that they are the largest owner of battery storage in the world, and the recently announced storage JV with Siemens called Fluence. The Fluence JV positions AES extremely well for the future. One of the reasons the battery JV is so interesting is because of the growth outlook. Generally speaking, growth investors aren’t interested in utilities. That’s because, double-digit earnings growth in utility-land is almost unheard of, at least not on multi-year outlook.
Another potentially big catalyst for AES Corp includes IMO 2020. This is a gross oversimplification, but IMO 2020 puts a cap on the amount of sulphur shipping vessels are allowed to use in fuel oil. This global regulation bodes well for global LNG demand. And with respect to debt, individual projects financed with non-recourse term debt, which means there is a natural deleveraging component to the business.
Something I like about this management team is that they’re focused on what they know, understand, and where they believe they have a competitive advantage. This perspective led to reducing the number of countries where they operate and becoming more acutely focused on developing and owning long-lived infrastructure assets.
The Stock Podcast, previously known as ‘Investing with the Buyside’, was founded on the belief that every investor should have the opportunity to hear a CEO or CFO of a public company describe their business, industry, and outlook. The chance to sit down and speak with management is called corporate access. However, you might instead be asking yourself, what is the ‘buy side’, why is corporate access so important, and what’s the difference between the buy side vs sell side? Well, please allow me to grossly oversimplify a very complex industry.