Analysis of Cez 2016

Company: Cez 

ISIN CZ0005112300 | WKN 887832 

Business: A Czech electricity producer and distributor. They offer heat and gas to consumers and are active with telecommunications, informatics, nuclear research, planning, construction and maintenance of energy facilities, mining raw materials, and processing energy by-products. 

Active: Czech Republic, Poland, Bulgaria, Hungary, Slovakia, Romania and in Turkey. They wanted to step into Germany buy buying assets from Vattenfall but have currently taken a step back from that position.

P/E: 10.7

Here you can find the previous analysis of Cez 2015. 

The P/E for Cez is good with 10.7 as is the P/B with 0.9 which gives a very clear buy signal from Graham.Their earnings to sales looks excellent with 10% but the ROE is only so, so with 7.7%. The book to debt ratio is ok with 0.8.
In the last five years they have had a poor yearly revenue growth rate of 0% which gives them a motivated P/E of 8 to 10 which means that they are fairly valued by the market today.
The dividend has not yet been decided for the year and I actually expect it to decrease but if not then they yield would be 9.7% and it would correspond to over 100% of their earnings which is clearly not sustainable in the long run! But as I said... I expect them to decrease it which will not please the Czech government.

Conclusion: Graham says yes to Cez and personally I would wait. The entire business are strongly pushed down, which is fine for stepping in as a contrarian, but the problem here is that there is not even a light shining in the end of the tunnel. One should really see that before stepping in. If they do decide to cut the dividend then most likely the share price will drop so I see no reason to hysterically jump on board of this one. I will of course remain as shareholder but I will not increase my holding.

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