December 09, 2011 - 9:46am EST by
2011 2012
Price: 7.15 EPS $0.00 $0.00
Shares Out. (in M): 22 P/E 0.0x 0.0x
Market Cap (in $M): 155 P/FCF 0.0x 0.0x
Net Debt (in $M): -93 EBIT 0 0
TEV (in $M): 62 TEV/EBIT 0.0x 0.0x

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GNE is a spin off from IDT.  The story at these levels is pretty simple.  It has a core business around selling electricity to resdidential and small businesses.  That business should do around $36 million of EBITDA and will grow as new territories are opened up.  For that it is trading less than 2.0x EBITDA with no debt and $4.25 in cash a share.  Then it has ownership in 2 shale plays - one in colorado with which it is a partner in the development of it with Total.  The other is in Isreal.  Before the spin-off a group of well known investors invested in just the shale assets (not the core business) at a $220-225 million valuation.  Those included Murdoch, Rothchild and Sterinhardt.  Quite simply the core business trades at less than 2.0 EBITDA with strong FCF and no debt and over 1/2 the market value in downside.  If you assume the core business is worth a measliy 4-5x EBITDA...then you could say:
4.5 x 36 mil = 162 or $7.35/share
93 of cash = $4.25/share
$220 mil valution for the shale = $10.00/share
Or a total of $21.60 in current value.  Of course should the shale play really develop then the bull case is a multiple of that.  At the $7 level - you really do not have to know anything about the shale though.  The shale part of the story is interesting - its a little more complicated for both assets than you typical shale play.  Each one has its own development issues (in CO its experimantal tech) and both have the potential to be worth massively more than $220 should they play out.  Presumably Murdoch, Rothchild et al invested at $220 valuation because the think it has the potential to be significantly more.  But like I said at $7 - who cares?  I will do a write up that includes a more thoughtful analysis on the shale risk/rewards when the stock approaches $15-20 as that is when you need to start to have a view on it to own it.


any analyst coverage...use of cash...incremental progress on shale assets
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