I have received a offer from SES to purchase shares between $11.40 and $13. The position I have is part of a diversified portfolio in my TFSA and I am up 90% at current prices and have really enjoyed the growing dividend. I am tempted to sell 1/3 of my position at the higher range of the offer to take some money off the table.
What are your current thoughts on SES as a company, its assets and market position?
What do you think of the offer given the current market price and this point in the cycle?
Thanks for the great service!
Colin
SES has a strong balance sheet and a very low valution of less than 6X earnings. It plans on buying and cancelling 13M shares. This will give it higher per-share earnings leverage and save its 3.5% dividend on those shares it cancels. Generally, we do not like tendering to such deals; The company thinks its shares are undervalued, and is willing to put up significant dollars to prove so. That being said, we are more wary of highly-cyclical stocks, and thus managing position sizes makes sense as well. We can't get personal, but if an investor has a 90% gain they could sell a 1/3rd position and still have a higher dollar exposure to the stock than they did a year ago (all else being equal). In terms of outlook, big EPS growth is expected this year (more than double) but consensus calls for a steep drop off in earnings in 2025. This is reflected in the low valuation. Much of this consensus call is based on commodity prices and the sector in general, and we do not have anything particular concerns on the company itself right now, but we would still be comfortable taking some of a position off the table into this offer.