Tuesday, July 23, 2013

Generating Cash High in the Sky

Over the past several weeks we have been looking at the top ten holdings of the small-cap energy sector exchange traded fund called Power Shares S&P Smallcap Energy (PSCE: Nasdaq).  The top ten holdings of this successful fund represent over 60% of the total portfolio.  Assets total approximately $27 million, leaving it among the smallest of ETFs.  The third largest holding is Bristow Group, Inc. (BRS:  NYSE), which represents about 8% of the fund.

Bristow Group provides helicopter transport services to personnel in the off-shore oil and gas industry.  Additionally, the company provides search and rescue, airborne emergency services, helicopter maintenance and pilot training services.  Bristow earned $130.1 million in net income on $1.3 billion in total sales in the last twelve months.  Operations generated $266.8 million in cash. 

A fair amount of cash is used to support the company’s dividend payout policy, which is projected to be $1.00 per share in 2013.  At the current price level of Bristow shares that represents a dividend yield of 1.4%.  Of course for holders of the Power Shares ETF are in a different situation. The dividend income received from underlying stocks or bonds in an ETF's portfolio are distributed to fund shareholders, but yield depends upon the basis price of the ETF share.  The current dividend yield on PSCE  shares is 0.6%.

Bristow’s competitive position is changing with the recent decision to divest of a joint venture interest in FB Heliservices and Leasing.  Its partner, FR Aviation is buying Bristow out.  The move will put $104 million gain in Bristow’s bank account after taxes.  We estimate that will bring the total cash kitty to about $320 million.  Bristow management has pledge to invest in the off-shore helicopter fleet to built market share and revenue.  The divestiture is expected to  have a catalytic effect on Bristow’s future growth.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.


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