South Jersey Industries (NYSE:SJI)

CAPS Rating: 5 out of 5

Provides energy related products and services through its subsidiaries: South Jersey Gas distributes natural gas; South Jersey Energy acquires and markets natural gas and electricity; and South Jersey Resources markets wholesale natural gas storage.


Player Avatar NtscrbEnergy (48.56) Submitted: 3/12/2007 7:02:48 AM : Outperform Start Price: $26.23 SJI Score: +63.44

South Jersey Industries is primarily a holding company involved in providing diversified energy related products and services through its subsidiaries, which include South Jersey Gas Company, South Jersey Energy Solutions, South Jersey Resources Group and Marina Energy. The company’s business activity entails purchase, transmission, and sale of natural gas for residential, commercial, and industrial use, which the company segments as utility operations, contributing over 60% to the over all revenues. While the non utility operations that consist of marketing energy services, energy management and consulting services provides the rest of the inflows.
The company has witnessed a healthy 2006, as earnings grew by 9% even though customer usage witnessed a drop as a result of warmer weather conditions. The rise was also boosted by Conservative Incentive Program, sponsored by the New Jersey Board of Public Utilities that ascertains profitability based on number of customers and not the actual usage. It also registered a rise in customer base by 2.4%, much above the national average.
Looking ahead in 2007, the pricing outlook of natural gas looks positive, as its consumption is expected to rise by 900 billion cubic feet, driven by increased residential heating need and industrial usage. The strong list of pending connection and continued sturdy demand in newly constructed houses in South New Jersey can prove to be vital for the company to deliver a good performance. Moreover the storage capacity that has now increased two fold will aid the company to further perform its hedging activity and roll the stock when the prices rise. Adding to it all, its subsidiary Marine Energy is going to benefit from full year operation serving the Borgata Casino expansion as well as Warren County Energy facilities, thus making South Jersey Industries a good investment.

Member Avatar NtscrbEnergy (48.56) Submitted: 6/6/2007 2:36:18 AM
Recs: 0

South Jersey Industries seems to have missed the mark. For the three months ended 31 March 2007, revenues registered a decline of 1% to $368.4 million, as a result of lower inflows from wholesale and retail gas operations. While the largest revenue generating Gas Utility Operations segment, observed a stagnant performance. The net income from continuing operations also followed the declining trend, falling 12% to $27.2 million. The drop can be attributed to increased cost of non-utility sales and higher operations expenses, which hampered the margins.

The Conservation Incentive Program aided the company in offsetting loses of lower than normal gas consumption, while delivering an 8% growth in South Jersey Gas. In the future this program will continue to benefit the company to face the volatile consumption, whilst at the same time aiding the company to keep the customer growth rate at over 2%, much higher than industry average of 1.5%.

South Jersey Industries subsidiary Marina Energy recently announced winning its biggest contract to design, build and install a power plant to serve Boyd Gaming’s Echelon new casino and resort project in Las Vegas. Given the massive size of the new Las Vegas project the company will generate inflows to the tune of $200 million as per the agreement, as the energy plant in expected to be complete in 2010. It will and aid the company is generating a new revenue stream and further expertise to pitch in for new casino’s coming in Las Vegas and Macau. Further, considering a decent 6% - 7% growth guidance provided by the company, the rising contribution from different revenue streams like commodity business and retail services and growing customer base, South Jersey Industries still appears a good investment for the long-term prospective.

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