South Jersey Industries (NYSE:SJI)

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.