|
|
Enron Mail |
ENE--Downgrade to 3S from 1S; Credit Concerns Need To Be Addressed * Lower rating to 3S (Neutral, Speculative) from 1S (Buy, Speculative) * Enron is the industry dominant player in the energy merchant industry; their business performance remains intact and should continue unimpeded if current concerns over credit and liquidity are addressed. We believe this is the most likely outcome. * However, until management completely clarifies these issues, particularly the use of off-balance sheet financing, we think growing credit concerns could put increasing strain on Enron's commercial relationships. Concern over a now higher probability "worst-case" outcome drives our 3S rating. * Enron's shares represent a "binary" outcome to investors. We see low-end valuation of $10 (1x our estimate of book value based on known off-balance sheet financings), with upside potential to $24 (2.4x bv). The expectation of near-term volatility in share price also justifies our "Speculative" risk rating. <<ENE Downgrade 10-26-01.pdf<< <<ENE Downgrade 10-26-01.doc<< Raymond C. Niles Power/Natural Gas Research Salomon Smith Barney (212) 816-2807 ray.niles@ssmb.com s ADDITIONAL INFORMATION AVAILABLE UPON REQUEST Salomon Smith Barney ("SSB"), including its parent, subsidiaries and/or affiliates ("the Firm"), usually makes a market in the U.S.-traded over the counter securities recommended in this report and may sell to or buy from customers, as principal, securities recommended in this report. The Firm or employees preparing this report may have a position in securities or options of any company recommended in this report. An employee of the Firm may be a director of a company recommended in this report. The Firm may perform or solicit investment banking or other services from any company recommended in this report. Securities recommended, offered, or sold by SSB: (i) are not insured by the Federal Deposit Insurance Corporation; (ii) are not deposits or other obligations of any insured depository institution (including Citibank); and (iii) are subject to investment risks, including the possible loss of the principal amount invested. Although information has been obtained from and is based upon sources SSB believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute SSB's judgment as of the date of the report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. Investing in non-U.S. securities, including ADRs, by U.S. persons may entail certain risks. Investors who have received this report may be prohibited in certain U.S. states from purchasing securities mentioned in this report from SSB. Please ask your financial consultant for additional details. This report has been approved for distribution in the United Kingdom by Salomon Brothers International Limited, which is regulated by the Securities and Futures Authority. The investments and services contained herein are not available to private customers in the UK and South Africa. This report was prepared by SSB and, if distributed in Japan by Nikko Salomon Smith Barney Limited, is being so distributed under license. This report is made available in Australia through Salomon Smith Barney Australia Securities Pty Ltd. (ABN 64 003 114 832), a Licensed Securities Dealer, and in New Zealand through Salomon Smith Barney New Zealand Limited, a member firm of the New Zealand Stock Exchange. This report does not take into account the investment objectives or financial situation of any particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision. Salomon Smith Barney Securities (Proprietary) Limited is incorporated in the Republic of South Africa (company registration number 2000/025866/07) and its registered office is at Grosvenor Corner, 195 Jan Smuts Avenue, Rosebank, 2198, Republic of South Africa. Salomon Smith Barney is a service mark of Salomon Smith Barney Inc. ? Salomon Smith Barney Inc., 2001. All rights reserved. Any unauthorized use, duplication or disclosure is prohibited by law and may result in prosecution.
|