March 25, 2002; Boost Present Value for TotalFinaElf
Investors looking for more liquidity in energy
investments may need to turn to the Mega Caps.
Fortunately the alternatives are promising. As a group, the stocks have impressive long-term records and
dominate the energy industry, as they own a wide majority of all the energy
assets held by publicly traded companies. Mega
Cap Energy stocks are among the safest, yet productive, investments one could
expect to have in a diversified portfolio.
In connection with last week's semi-annual
presentation by Mr. Thierry Desmarest, Chairman of TotalFinaElf, we update our
analysis of the company. A higher
present value of $85 a share leads to a McDep Ratio of 0.90 and a low ratio of
debt of 0.15 (see Table L-1, L-2).
Our valuation takes little account of TOT's 26%
ownership of the pharmaceutical company, Sanofi-Synthelabo, worth about 15% of
the market cap of TOT. The
continued divestment of drug shares can lend a supportive glow to financial
results. Accounting gains help
lower the cost basis of less successful investments.
The cash proceeds have been redeployed to stock repurchase.
In its most important business, oil and gas
production, TOT expects to grow volume at a single digit rate.
Its next most important business refining/marketing has been restored to