First Gen Corporation (FGEN) and subsidiaries earned $183 Million for the period 1H 2020. What is better is that it was able to translate such earnings into cash from operations of $302 Million.
The cash generated from operations allow FGEN to bolster its liquidity. FGEN’s balance sheet has a cash of $748.7 Million as of end of 1H 2020. That is an increase of 20% from the end of 2019.
Only around $36.7 Million were used by FGEN for capital expenditures. This is a testament to the efficiency and flexibility of operating a natural gas power plant. The low capex allows FGEN to pare down its debt. Long-term debt was down by around $200 Million from $1.6 Billion to $1.4 Billion.
FGEN is an efficient and a flexible power company but underappreciated by the market. FGEN is undervalued. FGEN’s undervaluation by the market has been noticed by KKR, the giant US private equity pioneer. Just this June KKR through its Valorous Asia Holdings Pte. Ltd. made a tender offer of 22.5 per share for around 11.9% of FGEN’s outstanding common shares.
Among its peers, FGEN has the lowest valuation.
It is not just KKR who is holding FGEN.
Disclaimer: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent perspective. Accuretti Systems Inc. does not hold any FGEN shares.