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FYI
-----Original Message----- From: cgi@eq.gs.com@ENRON [mailto:IMCEANOTES-cgi+40eq+2Egs+2Ecom+40ENRON@ENRON.com] On Behalf Of scott@nypcdsn02.eq.gs.com; caven@gs.com Sent: Monday, April 02, 2001 6:02 PM To: Derrick Jr., James Subject: Goldman, Sachs & Co. - Enron Corp. --------------------------------------------------------------------------- Goldman, Sachs & Co. Investment Research - Documents --------------------------------------------------------------------------- Goldman, Sachs & Co. Investment Research ENE: This Overachiever is Underperceived Even as Prospects Improve: Buy *************************************************************************** * Enron share price has fallen sharply (by 35%) from recent Jan high as * * investors have focused on issues we view as almost insignif. to future * * valuation and ignored the extremely strong and, we believe, improving * * fund. in key growth businesses. We cont. to estimate future LT (over * * five years) EPS growth at 25% versus consensus 17% est. as ENE Wholesale* * Services appears likely to sustain 20% plus LT growth even as Retail * * (EES) is emerging as a more powerful growth engine than perceived by * * investors and telecom has interesting prospects. We strongly reit. our * * Buy rating, forecast very strong NT EPS results and see the segments of * * ENE that generate earnings as trading at only 20X 01 EPS. * *************************************************************************** David Fleischer, CFA (New York) 1 212-902-6018 - Investment Research David Maccarrone, CFA (New York) 1 212-902-0324 - Investment Research Eric W. Mandelblatt (New York) 1 212-357-7547 - Investment Research ===================== NOTE 6:20 AM March 29, 2001 ===================== Stk Latest 52 Week Mkt Cap YTD Pr Cur Rtg Close Range (mm) Change Yield --- ------ ------- ------- ------ ----- Enron Corp. RL 58.10 90-55 43374.6 -30% 0.9% --------------Earnings Per Share--------------- ENE (US$) Mar Jun Sep Dec FY CY 2002 FY 2001 FY 0.46 1.80 2000 FY(A) 0.40 0.34 0.34 0.41 1.47 -Abs P/E on- -Rel P/E on-- EV/NxtFY LT EPS Cur Nxt Cur Nxt EBITDA Growth ----- ----- ----- ----- -------- ------ ENE FY 32.3X NMX 1.6X NMX NA 25% =========================================================================== * Investors appear to have been racing to sell ENE shares because of its apparent high P/E multiple (ignoring the considerable value of segments including Enron Energy Services, telecom and non-energy wholesale services) and misconceptions about a number of issues including its stalled asset disposition program (the Portland General Electric sale could be significantly delayed), the market position of its Indian power plant and California energy issues. We believe that the current period of perceived uncertainly is actually an excellent opportunity to buy into a company that we view as virtually unique in the economy. We believe that the energy industry in the United States and world is undergoing a major transformation and that a very few companies led by Enron are positioned to create efficiencies and provide the products, services and flexibility required by customers. We believe these opportunities will lead to growth in earnings of 25% over the long term even if telecommunications makes only slow progress and does not come close to reaching our expectations. * Enron is likely to report strong results in Q1 and 2001 from all core businesses. Although mgmt indicated on its March 23rd conf. call that it was 'very comfortable' with ests of $1.70 to $1.75, we continue to be very confident that the company will equal or exceed our $1.80 estimate. Wholesale Services is likely to have an 'outstanding quarter' according to CEO Jeff Skilling with a 25% to 35% increase in natural gas volumes and a doubling of financial volumes. Retail appears on track to achieve its $30 billion of new contract signings and turn profitable in 2001 on a fully allocated basis. Telecom has progressed at a slower pace than expected by investors as bandwidth trading has turned out to be more complicated to implement than some believed and the content business (now without Blockbuster as a partner) appears to also be developing more slowly than implied by Enron in 2000. This said, the business opportunities in both parts of telecom appear to be excellent. =========================================================================== Important Disclosures (code definitions attached or available upon request) ENE : US$ 58.10; CF, CP, M --------------------------------------------------------------------------- *************************************************************************** Copyright 2001 The Goldman Sachs Group, Inc. All rights reserved. This report is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based upon this material. This material is for the general information of clients of Goldman Sachs. It does not take into account the particular investment objectives, financial situation or needs of individual clients. Before acting on any advice or recommendation in this material, a client should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. Certain transactions, including those involving futures, options, and high yield securities, give rise to substantial risk and are not suitable for all investors. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities, or derivatives (including options) thereof, of companies mentioned herein. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without Goldman, Sachs & Co.'s prior written consent. This material has been issued by Goldman, Sachs & Co. and/or one of its affiliates and has been approved by Goldman Sachs International, which is regulated by The Securities and Futures Authority, in connection with its distribution in the United Kingdom and by Goldman Sachs Canada in connection with its distribution in Canada. This material is distributed in Hong Kong by Goldman Sachs (Asia) L.L.C., in Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch, in Japan by Goldman Sachs (Japan) Ltd., in Australia by Goldman Sachs Australia Pty Limited (ACN 092 589 770), and in Singapore through Goldman Sachs (Singapore) Pte. This material is not for distribution in the United Kingdom to private customers, as that term is defined under the rules of The Securities and Futures Authority; and any investments, including any convertible bonds or derivatives, mentioned in this material will not be made available by us to any such private customer. Goldman Sachs International and its non-U.S. affiliates may, to the extent permitted under applicable law, have acted upon or used this research, to the extent it relates to non-U.S. issuers, prior to or immediately following its publication. 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Unless governing law permits otherwise, you must contact a Goldman Sachs entity in your home jurisdiction if you want to use our services in effecting a transaction in the securities mentioned in this material. *************************************************************************** --------------------------------------------------------------------------- This Message was sent from: User : cavenh Remote Host : 198.242.136.154 Web Browser : Mozilla/4.51 [en]C-CCK-MCD CPT-2 (WinNT; I) Date : Mon Apr 2 18:02:10 US/Central 2001 ---------------------------------------------------------------------------
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