Message-ID: <4882144.1075845450306.JavaMail.evans@thyme> Date: Fri, 18 May 2001 11:04:00 -0700 (PDT) From: benjamin.morton@ssmb.com Subject: ENE: Reiterate Buy; Believe Leadership Still Intact Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: "Morton, Benjamin [EQRE]" X-To: X-cc: X-bcc: X-Folder: \Greg_Whalley_Oct2001\Notes Folders\Connect deletes X-Origin: WHALLEY-G X-FileName: gwhalley.nsf ENE: Reiterate Buy; Believe Leadership Still Intact * ENE has underperformed its peer group of Energy Merchants. Stock price down 39% from 52-week high ($90 on August 23) vs. peer group, up 1.9%. * We reiterate our Buy rating on the stock, and believe the weakness is largely due to concern over ENE's group-high P/E multiple and PEG ratio of 27x and 1.3x, respectively (group average 19x and 1.0x), coupled with a series of concerns over various parts of Enron's business: bandwidth, India, etc. * Our sense is that the bandwidth unit is performing on target, and is likely to beat the strong numbers posted last quarter. India, while a significant issue, remains a small part of Enron's asset base (about 4%). It is a legacy business, in our view, and does not materially affect our overall view of the company. * We see ENE's business fundamentals intact, and in fact, improving. Growth rate expansion to 25% from 20%; growing returns on capital; bandwidth trading all good reasons to own stock -- justify premium valuation. <> <> Raymond C. Niles Power/Natural Gas Research Salomon Smith Barney (212) 816-2807 ray.niles@ssmb.com s - ENE 5-18-01 Reiterate Buy.doc - ENE 5-18-01 Reiterate Buy.pdf