With more than 40 coal mining companies, the ASX is littered with heavily polluting and not-so-environmentally-friendly businesses. How good would it be if we could make money on the share market while also having a positive environmental impact?
Two under the radar, yet eco-friendly ASX companies within the energy renewable sector are New Energy Solar Ltd (ASX: NEW) and Infigen Energy Ltd (ASX: IFN).
New Energy Solar
With 16 plants in operation in Australia and the US, New Energy buys and develops large-scale solar plants with long term distribution contracts. New Energy has just inaugurated its 16th plant, which is set to increase its overall production capacity by 70%, from 454MWDC in the previous year to 772MWDC. Further, most of New Energy’s production is contracted out to reliable off-takers for a weighted average length of 16 years.
New Energy was listed in December 2017 and has now a market cap of $484 million and a price-to-sales (P/E) of 20. It is currently trading at a discount to its net asset value (NAV), which was last measured at $1.55 per share. The discount to NAV indicates that this could be a good time to purchase shares, which also come with a juicy dividend yield of 5.8%.
Something to be aware of is that New Energy is managed by an external asset manager. This means that the company must pay an annual management fee, as a percentage of enterprise value, and an acquisition and disposal fee. Due to the fee setup, there is some concern that management might take on projects just to increase its fee revenue, rather than creating shareholders value.
Infigen has been shifting from being an owner of wind farms and wholesale distributor to becoming a vertically integrated utility. Infigen has a current operating capacity of 600-700MW through its 9 wind farms (7 fully owned) and firming assets. Management recently stated that it’s aiming to increase its energy production to 1300-1400MW, with up to 75% of that contracted out long-term.
Infigen is the fifth-largest utility on the ASX with a market cap of $645 million. At its current price, Infigen shares can be acquired at a P/E of 15, which is much lower than the median utilities sector P/E of 31. It currently pays a dividend of around 3%, which is well covered by earnings and by a conservative payout ratio of 46%.
So there you have it, two eco-friendly ASX shares to consider if you’re looking to create wealth while maintaining a positive environmental and social impact. Out of these two companies, my preferred pick would be Infigen as I am not a fan of New Energy’s external management.
The post 2 under the radar ASX shares for the eco-friendly investor appeared first on Motley Fool Australia.
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