Power from the atom

Waiting for a totally clean and renewable energy source, capable to fulfil whole world energy demand, there is source which is pushing and demanding new spaces. Nuclear energy: this kind of CO2 free energy which is supplying about 17% of world production is becoming more and more important in our days and the forecasts show us a growing weight in next years.
Italy and Great Britain have joined recently France in the nuclear supporters’ lines and China is working hard in its nuclear plants system.
This energy niche has an absolute World Champion who is called Areva (CEI.PA): the French state owned reactor makers which is the absolute leader of nuclear supply chain.

Areva is extremely interesting because they’re covering the whole supply line by the mining to the recycling and radioactive wastes treatment, passing through reactors design and production.
Looking at the financial statements we can identify some weak points:
Balance Sheet: total current assets are increasing among last years but they are 2 billion less than Current Liabilities, this is not good for company solvency. By the way total equities are positive and increasing during last years. Total Debt/Total Equity=0.70 is good.
Cash flow shows stable cash from Operation which is insufficient to pay the company investment needs, that causes an issue of debts of 1,700 millions of euro to cover investments (the UraMin acquisition). By the way looking at the last 5 years we see that is the first big issue of debts and along years they do not put more stocks to raise funds and they have always paid dividends.
Income Statement: Total revenues are increasing of 8.4% over last year and 31% over last 5 years. Good but not excellent. Net Income has almost doubled over last 5 years. Return on Equity is only 10.8% and the Operating margin is 6.28%
P/E: 36.66
Dividend yield: 1.10%
After this analysis I would not choose to invest in this company: the financial picture of the business just sufficient: nothing exceptional.
So why has Value Finance portfolio decided to invest in this company?
Because I trust in the management: Anne Lauvergeon has a great vision and passion to work and promote the company all around the world, defending it by possible takeovers actions. French government is a great promoter of its jewels and Nicholas Sarkozy has always helped to sign new contracts all over the World during his first years of presidency. Furthermore: a possible additional IPO is possible in order to rising up the necessary funds in order to financ new investments: a bigger percentage of floating shares in the market, with its leading position, will push stock prices higher and higer.
New contracts every week, a global recognised leadership position from US to China, good management, a great recruiting strategy that shows positive outlook for future make Areva one of the leading lines of Value Finance portfolio with 18% of total assets at 23/06/08. Entering date into portfolio 14 feb 08.