POWER CORPORATION $17.23 - Toronto symbol POW

POWER CORPORATION $17.23 (Toronto symbol POW; Shares outstanding: 407.5 million; Market cap: $7.0 billion; SI Rating: Above Average) is a diversified holding company. It controls one of Canada’s largest mutual-fund companies, IGM Financial, and Great-West Lifeco, one of the country’s largest life insurers. Power Financial, 66.4% held, is a holding company for Power Corp.'s financial assets, which include 72.9% of Great-West Lifeco and 58.4% of IGM Financial. As well, Power Financial holds 50% of holding company Parjointco, which, in turn, owns a 54.3% interest in Swiss-listed Pargesa Holdings SA. Pargesa has 95% of its assets in five large European companies: Imerys (minerals), Total SA (oil), Pernod Ricard (wine and spirits), Suez (energy, water and waste services) and Lafarge SA (cement and building materials). In the three months ended September 30, 2008, Power Corp.'s earnings, excluding one-time items, fell 6.2%, to $332 million, or $0.70 a share, from $354 million, or $0.76. Great-West contributed $203 million to Power’s earnings and IGM contributed $74 million. Power Corp.'s shares yield a high 6.7%, and the stock trades at only 6.5 times this year’s forecast earnings. Like many holding companies, Power trades at a discount to the break-up value of its assets. This is currently estimated at 19%. That’s a plus, because you have more assets working for you. Power Corp.'s exposure to cyclical European companies adds risk, but those interests only make up 7% of its assets. Power Corp. is still a safety-conscious buy.

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