How hard will DH be hit by yield equality?

 DH Corporation was a maker of cheques but acquired a number of computerized financial services in USA.Then it was considered to be a "fintech" or a financial technology company. As a result their revenues and earnings started to grow quite rapidly for awhile.But both revenues and earnings became spotty and unreliable.Then in 2016 DH announced that there would be a dividend reduction and the stock price plummeted from about $40 per share to a low of $14.But the stock price has bounced back to the $22 level.Many investors are not sure what will happen in the new year as the stock will pay it's same dividend in the fourth quarter of 2016 and then reduce it for the first quarter of 2017.
                            

            The First Signs
      Before the announcement of the dividend cut there were signs starting to show that there might be trouble ahead.The third quarter  report showed a 20% reduction in sales and a 13% reduction in earnings.But analysts were talking about the reduction before the actual report.The announcement of the dividend cut  came before the report as well.The actual cut will be from .32 per quarter to $.12 per quarter for a 62% reduction.DH management stated that this dividend cut would give them $86 million available to repurchase shares,reduce debt and some for organic growth.So in the long run the company would be better off from the dividend cut.But in the short run investors will suffer.It will also call into question the forecast of EBITDA provided in the guidance.But probably by less than the miss in the third quarter.      
       Other Dividend Cutters
         DH used to trade at a higher yield;before it was a "fintech" company it's yield was about 7%but now it trades with a 5 to 6% yield.A stock trading at a 7% yield will continue to trade on it's yield whereas a stock trading at a 2 or 3% yield may trade more on it's  earnings (P/E ratio).Other stocks have cut their dividends by a large amount also.Usually the consequences are the same. Both Transalta Power and Atlantic Power cut their dividend. DH is seen by this blog as being more in line with Transalta Power.Yield equality is discussed in my blog on LinkedIn (Linkedupdale on February15,2016) for Transalta Power and three other stocks.The idea is that when the dividend is cut by a substantial percentage the price will fall by the same percentage.Consequently the yield will fall to the same level as before but investors will ask for a yield premium because of the added risk.In the case of DH the stock price has already fallen significantly so will it fall anymore?The answer should be given by the yield.If the dividend becomes $.48 per share for the year then the price with a 5% yield will be around $10.00;this seems a little low according to this blog.But it is also clear that $14 to $15 may not be the bottom but a plateau price.
        Other factors
  In the case of Transalta Power the price did not fall to it's old equality level;it stayed above it but not by much.The same is true of Just Energy and Atlantic Power (all dividend cutters).In all cases the company acquired new assets or sold off assets and reduced debt.Investors were happy with their new profile and bid the stock price up above the yield equality level but the stock price stayed at a plateau level for some time.This is likely to happen to DH as well.So this blog expects the price  not to march past the $22 level and maybe move down towards the $18 level unless something is done to improve it's earnings in the next 3 months.Cutting the dividend is not a successful short term strategy.It usually takes some time and some astute management decisions with the extra cash to get the stock price back to it's old stock price level.

                           

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And a partridge in a pear Tree

   Everyone likes to have a nice present for Christmas.And a junior technology company called Tucows would make a nice gift under a larger player's tree.Tucows has a peculiar name but has become well known in Canadian small to mid cap markets.That's because it is a winner.It competes with companies like  Kinaxis and Shopify but they have a much larger market capitalization.So they would be much harder to  acquire and it would take quite a bit better credit facilities to acquire either one of them.Tucows,for example, only trades 2500 to 3500 shares on a an average trading day.And it has moved up from $12 a share 2 years ago to it's present $48 a share.
      Speculation or a Solid Company
      Tucows is a well managed company and it did not move up so fast by luck.It describes itself as a provider of internet services and domain names and other internet services.But it also has shares or positions in a number of small junior technology winners like Intrinsync Software and Counterpath Solutions and Neulion.These small cap technology companies have given it a very good growth trajectory.So although it only has a market capitalization of about $500 million it competes with companies like Kinaxis which has a market capitalization of about $2 billion.However they have raised much more equity capital and have diluted their earnings for their shareholders.Neither Shopify nor Kinaxis have positive EBITDA nor earnings per share.Tucows has estimated earnings per share of about $1.75 per share.And it's management  apparently does not want to dilute earnings with an equity issue; as a result it only has a float of 10 million shares.If it had a float of 25 million shares  it's earnings per share would be still considerably higher than all of it's competitiors.Instead it prefers to increase it's stake in small cap technology winners and it's price has moved up recently form $35 a share to it's present $48 price.Others have noticed!
     Looking at the  New Year
  If Tucows does make it past Christmas and escape being in a larger company's stocking then it will have to make changes in the new year.Right now with it's present share price and 10 million share float a competitor can gain control of this technology winner with a little more than $300 million.That would upset this blog which has put a lot of resources into strengthening it.A share split and a rise in the share price would help but so would a secondary equity issue of 10 million shares and a neat $500 million to put in it's war chest.                use Workathon for business solutions ;use Workathon for business solutions

Tecsys- the new kid in town

    Yes just like the song by the Eagles says this is the new kid in town.Tecsys has been around for awhile but has never been in this blog. And now it just had a second quarter report which was not exceptional but a solid quarter. Quarterly revenues increased by 5% over that of 2015 and EBITDA went from $1.2 million to $.935 million. It has a yield of 1% and a market capitalization of about $150 million.This is certainly a decent dividend for a "small cap" stock.Tecsys according to this blog has good growth prospects.It traded at around $2.00 five years ago and gradually moved up to $9.00 then it fell off to the $6.00 level and now has gone back up to $10 per share.
    Operations
   Tecsys operates a supply chain providing  materials chiefly to hospitals and health organizations.But it does have a new  division that handles construction and infrastructure.This area contains ownership in small cap companies like Evoko, Construction Cointrol and The Municipal Infrastructure Group.This is a new area but is providing a fair amount of TCS's growth.Tecsys (TCS) has seen it's annual revenues grow from $42 million in 2010 to $66 million in 2015 and operating income from $1.3 million in 2010 to $4.6 million in 2015.Net income has grown constantly from $.9 million in 2010 to $4.80 million in 2015.It has opened new markets, increased revenues, and has managed it's revenues well. So that net income has marched forwards steadily.
   Conclusion
 This quarter was not good relative to the same quarter in 2016 but it was solid as measured by other quarters in this calendar year.Annual revenues are about $66 to $70 million and this quarter is in line with that pace.EBITDA also is about average at $935,000;some quarters have been as high as $3.25 million.Their new subsidiaries are primarily located in western Canada and are expected to increase in profitability in 2017.And their new resource called TMIG should fit in well with their other subsidiaries.Their medical facilities will earn about the same this year.Putting these facts together  this blog expects that revenues may hit $75 million for the next fiscal year.This means that their dividend will be safe and the P/E multiple will be very low relative to it's peers.
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Algonquin Power completes three big new projects

       On November10 Algonquin Power released it's third quarter results.It shows substantial increases for revenues and even greater increases in net income and adjusted EBITDA.Revenues increased by more than 15% to $221 million while adjusted net earnings increased by almost 60% and adjusted EBITDA increased by 30% to $91 million.More importantly adjusted funds from operations increased by about 15%  to $61 million.
    Nine month Operations
 Revenues grew at a slower pace for the 9 month period;revenues were ahead by only 3% to $786 million for the third quarter.While adjusted net earnings were ahead by about 40% for the period.The more important adjusted EBITDA increased by about 28% over the third quarter of 2016.While adjusted funds from operations  increased by about 20%.This shows that the growth in  revenues have  tailed off but existing projects have become more profitable.Algonquin management attributes the increased earnings to the newly acquired Park Water System.
      New Projects
    Algonquin Power management has correctly realized that it needs to have new projects to steepen it's growth path for earnings.So in late 2015 they acquired the Park Water System and in 2016 they built the O'dell wind farm and now they are trying to complete the requirements for the acquisition of the Empire Electric Company.All of these are large projects and all are starting to influence earnings.AQN attributes the increase in earnings in this quarter to the Park Water System and O'dell will be impacting earnings in the fourth quarter.Empire will likely be coming onstream for revenues and earnings in 2017.These are all American systems and two of the three are regulated systems with in most cases  steady growth in earnings.Most Canadians (including this author) were sceptical of  the expected treatment by American regulators.But with a few exceptions the regulators have been very business-like. In fact, AQN's free cash flow has been robust enough for it to declare an increase in their 2016 dividend;it now stands at $.1435 per quarter.And with the expected increase in adjusted EBITDA  in 2017 this blog expects a further increase in the dividend in 2017.                        

                       The Fourth Quarter
          Increases in revenues have started to flatten for Algonquin although they have shown good ,steady increases in earnings.Faced with this situation Algonquin realizes that they need big projects and went out and got them.In the 2016-2017 period they picked up three large producers of earnings;two are regulated and one has a long term power agreement.AQN has shown good increase in earnings in the past and needed not only the same increase in earnings but a steepening curve.And they have done so.
       Regulators have their risks too
  In 2015 Algonquin Power announced that it was acquiring the Park Water System in the western USA and they were building the O'dell wind farm in Minnesota and trying to acquire the Empire Electric Company in Kansas and Missouri.At the time the price of AQN  shares  was about $10.00 to $10.50 a share.The yield was about 4%The regulators did slow things down but the Park Water System went ahead and soon the O'dell wind farm was built.The share price moved ahead to a high of $12.50 but it dropped in August to the $10.50 area and it has hovered here.Regulators slowed down the acquisition of the Empire Electric Company.Now the Park Water System is adding to earnings according to AQN management.Not the O'dell wind farm yet.Although AQN expects to hit $500 to $525 million adjusted EBITDA or $2.00 a share the price has not bounced back to it's summer levels.This although the yield is now more than 5%.
     It is possible that investors are still nervous about American regulators even with the higher yield.This blog predicts that once the yearend adjusted EBITDA of $500 to $525 million comes in the stock will push back to it's summer levels.Also I am sure that investors want to see revenues and earnings coming in from O'dell this year and Empire next year.This is likely the catalyst to send Algonquin to new levels above $13.
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Chorus Aviation's new Revnue Diversification Strategy

 On  November 9 Chorus  came out with their latest quarter's results.They have been restructuring fro several quarters now and find themselves in a place where they can  diversify even further.Chorus tells it's readers that total revenues were down from Q3 2015 while adjusted EBITDA was ahead by only 2%.But Chorus has made quite a few changes since then.This includes increasing their leasing revenue under the CPA by 51% to $72 million.They have also streamlined their Voyageur business and established a Voyageur Avparts business.Lastly they have established a relationship with Air Nostrum(Spanish) and leased 4 aircraft to them.
   The third Quarter
   Chorus showed investors adjusted EBITDA of $70 million and states that it is only 2% better than Q3 2015.But it was about 40% better than Q1 and Q2 of 2016.In fact both Qtrade and Yahoo Finance estimate 2016 adjusted EBITDA of only $66-$70 million.It seems that the financial websites have underestimated the 2016 Chorus performance.For 9 months Chorus shows that although revenues were down adjusted EBITDA was recorded at $179 million.This blog estimates that total 2016 adjusted EBITDA will be at about $250 million and earnings per share (e.p.s.) of about $2.05.This is well above the present dividend of $.48 but Chorus does have some extraordinary items to consider also.For example, net income was $99 million for 9 months and was helped by a smaller foreign exchange loss than in 2015.But free cash flow is big enough for Chorus management to start looking at an increase in the dividend soon.               

      The Fourth Quarter
    Should Chorus show increases in aircraft leasing revenues and Voyageur revenues in Q4 they will be in a position to raise the dividend back to the old level of $.60 per share.Maybe not in one step but perhaps in two steps.Perhaps investors will get more information then on their progress on Air Canada Express.But there should be no doubt that many investors will be impressed with their diversification strategy.          use Workathon for business forecasts ; use Workathon for business consulting

Tucows does it again- another solid quarter

      Workathon is the blog I use for new subjects and to explore new areas or new companies.This post is dedicated to a company not previously covered by either of my two Blogger blogs. Tucows is an uprising Canadian technology stock trading at about $42 a share. On November7 Tucows released it's third quarter results;they were substantially better than most of it's competitors.In particular,the results were better than that of Kinaxis, another Canadian company with a much larger market capitalization.                        

   How do the Numbers Look?
     (a)Earnings
        For starters Tucows had positive earnings per share while Kinaxis is still showing  negative earnings and e.p.s.Tucows had a 55% increase in e.p.s over 2015 at a record of $.45 per share.It's P/E ratio was high at 25 times but for a software company was remarkably low.Shopify, for example, shows a P/E ratio of 55 times.And Kinaxis has a P/E ratio of  -(464).Tucows only shows a modest growth of revenue at 11% but adjusted EBITDA grew by 48% over 2015 to $8.6 million.
     (b) Growth
   It's two main products are Ting Mobile and it's domain services for the internet.Their Ting Mobile services are expanding in the United States every month.But Tucows is always on the look for a new acquisition.As it has contacts and connections with other Canadian internet services.This blog expects this side of it's business to show growth in 2017.
     (c) Assets
   Both Tucows and Kinaxis have a similar  asset base;both have slightly less than $130 million in assets. But as most investors know the amount of assets are not so important to a software company.More important is the market value of these assets or the market capitalization.Here is where the two differ to a large extent;Tucows has a market capitalization of about $440 million while Kinaxis has a market capitalization of about $1.6 billion or four times the size of Tucows.
      Going Forward
    Tucows does need greater revenue increases;it is still behind Shopify in this category.And revenue growth was only about 11% in this quarter.A reasonably small tuck-in acquisition would be a good idea at this stage of their development.However their earnings and earnings growth are solid;here they are better than their competitors.As this author has mentioned in other blogs Tucows' float is quite small and less than Kinaxis and Shopify.A small rights offering or a secondary equity offering would be beneficial over the long term.But Tucows' basics are solid and investors should realize that this stock is quite a bargain at these prices; this blog sees it trading in the $50 range by Christmas.All it needs is one more good quarter and it will be there.                         use Workathon for analysis of internet stocks  ;use Workathon for business consulting                  

Transalta Renewables moves forward,down under (Austarlia)

Transalta Renewables (RNW) is a Canadian utility with a major project in Australia which is where the koala in the caption lives;this project is in the area called South Hedland,The project will be finished in mid-2017.Until then it is a drain on it's capital.The return on equity will be substantial but it is a rather large investment.They have spent $224 million and have another $87 million planned for the remainder of 2016.This will be done with debt as their payout ratio is now around the 100% mark.That aside earnings and comparable EBITDA will be ahead for 2016.This indicates that the assets handed down from Transalta have been a nice mix of profitable assets.RNW goes on to say that "performance is tracking towards the upper end of guidance for 2016".

What Do the Numbers Say?

Both Qtrade (an independent broker) and Yahoo Finance put their estimate of earnings at around $.56 to $.60 per share.But that figure is out of date as the new figures put the best estimate of annual EBITDA at around $300 million based on the 9 month earnings.EBITDA (comparable EBITDA) is according to this blog the best estimate of earnings and earnings per share (e.p.s).So using these numbers this blog predicts e.p.s. of about $1.35 per share.This is a substantial increase over 2015 and without any revenues from South Hedland yet.

Conclusion

It is possible that Transalta Renewables is being a little too optimistic when it gives guidance of $300 million EBITDA for the year.Yahoo Finance forecasts only around $200 million.But RNW shows comparable EBITDA of  $200 million for 9 months so it is more likely that Yahoo is low here.This blog cannot see e.p.s. of less than $.80 for 2016;this means that earnings will increase by at least 33%.The third quarter is not a hugely important milestone for RNW but 2016 as a whole is.It is a transitional year as 2017 will start to bring in earnings from it's Australian assets.It does have some revenues from a natural gas pipeline in Australia now but South Hedland is much bigger.In other words, 2017 will be the first year that RNW has significant earnings from assets not downloaded from Transalta,it's parent.This blog believes,by the way, that Transalta may download more assets in 2017 as it still needs cash as has a significant amount of assets.Also the transfer of shares that comes with a download ensures that Transalta keeps a significant percentage of Transalta Renewables.On top of that we will soon see who has forecasted more accurately - RNW or the financial websites.              use Workathon for financial analysis of utilities

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Newmarket Gold to Kirkland Lake Gold- Lets' dance first

On October13,2016 both Kirkland Lake Gold and Newmarket Gold came out with their quarterly report.Both showed improvement over the previous quarter.Newmarket (NMI) showed production of 56,000 ounces for the quarter and 175,000 ounces for the year to date.Kirkland Lake (KLG) showed production of 77,300 ounces and 208,000 for 3 and 9 months.Both have robust cash balances and improving grades of gold being mined.But in a press release in September Kirkland Lake wants to merge with Newmarket Gold.On the surface this seems to make little sense as there appear to be few synergies here.Most of Kirkland Lake's assets are in Northern Ontario and most of Newmarket's assets are in Australia.But there is a common interest these two share- the huge Fosterville mine assets.

Increased Production

The Fosterville mine showed production this quarter of 37,000 ounces which is 1% below the last quarter.This has allowed 9 month production of only 175,000 ounces for Newmarket Gold and 2016 guidance of only 225,000 to 235,000 ounces.This is a very slight increase over 2015.But in 2015 and 2016 Newmarket has found much more ore at the Fosterville site.Recently they found a new discovery at the Lower Phoenix Gold System in the west lode and in the Eagle Fault System.No new assessment of the size of the deposit has been given but this blog has estimated that the total deposit may be as high as 4 to 5 million ounces with all extensions counted.But production from the mine has not gone above 37,000 ounces for a quarter or 160,000 ounces for a year.This is the problem and Kirkland Lake has seen it and made their bid.

Kirkland Lake Gold looks good

At first blush this looks like a good takeover.Kirkland Lake has offered $2 billion and will get 57% of the new merged company.NMI shareholders will get $5.28 a share for shares now trading at about $3.75 a share.But will shareholders get the maximum value for their shares?There can be no doubt that NMI management is not getting sufficient production from the Fosterville mine and new management might help here.But there are no apparent synergies between the two companies.Can shareholder value be maximized by allowing KLG to take a minority position with their approval?The problem is that NMI at this point does not know how much additional gold is in the extensions from both the Fosterville and the Cosmo mine.So how can NMI management put a true value on Newmarket Gold?It is very difficult at this time according to this blog.

Other Options

Don't get me wrong; I know that this is a "bona fide" offer but NMI has other options as discussed in my post on Blogdaleupsome of September30,2016 see details of options for NMI.Newmarket Gold could approve of a minority position by Kirkland Lake Gold and start to work more diligently to increase it's production at both mines.One possibility is to put a second mine entrance to the large Fosterville mine and increase production.If legal problems exist with the old owner of the Victoria State mines then resurrect Crocodile Gold and put all assets not formerly owned by Aurico Gold into Crocodile Gold and Newmarket would own 100% .However first NMI management must deal with a pretty good offer from Kirkland Lake.This blog notes that no date has been yet set to give approval to the KLG  offer.Maybe there will be no shareholder vote if enough substantial changes can be made in the NMI operation.                 use Workathon for the valuation of resource stocks

Element Financial will finally split up

             Element Financial has been talking about it for months or is it years.They gave a press release that states the split up will occur on October3,2016.This blog doubted that such a split would occur nor could Steve Hudson get shareholder approval for the split.But Element Financial announced in a recent press release that the split would go through and that one old Element Financial would give the shareholder one new Element Fleet Management and one new Element Commercial Finance.Shareholders approved the split unanimously.The new shares presumably would trade on October3 or shortly after. But at what price?
        The New Deal
      The vast majority of assets are in the now called Fleet Management division and so would be after the split as well.Element Financial (EFN)  now has total assets of almost $21 billion and 65% to 75% of them would go to the new Element Fleet Management with the other 25% to 35% going to Element Commercial Finance.Total debt now stands at $16 billion and likely the allocation of debt would be along the same lines. But no guidance has been given here and it is possible that debt will be allocated on a project basis and less debt will go to Commercial Finance.This will have a tremenduous impact on the price of the smaller stock.Consolidated earnings will be the same although there will be a 10 to 15% increase for 2017 according to guidance.So earnings for 2015 will be about $1.65 to $1.75 before tax and about $1.25 after tax for the whole entity.And earnings before tax for Commercial Finance will be about $.45 before tax;this means that earnings before tax for Element Fleet Management will be about $1.25 to $1.30 for the year.This likely means that Element Fleet Management will trade at close to it's present value. and maintain the same P/E ratio.And Element Commercial Finance should trade at close to the $5.00 to $6.00 range. It may not open there but it will climb to this level by mid-2017 and keep a P/E ratio a little less than Element Fleet Mangement as it's growth rate seems smaller.
        Conclusion
   Many investors(including me) thought that the split may not be beneficial to them.But Steve Hudson has engineered a split that should please almost everyone,that is all three penguins will be happy (as in the caption above).This blog does not see Element Fleet Management retreating;it may move gradually towards the $18 level.But the bonus to existing shareholders will be Element Commercail Finance for which they will own in equal proportion to their existing stock.In theory, this split may allow for a 25% to 33% gain to old shareholders by mid-2017.The starting price for Element Commercial Finance will depend on the allocation of existing debt but even a low initial price will likely see it trading at a minimum of $4.00 by year-end.                                                         

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Is Air Canada Express on schedule?

     In it's last quarterly report ,Chorus Aviation talked about moving towards some kind of new agreement with Air Canada on the operation of Air Canada Express.It is not clear yet whether this has been covered in the Air Canada amended CPA agreement.But a number of things are becoming clearer.Chorus and it's partner Georgian Air Lines own the majority of the equipment(140 of 171 aircraft) in Air Canada Express now and Chorus has already ordered new aircraft for 2017.The division of duties or functions as well as revenues has not been decided yet.Or if it has the public has not yet been told of it.This blog predicts that Chorus will have more,not less, earnings from the new operational agreement.It is also likely that Air Canada will earn more revenue under the new setup as well.
                                      

    The new Chorus Structure 
 Workathon has in the last two or three posts on Chorus talked about the new structure that is emerging from out of the old company.Chorus now has a bigger maintenance operation and it has a new specialized charter operation centred around it's latest acquisition called Voyageur Airways.Both seem to be bringing in additional revenues and earnings.Consequently after Chorus showed in 2016 a good first quarter of $.29 or $.30 per share this blog predicted annual earnings of about $1.25 per share.But Chorus showed investors in the second quarter that it's earnings exceeded all analysts predictions as it came in with earnings per share of $.54 to $.56 .This increased this blog's prediction for annual earnings of $1.65 to $1.85 per share.
  It is hard to explain the extra earnings when the revenues from the amended CPA agreement are coming down not up.One possibilty is that Chorus is now earning more money from it's secondary operations such as maintenance and charter business.But it must be generating some earnings now from the Air Canada Express operation.According to Macleans magazine Air Canada has had two bad quarters in a row and needs more revenues and earnings.According to Macleans magazine Air Canada needs more revenues and it would be in their interest to make Air Canada Express more profitable.This blog agrees with this position and feels that giving more autonomy to Chorus and Georgian Air Lines to run Air Canada Express will certainly help.So with this in mind it is likely that Chorus will have another good quarter coming up and e.p.s may even beat that of the second quarter.
                                                  

               The third Quarter
   Chorus Aviation has increased it's earnings per share above expectations in 2016.Qtrade (a small broker) estimates their earnings per share at about $1.60 per share for the year and Yahoo Finance estimates it at only $.80.Workathon estimated annual e.p.s. at $1.25 per share after the first quarter and now (after a good second quarter) at about $1.75 per share.Chorus may be making more from Air Canada Express than all parties originally forecast and now may be ready to beat the trend of the first half.If so look for Chorus to hit $7.50 in October.I don't think Air Canada will be unhappy. 

Tucows is a different breed of "cap"

         Usually  the saying goes "something is a different breed of cat";this denotes an unusual person or company.And that applies to Tucows that I have never analysed on any of my blogs.This is the first for Workarthon also.In 2013 Tucows traded at about $12 to $13 a share and now it trades at $36 to $40.It only has a market capitalization of $370 to $400 million.Small even for a "small cap" but a decent size for a growing technology company.After all Tucows has grown 300% in 3 years.So just why has it done so well?
          Operational Numbers
      An examination of comparables reveals why it has done so well.It has earnings per share of $1.38 per share and a P/E ratio of 26.Revenues have grown by only 4 to 5% over the last quarter  but by about 20% over Q4 2015.Operational income shows about the same growth.This compares to Blackberry which has had  a reduction of revenues by 20% since Q4 2015.A quick examination of junior technology companies reveals that Tucows (TC) is one of a few that has positive growth in revenues matched with positive earnings per share.
    It has had large growth in plant and equipment since Q4 2015.While it's market capitalization is below Blackberry (BB) it's EBITDA is much larger at almost $20 million (according to Qtrade) or $25 million (according to Yahoo Finance) compared to negative$200 million EBITDA for BB.Surprisingly Tucows has a float of only 10 million shares;this compares to 523 million for Blackberry and 104 million for Urthecast, another competitor.This is actually a problem for Tucows as it trades very thinly and it's small float prohibits some institutions from acquiring it's stock.It's daily volume of trade is only 2000 shares.A 25,000 share transaction might send the price up by $3 to $5 a share.Otherwise this blog believes that Tucows would be trading closer to $45 a share.          

                    Financing Changes

       Tucows has just recently arranged $75 million in debt financing.It will be used for "share repurchases,acquisitions and capital expenditures".Admittedly Tucows has little debt on it's balance sheet now but it does not need to repurchase shares;it needs to issue more shares.It only has 10 million shares outstanding and this is much less than any of it's competitors.It could easily double the number of outstanding shares that it has to 20 million.This would increase it's liquidity by $720 million and it's trading float both of which would increase it's attractiveness to large institutions.This blog realizes that it would dilute it's earnings per share to$.70 but it would give it the capacity to acquire a number of  small technology companies like Splice Software or even a chunk of Intrinsync Software shares.Both show good growth.

          Conclusion

    Tucows has shown exceptional management in the period from 2013 to today.It has been very careful about issuing new equity and diluting it' earnings.At the same time it's revenue growth has slowed recently.A new equity issue would increase it's liquidity and allow it to pick up a few fast growing technology    companies.Perhaps 10 million new shares is extreme but 1.5 to 2.5 million shares priced at $36 a share would be a quite  acute move.This would reduce earnings by $.25 to $.30 per share.This blog is against any share repurchases when it only has 10 million shares now; a rights issue for 1 to 1.5 million shares would be quite a good idea.                            use Workathon to improve your share price;  use Workathon for business news

Algonquin Power is on track to hit $500 to $525 million EBITDA (2016)

On August11,2016 Algonquin Power gave it's second quarter results.It was a solid performance and an improvement over the first quarter.Almost all operational figures were improved over the same quarter in 2015.But the important story for this blog is that adjusted EBITDA was $99 million compared to $81 million in 2015 for Q2.And $247 million versus $196 million for the first half.Algonquin has given guidance of $475 to $525 million of adjusted EBITDA for 2016 and this blog sees no problem in hitting the mid-point or $500 million of adjusted EBITDA for the year.
      Financial Data
       Usually this section contains a ream of operational data but suffice it to say that revenues were ahead of 2015 by almost 15% and adjusted EBITDA was ahead by almost 20%.While adjusted EBITDA was almost $250 million for six months.There should be little trouble in achieving $500 million mentionned in guidance.This will be a 25% increase over the $400 million achieved in 2015.This has allowed AQN to increase the dividend by 10% in 2016.And this blog calls for a small dividend increase in 2016 if they meet earnings guidance.AQN'S yield is below most of it's peers.
       New Projects
       Algonquin Power spent a lot of time and money on meeting all regulatory requirements for Park Water Systems in the western USA. Now all requirements have been met and it is bringing in earnings.It also has finished construction of the O'dell wind park in Minnesota and it is fully commissioned.Lately it got a $10 million revenue increase for it's Calpeco Electric System and it has shareholder approval for the Empire Electric System.It is these new projects that are likely to push adjusted EBITDA beyond $500 million for 2016.But this blog expects almost no earnings from Empire in 2016; there will likely be further regulatory hurdles to meet.

                                        

       Regulatory Risk
   Algonquin Power has done tremenduously well based on the best measure of earnings and earnings per share,that is, adjusted EBITDA.Adjusted EBITDA has grown from $305 million in 2014 to $400 million for 2015 and now is on track to hit $500 to $525 million for 2016.The chief wild cards will be the  amount of earnings from the O'dell wind farm and Empire Electric.This puts earnings per share at $5.10 to $5.25 per share (at a minimum) and the price/earnings ratio at slightly more than 2 times.Why does an utility with such solid growth only get a multiple of 2 when it's peers are getting 10 to 20? It is apparent that investors have sensed the risk to earnings from having too many of it's assets in the American regulatory basket.Is this a real or imagined risk?This blog is betting on the latter as I am a shareholder in this tremenduous growth stock.             see recent analysis of AQN stock performance;  see analysis of the underperformance of AQN

Chorus Aviation closer to consolidation with Express

     Chorus Aviation just released another quarterly report on August11.The title of my last blog on Chorus (CHR) was Chorus needs another Step click here for details.And they just took another step.Chorus says that they have acquired 5 new Bombardier Q400 aircraft and are now moving towards consolidation of Air Canada Express.The operating conditions are not yet clear but it seems like it will be run (almost completely) by Chorus and it's partner Georgian Air Lines.At the present time Chorus and Georgian own 140 out of a total 171 aircraft operated by Air Canada express and they serve 120 locations.There will certainly be a revenue split with Air Canada but CHR has given us no details here.
     Second Quarter Earnings
     Chorus had a big first quarter and showed investors $45 million of EBITDA and $55 million of net income.The latter was buoyed by a large foreign exchange gain but adjusted EBITDA was actual.It amounted to $.29 to $.30 per share and this is a good proxy for earnings per share.This quarter adjusted EBITDA was even bigger at $58 million.So adjusted EBITDA was $.54 to $.56 per share in Q2.This makes earnings per share of $.83 to $.86 per share for six months and on track to hit $1.75 to $1.85 per share for the year.
   Operating revenue (under CPA) was down from 2015; it went from $400 million to $310 million.However aircraft leasing revenue ( under CPA) went up from $16 to $23 million.10 new aircraft were obtained for leasing under the CPA.And 3 more will be acquired in September.This will bring the total to 34 aircraft in this program.Surprisingly there was no information on the newly acquired Voyageur Airways nor on the Chorus maintenance operations.
      Air Canada Express
    The consolidation of Chorus and Air Canada Express is new information for this blog.It is clear that Georgian Air Lines and Chorus almost run this operation now as they own 140 of 171 air craft and Chorus just acquired 5 new aircraft for Air Canada Express.However it is not clear what relationship Georgian Air has with Chorus.This blog expects there is some relationship.It is also not clear what split on revenues Chorus will have with Air Canada here.The next quarter, especially with the new aircraft, should reveal more of what the amended CPA agreement is all about.This blog expects an increase of revenues and income in Q3.
           The rest of 2016          

Chorus had a good first quarter in terms of net income and adjusted EBITDA.And the second quarter was also a strong one but with a smaller foreign exchange gain.Operating revenue was down but leasing revenues were up.This blog expects that EBITDA from Voyageur and their maintenance operations will continue to grow.Now Air Canada Express should start to be a source of income for Chorus. Adjusted EBITDA should be  $.85 per share for the first half and about $1.75 to $1.95 for the year.At $6.00 per share this makes Chorus a cheap purchase at a little more than 3 times earnings.But investors still need to see how the Air Canada Express arrangement will unfurl.                         use Workathon for analysis of small caps; see recent analysis of amended CPA agreement

Huronia XII Cobourg needs help too

   The Huronia series was intended to give some assistance(although not asked for) to the small towns in the Lake Simcoe and southern Georgian Bay area.Most of these towns can use all the help they can get.And some only want new jobs if they fit into the existing structure of the town.No smokestack industry for twons with beaches.For example, I have suggested milk processing (and given a preferred location) to Wasaga Beach and they prefer to stick to their booming tourist industry, Who can blame them?This changed when I did a piece on Peterboro which is semi-industrial and not in the Huronia area.This, Huronia XII is along those lines as it is not in the Huronia area either.
        Cobourg- a former thriving Industrial Centre
    Cobourg was established in 1898; as the caption shows it has a good beach on Lake Ontario. It started later than Peterboro which is just north of it but began to build up quickly.By the 1900s  it had several small industries and was more advanced than many other small towns along Lake Ontario.But times changed and left Cobourg behind other locations like Bowmanville, Oshawa and Peterboro.It tried but failed to catch up.
    Cobourg - then and now
    Cobourg has a population of 18,500 but it has grown slowly.Yet it is well connected in a transportation sense;it is on the main CN and  CP rail line and on the 401 which connects to Toronto and Kingston. Also it is only 7 kilometeres away from Port Hope which has a population of about 15,000 and  can be entered by an extension of a main street in Cobourg.The two towns are closely bonded in a number of ways.                                                             It did have a small chemical business and the chemicals were used in the pulp and paper business.But this business has closed now.The biggest employer in town would be the food industry with producers like Weetabix, Weston Bakeries,Brandneu foods and Curtis Chicks in Port Hope.Cobourg also has an Agricultural Food Venture Centre which is a non-profit operation which does small batch food processing and packaging.But there is no connection  nor attempt at consolidation between these businesses.
    Let's start with the Food Venture Centre
    I think that there is a place for government funding in Cobourg.The connection between all these separate food businesses in Cobourg is the Agricultural Food Venture Centre.At the present time it only has packaging and processing in small batches.If more investment(government money) was put into it then it could become a centre for processing and packaging for a number of foods, including chicken and agricultural products.For example, wheat and flour for baking could be processed and packaged here.The finished products could be moved to market.In the case of chicken it would be moved to retail grocers and in the case of wheat and flour to Weetabix and Weston Bakeries.This would likely mean that the number of jobs in the Food Venture Centre would triple and the number in the three suppliers would increase by some percentage.However this does not prove that the beach fixes everything.                 use Workathon for blogs on economic development; read Workathon for blogs on economic development;use Workathon for ideas on economic development

Online Consultancy -being ahead of the Curve

     This author has several blogs,including one on Tumblr,one on LinkedIn, and three on Wordpress and these two on Blogger.Those on Blogger and Wordpress are quite similar;the other two vary somewhat.But basically all offer online consultancy.Although my advice and information is unsolicited by a customer.I am ,in effect,offering my advice and special information without an offer of payment.I have to hope that the customer will find some indirect way to show it's appreciation or compensation.
    Defining Consultancy
     Ordinarily, consultancy begins with a customer finding a problem or a bottleneck in it's operations.A search begins to find a consultant in that field that can help speed up their operation or remove the bottleneck.Once a suitable consultant is found a Mission Statement is drawn up and agreed upon by both parties.Then the project begins with a definite deadline for finishing.
   If the process begins online then a Mission Statement can be sent to a customer without an offer being made.Or an inquiry can be made to a consultant without a specific need required.Communication can be continued online through the internet and a project becomes defined.Sometimes there was a need but it wasn't urgent.Either way the project becomes defined and the terms of payment and the time frame agreed upon.
   A consultant advises clients on how to improve their operation or make it more efficient or more profitable.That is, a consultant is paid because he reduces costs or increases revenues.A good consultant can earn up to $250,000 a year but he should have at least one very profitable project a year.
   Online consultancy is a form of ecommerce;communication and the terms are set through the internet.Much of the project can be done on a secure website and even research can be done online and kept on  PDF file.Payment can be done on the internet as well using a service like Paypal which is quite secure or electronic bill payment.
       My Consultancy
  Most of the posts done on Workathon are a form of consultancy.There is no defined Mission Statement  nor terms of payment nor time frame set out.These are problems or opportunities that I see and respond to.No offer has been made by a customer nor did I make a proposal request.On the other hand no payment is made either; any appreciation or lack of it is done indirectly. I look at problems like the increase in the value of a stock because a gold deposit has been underestimated,or information being misunderstood leading to an underestimate of daily oil production and even my take on the amount of annual government spending.It must be said that not all my consulting projects get the same amount of readership nor appreciation.But all are carried out with a high degree of thoroughness.
                                              

read my blogs on problem solving of many kinds ; read interesting blogs on Workathon on many subjects

The new Newmarket Gold

On  July12,2016 Newmarket Gold  released it's quarterly production results.Newmarket is the old Crocodile Gold but it has a few  new tweeks.Newmarket has all of it's assets in Australia (3 gold mines and a new one soon starting) but it's headquarters is in Vancouver, Canada;this is a Canadian gold company.
     Production data
 Newmarket had record quarterly production in this quarter;62,000 total ounces is 9% more than Q2 2015.First half production was at 119,250 ounces which includes 57,000 ounces for the first quarter.Newmarket is on track to exceed their annual guidance of  205,000 to 220,000 ounces.This blog predicts annual production of 245,000 to 255,000 ounces.This is chiefly because of the increases in the grade of ore in the Fosterville mine and a slightly higher gold recovery rate.
  Newmarket reports that they have a new gravity gold circuit increased recovery system.And they also report that mill grade increased by 27% over Q2 2015 at the Fosterville mine.This is important as that is now 61% of total production.There are now 8 drilling rigs at Fosterville;4 rigs at the Lower Phoenix structure and 4 at the Harrier south extension.Drilling is both above and below ground.There is no drilling now at the Phoenix structure which is where much of present production comes from.And Newmarket reports that there are 2 rigs at the new Aurora B resource in the Stawell mine.
  Fosterville had a quarterly record production of 37,250 ounces.The Cosmo mine produced 15,500 ounces which is an increase over 2015.But the Stawell mine production fell to 8500 ounces chiefly because the mill grade of their ore decreased.
   Newmarket has another property called Maud Creek which seems to be in the centre of Australia.They have completed their assessment study and it has a 5% NPV using a gold price of $1200 per ounce.Newmarket will commence a feasibility study in Q3 and may be ready to drill in early 2017.They probably would use the Cosmo mine mill to process their ore at first.
           New Guidance
      Investors should be happy with this quarterly production report.The full financial report will follow.But Newmarket does say that it has a cash balance of $70 million which is up 34% from Q1 2016.It also shows that now it has no debt.This ensures that the Maud Creek mine will be ready to start production with a successful feasibilty study in Q3.Newmarket has talked in other quarterly reports about other properties they have including a Silver Tip mine.And now the price of gold is inching forwards;it may stay in the $1325 to $1375 per ounce range for the rest of 2016.This price scenario will allow Newmarket to make a small acquisition and take on a little bit of new debt.Although it is clear that their main focus now is on assessing the total size of the Fosterville resource. 
     If this blog is right about their new annual guidance being 245,000 to 255,000 ounces and the gold price staying in it's present range then look at the share price being in the $4.50 to $5.00 range by December, 2016.          use Workathon analysis of Cdn. resource stocks

Intrinsync Software is one of the new junior techs

   

This is  a blog about a company not previously covered in Workathon- Intrinsync Software.Although it has been mentioned in a blog analysing Tucows on 09/03/2015 called Four Small Cap Technology Stocks.This is one of a number of  junior technology companies that has taken a different path to growth.It started with a number of products that were not going to be pathfinders nor groundbreakers.The technology and the products were only slightly profitable.But  this stable of products was well managed  and so it brought in new staff and had some money  left for investment.And so it made some investments in other junior technology companies.This became the start of a new and growing and more successful company.
        The Basic Data
 Intrinsync Software was priced in the $.40 area from January,2012 to about June 2105.Then it moved into the $.75 price range.It still only has total assets of about $15 million but it is typical of software companies to have few assets.More importantly it has a market capitalization of about $25 million and earnings per share of $.09 combined with a price/earnings ratio of 13 times.These are pretty good numbers for a software company some of which can have quite large P/E ratios.It is not unusual to see a P/E ratio of 20 to 25 times;this would give ITC a price of $1.75 to $2.00 per share.This gives investors a snapshot of where they are now but not where they are going.
             Small Cap Startups
    ITC has a program to acquire small cap technology companies with little good will (or negative good will) and interesting new technologies.Some of the companies ITC has acquired include Global Relay,Spry Logistics and now taking a position in Payfirma.It may also have small positions in Neulion and D-Box Technology.It's earnings are not great but it has only 20 million shares outstanding.So it still has some equity  to buy other startups.Overtime they will combine these separate parts into a new and different operation.That is slowly taking shape.
                                       

      Conclusion
      Intrinsync Software is a junior technology company;now it has parts of several other junior technology companies.It will need to take greater positions in all of it's subsidiaries and combine the operations gradually.This will require more equity and more debt so the acquisitions must be prudent.But the new ITC will become a small technological operating company producing a few special products.It is not there yet but it is on it's way.This blog believes that a P/E ratio of 13 is light for a company with this kind of potential.                 see Workathon for prediction on growth of ITC ;  get stories on Cdn. junior tech companies on Workathon.blogger.com

Chorus Aviation needs another Step

   Several blogs on Workathon have talked about and suggested a restructuring of both the  quarterly report and it's corporate structure of Chorus Aviation.Some of these blogs are July12,2015 and Nov.18,2014 and October23,2013.click here for details .But in fact over the last two years this blog has seen that the changes are becoming more visible- both in the quarterly report and the corporate structure.For example, since the C.P.A agreement with Air Canada was amended the regulated revenues and income have fallen.The fall has been gradual but clear.But the category called non-operational income (by Chorus) and non-regulated income by this blog has grown.Chorus reports that there was an increase of $70 million in non-operating income over the same quarter in 2015.This is dramatic and points to a number of  structural changes.It also points to the  fact that EBITDA had a substantial increase not decrease in the last quarter.
    Initial Steps
   Chorus underwent a number of changes.Their initial step was in 2012 and 2013 to invest in a number of foreign airline operations,including one in South America.Most of these were far from home but quite profitable.After a little fixing up and improving they were put back on the market and sold for a tidy profit.They also had a maintenance operation in the London, Ontario airport.This also was sold for a good profit and their entire maintenance operation was moved to Halifax where their headquarters are.They bought a number of small specialized maintenance firms like Telesys  and started to increase the size of their maintenance operation and revenues.
        This gave them a little independence but they were still very dependent on their main C.P.A. agreement with Air Canada.Recently they bought a specialized charter operation called Voyageur Airways in North Bay, Ontario and have bought a few more CRJ regional jets for this operation.Chorus says that only $10 to $20 million of EBITDA comes from this subsidiary yet.This blog predicts that more investment will be spent here in 2016.
     A Good Quarter
  The first quarter of 2016 was a good one for Chorus as net income was $55 million which was a record quarter.But this quarter recorded almost $40 million in foreign exchange gains as well as a large amount of  what they call non-operating income.Can they repeat this in the second quarter?
  Net income was $55 million or about $.48 to $.50 per share but the more important EBITDA was $45 million or about $.29 to $.30 per share.EBITDA gives us a better measurement of earnings per share and if Chorus can come in with $35 to $40 million in the next quarter this will be a successful first half. This will indicate that Voyageur Airways as well as their maintenance operations are becoming more successful. Furthermore earnings per share will be around $.66 to $.70 per share for the first half and $1.30 to $1.40 per share for the full year.The second quarter will tell investors how successful their restructuring has been and how much more remains.
    This blog predicts that EBITDA will be around $33 to $35 million for the second quarter and $.60 per share for the first half.Still,

on track to hit $1.25 per share for the year and maybe even raise the dividend.This blog expects Voyageur to have growing pains and C.P.A. revenues to be down from the first quarter.The wildcard here will be how much revenues they earn from their  maintenance agreements,including the one with Bombardier.                                   read expectations for the second quarter;  read expectations for Chorus Av. second quarter

More gold in the south for Newmarket Gold

  On June 27,2016 Newmarket Gold had a press release telling the public about the drill results from their recent drilling program south of the Fosterville mine.It has been the position of this blog that sometimes a press release can be more important to investors than a quarterly report.This is one of those press releases.The results in this drilling report show that  not only has the Fosterville mine got extensive resources in the north where the Phoenix and Lower Phoenix ore bodies are contained.There now is evidence of an extensive ore body in the south.Newmarket makes it clear that they have more work to do to delineate the size of this new deposit.
          Three Fault Lines
  Past blogs on Blogdaleupsome have used information in other Newmarket (formerly Crocodile Gold) to try and estimate the size of the total ore body at the Fosterville mine.With the new information given on the extensions from the Phoenix and Lower Phoenix structures this blog on January16,2015 concluded that the ore body could be as big as 5 million ounces of gold.read about the size of the Fostervilleore body. The three main deposits are The Central,the Harrier and the Phoenix reserves.Little mining is now going on in the Central ore body.And not much miming is being done on the old Harrier deposit.Most of the ore coming out of the Fosterville  mine comes from the Phoenix structure.There is a Phoenix and a Lower Phoenix structure and little work has started on the Lower Phoenix structure to date.Although the ore body seems to be huge Newmarket is only producing 200,000 to 225,000 ounces a year.Principally coming from the Harrier and Phoenix structures.
       The Harrier reserve
     In the past the impression has been given that mining is winding down at the Harrier reserve.But now Newmarket has completes drilling on 14,000 metres of property south of the Harrier south gold system.Intercepts have shown from 10 to 22 grams per tonne of gold.And the same grade for the Osprey gold system.It appears that Osprey is south and east of the main Harrier reserve.The width of the mineralization is only 3 to 5 metres so the size of the ore body cannot yet be determined.And Newmarket intends to do more drilling to delineate the ore body further.          

         Conclusion
      It now seems that the original Fosterville mine was almost all done on the surface.There was only a limited amount of underground drilling going  on in the old mine. There has been an extensive ore body found north of the Phoenix and Lower Phoenix structures.And now it appears that there will be a sizeable ore body found south of the Harrier fault.Furthermore Newmarket reports that the new deposit is at about the same depth as the Lower Phoenix reserve.It is possible but not likely that this is a continuous ore body.Either way it is now likely that the total reserve may be as big as 6.5 to 7 million ounces.No final speculation will be made by this blog until we see the width of the gold intercepts.   see analysis of gold deposit size;   use Workathon for anlysis of resource stocks

Interrent REIT recycles capital

 On April 27,2016 Interrent REIT came out with a very important press release.Thye announced that they had an unconditional sale of properties in Kingston, Ontario for combined proceeds of $21.2 million; this comes in at $105,000 per suite.Interrent also announced that they have sold in total 461 suites recently (in Belleville, Brantford,Brampton and Kingston) for  combined  proceeds of $52.5 million or $113,500 per suite.So the price per suite for the Kingston properties was slightly below the average in the other non-core properties.This is part of their asset allocation strategy that will put more capital into the core areas of Ontario and Quebec.It was not clear from the press release if there remains a significant amount of non-core assets yet and whether they will all be sold.                       

         The Strategy
  As the picture above shows Interrent realizes that only the core areas like Toronto and Montreal and Ottawa will get above average growth in rents and asset values.The outlying areas like Kingston and Brampton and Belleville will only get average increases that are in line with their historical growth.Interent announced in their press release that this strategy is expected to increase both occupancy and rent per suite.This blog believes that this is correct.For example, rental revenue has increased since 2015 by 20% and by more than 50% since 2012.Also operating income was constant since 2015 but increased by about 48% since 2012.Interent has consistently recycled capital since 2012.As a result the stock price has reflected these better financial numbers as it has moved from $6.50 per share in February to the present price of $7.80.
              Conclusion
   Sometimes important pieces of business strategy can be revealed in a single press release.This is the case here as Interrent revealed that they are recycling $52.5 million.This is only about 4% of their total asset base of $1.23 billion but it will have an effect and it is very likely that more of their non-core assets will be sold off.In addition, they made almost $10 million of net proceeds on these sales.Operating income was $40 million in 2015 and is on track to hit $48 to $50 million for 2016.This should be good enough to move the stock closer to $9 per share by Christmas.        use Workathon for analysis of Cdn. reits;get clearer analysis of Cdn. reits

Canexus reports before the merger

        On May5 Canexus, a chemical producer, reported before being acquired by Superior Plus.On October 6,2015 Canexus (CUS) announced that it had agreed to be acquired by Superior Plus,another Canadian chemical and energy producer.The deal is supposed to be carried out by the end of the first half, that is, by the end of June.It is a cash and stock deal.But Canexus refers to it as an all stock deal.The proposal is .1531 shares of Superior Plus for every Canexus share.This would mean that an additional 27 million shares must be issued to buy all Canexus shares.
                                              

      Highlights of the Quarter
   Canexus reported cash operating profit (COP) of $31 million compared to $27 million in Q4 of 2015 and $32 million in the first quarter of 2015.This is an unusual term and should be equal to EBITDA with interest and tax expenses removed so EBITDA would be $41 million.Canexus says their performance is because of the strong performance from North American sodium chlorate and the Brazil business units. Sodium Chlorate COP made up $22 million or about 70% of the total. Sodium chlorate sales were 5% higher than 2015 and there was a positive effect from the  weaker Canadian dollar.North American chlor alkali had a COP of only $2.5 million which was down from  the same quarter in 2015 and Q4 2015.Their Brazilian operations generated a COP of $8 million compared to $7 million in 2015 and $6 million in the fourth quarter.
    The Upcoming Transaction
 Canexus refers to the merger or acquisition as "the transaction".Superior Plus estimates that it is valued at about $316 million;they intend to acquire all issued and outstanding shares of Canexus. SPB had excellent timing in it's offer as Canexus had just taken a hit on unloading it's oil transshipment operation called NATO.In fact, CUS took a further writeoff on NATO in this quarter.So Canexus had a short term liquidity problem and SPB made it's offer.                                                                                                   It was intended to be carried out by the end of the first half of 2016.That means it would be done by the end of June.But that will add another almost 20% of new shares to Superior Plus.So in effect that would dilute earnings by about 20% if done all at once.This blog calls for only a third to a half of the Canexus shares to be converted by the end of the third quarter.Perhaps then Superior Plus will re evaluate and buy only 50 to 75% of the total outstanding shares.Either way this blog does not see all of Canexus shares being acquired by December 2016.However on the positive side this does look like an accretive acquisition based on this quarterly report by Canexus.               see evaluation of Canexus merger  ;see analysis of two Cdn. chemical cos.