Chorus Aviation's new Structure makes money

   Chorus Aviation reported it's fourth quarter and annual results on February19,2016.It is working under the amended CPA agreement with Air Canada and the changes are noticeable.First it's operating revenues are down from $401 million to $357 million but operating expenses are down also.CPA pass through revenues, made from the Air Canada agreement, are down but revenues from leasing and charters are up as is maintenance revenues.It's new acquisition Voyageur has successfully added to revenues and EBITDA.             

            Financial Details
  Chorus sets out at the start of it's report that operating income (8.4%),adjusted EBITDA (2.6%) and adjusted earnings per share (1.3%) are all up from last year.Adjusted EBITDA was $209 million and adjusted net income was $96 million.Net income was $26 million and adjusted net income per share was $.21 per share.
 An interesting trend is that all figures in the fourth quarter on an anuualized basis are higher than the yearend figures.The revenue figures for the fourth quarter were below that for the same quarter in 2014.While the adjusted EBITDA,adjusted  net income and net income figures were ahead of last year.But not only are they ahead of the same quarter last year but they are ahead of the year as a whole once anualized.Chorus is managing things better each quarter as it looks.One of the reasons is definitely the acquisition of the Voyageur Airways operation;Chorus has leased new airplanes and Voyageur is contributing to increases in EBITDA.
    The new Organization
 This blog has been critical of Chorus in the past because it has included regulated and non-regulated revenues together so that it is difficult to separate.This report is better than past reports for clarity.It is easier to see one organization from the other.Still there could be improvements in the organization of the report itself.
 Further to that is the actual makeup of the company.It is clear that their new acquisition Voyageur Airways has added revenues and EBITDA.Chorus has leased 5 new CRJ200s so it can do more contracting and chartering.This blog believes that more investment will have to go into Voyageur in 2016.
 It is clear that overall revenues have decreased but Chorus has been very efficient with both their regulated and non-regilated operations.Proof of that is EBITDA and net income have risen as .a whole.It is important to note that adjusted net income per share for the fourth quarter is greater than for the whole of 2015.This blog finds that this is a very well run company that is on the right path. Furthermore as Voyageur fits into it's operation better and with more new investment the next quarter should be.better again.
 Conclusion
  The new organization seems to be on the right track.But investors do need to know if revenues and EBITDA is increasing for Voyageur.Just an overview statement should be sufficient.The maintenace operations are also contributing to revenues and EBITDA but their contribution is not great enough yet to require much of a breakdown here.Overall performance is good and this blog expects annual EBITDA  to hit $240 to  $250 million in 2016.Also it would not be too difficult to see adjusted net income per share of $1 per share for 2016.If that happens then a dividend raise back to $.60 where it was in 2012 is not out of the question.                 use Workathon (blogger.com) for analysis of Cdn.juniors; use Workathon(blogger.com) for analysis of "small caps"

Connacher Oil and Gas "hunkers down"

  Connacher Oil and Gas is one of three junior oil producers that has gotten good coverage in this blog.Connacher has several blogs covering various aspects of it's development in Workathon.This blog has covered Connacher through the sale of it's Montana refinery and the opening of Pod One and then to the opening of the Algar plant(see earlier blogs).Production has climbed gradually(with the urging of this blog) from 10,000 barrels per day to 11,000 barrels and then in Q4 up to 13,900 barrels per day.
      2016 Production Guidance
  So it is with regret that this blog reports that on January18,2016 that Connacher announced that it intends to have production of only 7000 to 8000 barrels per day.It also announced that both SAGD plants are open although equipment maintenance at both plants is ongoing.Furthermore Connacher announced that production would be only 3000 to 4000 barrels per day in March.It is not said specifically but this blog guesses that this is a result of the oil price reductions.Connacher is one amongst many junior oil producers that is cutting back production.
  Connacher states that they have a cash balance of about $48 million so they are not in need of cash at this point.And they are not running low on oil reserves as they have 8 million barrels of proved,producing reserves and  214 million barrels of estimated proved reserves;they add that their total reserves remain at 436 million barrels.
      A Different Viewpoint
  This blog has encouraged Connacher consistently to increase production.So again this blog tells them(especially with heavy oil) to try and raise production or at least to match Q4 production.I understand that this will reduce North American supply of oil and put upward pressure on the WTI price.On the other hand,the production cost curve should be still going down on  plants that are 8 and 5 years old.In other words Connacher should consider more it's own position rather than the macroeconomic situation.Plus the fact that it is more difficult to produce 20,000 barrels per day than it is to produce 14,000 barrels.They have to increase their own efficiencies in order to grow to a mid-tier producer.In addition, they have still sizeable reserves.Connacher should be aiming at a  $.35 share price not a $.035 share price.                              analysis of resource stocks on Workathon;analysis of resource stocks on Workathon                         

In Criticism of large Dividend Cuts

Recently Transalta Power announced a dividend cut and it is not yet clear if it is a reduction to a quarterly based dividend or an annual based dividend.If it is a quarterly dividend then it will be a 11% decrease in the dividend but if it is an annual dividend then the reduction will be about 75%.The effect on the shareholders and the stock price and on management will be dramatically different.This piece looks at other utilities that have made a dramatic cut and one that faced with this decision decided to increase the dividend.
       Atlantic Power
  This case is discussed on Econothon II (in Blogger) last week.Atlantic Power (ATP) was priced at $14 a share in 2013 and paid a dividend of $.40 per share which is only a 3% yield.There were difficulties and accounting problems and ATP decided to cut it's dividend to $.12 per share;this is a 70 % reduction.The stock price reacted by dropping over a fairly short period of time to the $2.00 level.This is a 75 % reduction and the stock  yield returned to close to it's old level.In fact, although the dividend reduction was done in 2013 the stock price is still at only $2.35 a share.In other words, there was a dramatic price drop and the price stayed down(except for small periods).It is the thesis of this piece that a stock after a dividend reduction will  move in price to obtain yield equality or close to it.
 The chairman who engineered this reduction was let go shortly after. And I believe although I am not certain that most of the board members responsible no longer stayed with the board.Doubtless the chairman was thinking of the long term welfare of the company and sacrificed his own job to improve the company in the long run.Very courageous if not very intelligent.Now in 2016 the company prospects look better but it has taken three years; a higher stock price could have helped with equity financing and made things easier  but they chose to do things the hard way.
  Just Energy
  Just Energy (JE) is another utility,a Canadian utility, that faced with eroding revenues from attrition and eroding earnings decided to cut it's dividend also.It too was trading at the $13 to $14 a share level and paid a dividend of $1.25 per share.It's yield was about  10% to 11% but it was cut to $.50 a share which translates into 3% on a $14 share price.The stock price dropped quickly to the $6 level which made the dividend equal to about 8%.This is not equal to the old yield but it is not  far from it. The price stayed here for about  a year and a half and  then started gradually to move back to the $9 a share area where it remains today.In summary, JE had not as dramatic a drop  as ATP and moved back upwards quicker than ATP.It's prospects look better now than in 2013 also.It has also made changes to it's service standards and is working on it's customer service also.
  Interestingly enough the Chairman of Atlantic Power was on also on this board and he was let go again. Although this blog does not know for sure if any of the 2013 board remains I believe that few remain, if any.Once again the board suffered in order to help the long term welfare of the company.Investors do not appreciate this kind of short term thinking.
     Capital Power
This is another Canadian utility that was faced with a decision about cutting it's dividend as it had a very bad quarter.Capital Power (CPX)earnings were dramatically lower than the previous four quarters.But it's management took a long term perspective and realized that the future would be better and looked for an improved few quarters down the road.They decided to make a small increase in the dividend.The next quarter was better and they are looking at a good quarter this time.The stock price fell for a time from $22 to $16 a share or a 27% decrease. It did not stay down for long and now moved up quickly to the $19 level.As far as this blog knows the CPX board remains in place and is expecting a large capital program in 2016.               
         The Diagnosis
  Transalta will likely only announce a small (11%) reduction in  the dividend in their quarterly report.A reduction to $.16 annually will likely cause the stock to come to yield equality. This means that the yield will be the same as it was before the cut.On average the stock has generated  a 7 to 9% yield.Although now it is temporarily higher.So if the dividend goes to $.16 the stock price will go to about the $2.00 to $2.25 range in order to earn the same yield.And the Chairman will announce an early retirement to be with his family.If the stock stays at $.16 per quarter then the price will stay in the $5 to $6 area and not stay there for too long before moving ahead.This will not cause too many changes in management nor the board.I hope they do the latter because I too am a shareholder.
                                                                  

                                                         use Workathon for analysis of utilities;see Workathon for analysis of Cdn. utilities;see Workathon for impact analysis on utilities

Cominar Reit grows and Grows

Cominar Reit grows and Grows

Cominar Reit is largely based in Quebec but it has properties in Ontario and eastern Canada also.It has industrial and residential  and office properties.It is the largest reit in Quebec and the third largest diversified reit in Canada.It  has had considerable growth in  the last five years.

Increased Financing

Cominar has increased it's debt and equity by a considerable amount over the last four years, in particular.The number of outstanding shares has gone from 60 million (estimated) to 170 million shares. Most of this has come from convertible share issues.But the shares have been converted to common shares and not always at a great price for existing sharholders.So market capitalization has gone up and the number of shares has gone up but the share price has stumbled since 2013.Also debt has gone up from $1.225 to $ 4.500 billion.Cominar expanded like all the  reits ;debt is cheap and easy to get and stock prices are buoyant(on average).This blog considers the price was buoyant as CUF.UN was priced then at $23 per share and most of the reits had a multiple greater than 18.On average the multiple should be around 15;18 to 20 means that the price is getting expensive.                However it looks like Cominar has been better at increasing it's financing than most reits.As Cominar has purchased a substantial amount of properties in 2012 and 2013 and early 2014 when real estate prices were relatively cheap in Quebec and eastern Canada.It's capitalization rates seem better than bigger and smaller reits.While it's debt to book value ratio went up only from about .5 to .55.This is high but not considering the enormous gains in revenues and assets.On the other hand,the number of shares almost tripled over the last five years.And many bought at low conversion rates.There are lots of shares  bought at $15 to $17 per share.

Growth in Revenues

As previously mentionned revenues tripled over the last four years.Also EBITDA as a percentage of revenues is above average; it was at 54% in 2015.Consequently not only did assets triple in the past four years but EBITDA grew faster than that of other reits.I used revenues divided by total assets as a proxy for the capitalization rate.I found out that the CUF "cap  rate" was at .125 in 2011 and dropped to around .10 in 2012 to 2014 before rising back to .115 in 2015.So in conclusion Cominar had a very solid "cap rate" before it started to expand.Revenues increased from 2012 to 2014 but the "cap rate" was not as profitable.But it has turned up again in 2015.

Earnings grow too

Several brokers ,including Qtrade, show EBITDA for 2015 at close to $400 million.Yahoo shows EBITDA at $475 million .This blog estimates 2015 EBITDA at about $485 million.But earnings per share are shown on several wqebsites only at $.80 per share.If you use EBITDA to calculate the earnings per share you get $2.79 per share.However  if there is a deduction for annual interest charges of $160 million you are left with earnings of about $325 million ;this makes earnings per share of $1.80 per share.This jives with Yahoo's figure of $1.60 per share.Therefore one of Cominar's problems is that many financial websites are making Cominar earnings per share too low and their price/earnings ratio too high.Using more accurate figures makes Cominar look like a bargain at even $16. It appears that Cominar has grown and grown effectively and even $16 a share is now a good bargain for the largest commercial reit in Quebec.   

use Workathon for analysis of reits;see Workathon for analysis of reits