Northland Power's Nordsee One project finally completed

Nordsee One is a huge project just like Niagara Falls in the picture above.It was planned in 2015 and work started in late 2016 and  it has finished in December 2017.It has been constructed in the North Sea which has the strongest winds in the world.It has 335MW of generating power and will produce 1300 gigawatts-hours of electricity. Acquiring Nordsee One and it's completion entitle Northland for the rights to own Nordsee 2 and 3.Project completion means that conditions have been met that will ensure the reduction of financing costs.

Nordsee One Inc.

In 2009 Northland set up a company called Nordsee One Inc.This limits their liability and reduces stress on Northland Power.The project was budgeted to cost EUR 1.2 billion and it is on budget and on time.70% or EUR 840 was financed by senior debt and this appears to have been converted to cheaper convertible debentures..The remainder or EUR 360 million was financed upfront by NPI and it's partner Innogy SE.This blog feels that there will be no more charges against NPI from Nordsee One as any interest charges will be covered by dividends from Nordsee One Inc.So it will be a self-sustaining corporation.And cash flow will move from Nordsee One into NPI.This will increase adjusted EBITDA and may force Northland Power to raise 2017 and 2018 guidance.   

                                              Other Nordsee projects
         When Northland Power bought Nordsee One from Innogy SE it also acquired the rights to build Nordsee 2 (384MW) and 3(400MW).According to the blog called 4-C Offshore, Northland and Innogy SE have acquired the right to build Nordsee 2 and 3.But they will not likely  even start to build until 2019.In the meantime Northland also acquired a partially-built wind farm called Deutsch Best which will have 252MW of power upon completion.Present schedules show that it will not be built much before the end of 2018.This means that by 2019 Northland Power will be a major player in the North Sea which generates more wind than any other source.                       getr updated news on NPI's Nordsee One  ; get updated news on NPI's north sea projects

Transalta has a good quarter and is in transition

       It is true that oil drilling has picked up  in Alberta as has the price of oil.Transalta says that" comparable EBITDA for the third quarter was the strongest third quarter result since 2013".Free cash flow was up $24 million over 2016.But these factors were not the main ones affecting TA.It is in transition in a couple of ways.Coal power generation is being gradually replaced.Consequently TA will get $215 million in 2018 from the Alberta government representing the net book value of it's assets. But coal will be it's largest earnings producer for the next 3 years.Also Transalta announced that it's South Hedland power station in Australia has begun commercial operation.EBITDA from it's Australian operation is now it's fourth biggest segment.And this blog expects more investment in Austaralia in the near future.
                  Structural Changes
  Transalta has used coal substantially to generate it's power in the past.In fact coal ( Canadian and U.S) is still the largest single source of earnings.Formal notice has been received to terminate their Sundance power purchase agreements.They will receive $215 million(the net book value of assets) to terminate Sundance in 2018.At the same time their Australia (South Hedland) power station has begun commercial operations.As a result their Class B shares will be converted to common shares.Consequently Transalta cancelled it's $350 million credit agreement with Transalta Renewables and reduced it's $1.5 billion credit facility to $1.0  billion.Transalta still owns between 70 to 80% of Transalta Renewables (RNW).This blog believes that TA is reasserting it's position in RNW again.In addition, their Kent Hills wind farm has completed a $260 million bond offering.Lastly Transalta expects to receive $335 million for the purchase of their Solomon  power station in Australia.
            Cash Flow
     Transalta's operations still generate a lot of profit and free cash flow.Adjusted EBITDA will be about $1025 million in 2017.While cash flow from operating activities will be about $750 million.This will leave free cash flow of about $325 million.And there will be another $215 million award from the Alberta government. But this money will be almost all used to update their  Canadian coal operations.Transalta is experiencing changes in all of their coal operations (including the shutdown of their Mississauga cogeneration plant).Cogeneration  and complete cycle power generation seems to be the way to go for their existing coal operations.Also look for more future projects in Australia.
                 Transalta Renewables
         Transalta has over the last 3 to 4 years downloaded most of it's renewable assets to RNW.In return it has retained 70 to 80% of RNW.There is little left to download now and so there will likely not be any more substantial downloading to RNW.Renewable energy products have not been as volatile as coal-fired and natural gas power.So this would not seem to be a good time to sell a small amount of their equity in RNW as their stock price is below the five year average price.Transalta may be content with updating some of their operations with their construction program expenditures and using free cash flow ($325 million) to start construction on a small wind farm project.        

The Transition

Transalta like most of north America is switching out of coal towards cleaner energy.The $215 million awarded by the Alberta government will help.Coal fired power will be switched to cogenerated plants and complete cycle plants.Transalta has one wind farm coming onstream called Kent Hills and may have another small one in 2018.Look for Transalta to announce another plant under construction in Australia.This is largely an unserved and less regulated market and offers good opportunities to TA.But Transalta will not move dramatically and this blog sees it in the $8.50 to $9.00 in 2018.

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Western Energy Services (WRG) gets it's chance to move up

    On November 9 a small oil drilling service reported it's results and they did not disappoint it's shareholders.On the other hand, the price did not barely budge.However a stock that was very little watched suddenly had more admirers (including this blog).It showed 40 to 50% increases in all performance measurements over the third quarter of 2016.This has been done with only a slight improvement in the price of oil.WRG's ace in the hole seems to be that it has a lot of new and modern technological equipment.Investors will be watching to see if it can repeat it's performance in the next quarter which should be a slower quarter traditionally with the cold weather.       

Financial Performance   

In the third quarter operating revenue increased by $20 million or by 67% to $51 million.Both drilling and production  services revenues were up.There was higher utilization of equipment in both segments.The increase in utilization was partly due to the quality of WRG equipment.In addition, two rigs were on long term contracts and a 4% increase in hourly rates.More importantly adjusted EBITDA increased from $.9  in 2016 to $6.9 million.This was combined with a slight increase in  administrative expenses of $.6 million to $5.4 million.And there was an increase in capital expenditures from $2.3 million in Q3 2016 to $6.3  million in 2017.

Finances 

Western Services got a new $215 million second lien from Aimco in return for 7 million common warrants at an exercise price of $1.25 per share.Also they made a private placement  of 9.1 million common shares to Aimco at a price of $1.25 for gross proceeds of $11.4 million.Lastly they completed a number of amendments to their Revolving Facility from $50 to $70 million.Still their property and equipment was valued at $720 million down from $663 million in 2016.

Year to Date

Performance for 9 months was even better than for Q3.Operating revenues increased 112% from $75 million to $160 million.Drilling revenue was up 142% and production services up 54%.Utilization of equipment was 36% compared to 14% in 2016.While adjusted EBITDA was $25.6 million up from $2.3 million in 2016.And administrative expenses was only up 12% over 2016.

What's Next? 

WRG is not expecting another big jump in oil prices in 2018.But this blog sees oil prices trending upwards in 2018.Both drilling and production services should be up over that seen in 2017. Adjusted EBITDA is likely to hit $35 million for the year.That will make e.p.s at about $.35 per share and the P/E ratio at only 3 to 4.This is a good buy with only a marginal increase in the price of oil.This blog suggests that some of these new earnings be  used to pay down the $215 million Aimco second lien.And if possible convert it to convertible debenture at a lower interest rate.Good results from the next quarter might send WRG to the $1.40 to $1.50 price level.But news on paying back part of the second lien will also help it get to $1.50

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Pulse Data has a tremenduously good quarter and pays special dividend

   On Novemeber1 Pulse Data released it's third quarter report and shreholders  could hardly wait for it.They showed their data library sales were the second highest ever including a $30 million transaction in August.They aslo have $30 million cash on hand and a $30 million availability in their credit facility.
           Performance Compared to 2016     

   
  This year was hugely better than the third quarter in 2016.Revenue was $32 million compared to $6 million.While net earnings were $14 million compared to a $6 million loss and cash EBITDA was $30 million.Free cash flow was $24 million or $.43 per share compared to $4.3 million or $.08 per share.
      Nine Months Perfromance
            The third quarter was so good that it brought the 9 month performance up as well.Cash EBITDA was $33 million or $.60 per share compared to $6 million or $.11 per share in 2016.And it has purchased and cancelled 1.3 million shares.Free cash flow was $26 million or $.48 per share compared to $6 million or $.11 per share in 2016.This again is a dramatic improvement.While the number of wells drilled only went up from 7200 in 2016 to 7550 in 2017.
      But Pulse Data has made other ventures into the data area.It had a substantial position in Data Group Income fund which became Data Communications Management.It has also taken positions in Petrowest and Entrec both of which are in the oil services area.And since the price of oil has moved up in the last two quarters these new subsidiaries have become more profitable.This blog believes that this is perhaps the main reason that revenues are so far ahead of 2016.As the CEO says"We are positioned to grow the Company when accretive opportunities present themselves."And this blog expects that other accretive opportunities will present themselves.
            A Reasonable Joint Venture
         It is not likely that the results are this good just from a $30 million data library sale and a 5% increase in drilling activity.This blog believes that much of the extra increase in revenues was due to the new small subsidiaries acquired both on the data side and the oil services side.If true then the increases seen in the third quarter will be there in the fourth quarter.But this blog recommends another acquisition or a joint venture as PSD has a good amount of cash on hand as well as credit availability.The suggested target is Intrinsyc Technology which has good sales from it's Open -Q computing modules but desperately needs a new application.These computing modules could be used to improve service in a number of areas including field surveying.This would make a good joint venture for both companies.   

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Intrinsyc Technology drops software but increases sales

      On November 8 Intrinsyc Technology reported it's third quarter results.It showed that as the CEO says "the company is also garnering strong interest from recently introduced new products and has additional products in the pipeline".However Intrinsyc Technology showed only slight increases in all financial indicators.It also adds that it has earned decreased revenues from services and software.Revenues for the third quarter and for 9 months was up but only by 6% to $14 million.ITC tells shareholders that it's new products have produced new orders and new markets.But of course not all these orders will become firm revenues.
             Nine Month Tally
         Revenues were up 5% to $14 million from $13.2 million for 9 months of 2016.But net income was only $197,000 in comparison to $1,905,000 for 2016.Also the all important adjusted EBITDA fell from $2 million in 2016 to $1,500,000 in 2017.The key here is that Intrinsyc tells us that revenues from software and services fell from 2016.This blog believes (as do most investors) that the margin on both software and services is lower than on hardware.Rumour has it that ITC has met with several software companies and other equipment producers but has not made an acquisition.An astute acquisition might increase adjusted EBITDA as well as revenues.It is clear that ITC would have little trouble issuing equity for an  acquisition as it

 has only 21 million shares outstanding.
               The Fourth Quarter
            It is true that revenues have increased consistently for four quarters and adjusted EBITDA has remained quite buoyant.For these details see earlier Workathon blogs.But ITC will have to sharpen it's pencil and make some important changes- if not in the fourth quarter then soon.The share price has already dropped from the $2.00 -$2.25 area as investors saw the drop in sales and earnings coming. And this blog sees the share price staying in the same price range without either (a) a new product line (b) an acquisition or a joint venture to bring out new apps on it's open -Q computing modules.As this blog feels that a 6% increase in sales is not enough to get Intrinsyc Software back to
 the $2.25 area.             

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Fiera Capital increases Assets under Management by 25%

An earlier blog on Blogdaleupsome,also on Blogger, (September22,2017) discussed 3 up and coming financial companies.The three were AGF Finance,Fiera Capital and Guardian Capital.Of the three  Blogdaleupsome picked Fiera Capital as the best investment.The reasons are discussed in the September blog.Now Fiera has sweetened the pot by buying an asset management company called Natcan which was an arm of National Bank.Fiera had $125 billion assets under management and now it has $139 billion-a 9% jump.

The Natcan Deal

This is a deal taking 7 years to complete.The deal calls for 7 annual payments of about $8.5 million each year for a total of about $60 million.Fiera gives no indication as to whether it will be accretive to it's earnings (either immediately or after several years).A rule of thumb is that a good deal requires payment of less than 5 times EBITDA but investors have not been informed of the multiple paid.But business in Quebec is not strong relative to the past and this blog expects that it may have paid only 2 to 3 times EBITDA.For example, an investor buying Fiera shares pays 95 to 100 times EBITDA.If the multiple is this low then look for Natcan to be accretive to Fiera earnings in one to two years.This blog takes this as an excellent deal as there is a real paucity of  players available to acquire in the $25 to $100 million category.       

Fiera's Share Price

First it should be mentioned that Natcan was an exceptional find for Fiera.They only found out because their Chairman is or was on the National Bank board of directors.He had information that few others had.Secondly now Fiera has $130 billion in Assets under Management compared to $35 billion for AGF and $24 billion for Guardian Capital.Assets under management is the revenue base that each financial company charges fees and can earn revenues on.So Fiera should ideally earn 20% more revenue in 2018.And this is the building block needed to send Fiera Capital to $18 by year end.          https://www.brookfield.com/

Emera Utilities is in a Breakout Pattern

   Emera is a Canadian utility that is based in Nova Scotia.It

was growing slowly for the last 5 to 6 years.But in 2016 it acquired Teco Energy and it's assets grew from 8 billion which is substantial to $20 billion.It acquired Teco assets in Florida, New Mexico and the Carribean.This plus one or two other transactions has helped to transform Emera; now it is on a breakout pattern.2016 was only an average year as it was experiencing acquisition costs and               re- organization costs.Revenues dropped,EBIT dropped and so did e.p.s.But 2017 looks like it will have quite a bit better results in most financial categories.
       The First Half
   Adjusted EBITDAat $922 million and and earnings per share (e.p.s.) at $1.87 are almost as large as for the entire year of 2016.And the third quarter looks like it will be better than the second quarter.And if the third quarter is only 50% better than the below average second quarter at $.75 per share the total for 9 months will approximate $2.70 per share and exceed the 2016 annual total.Again an average fourth quarter will put e.p.s. for 2017 much larger than 2016.As said above that will mean that Emera results will have a break out year in 2017.
     The change has come from the Teco Energy acquisition which at first didn't look successful and now is bearing fruit.Emera has said after the Teco acquisition that it intends to raise the dividend by 8% every year until 2020.This seemed like a vacant promise at the time but now appears more likely.Partly as a result of this policy Credit- Suisse has given it a target price of $58 per share.This blog sees that once the 8% dividend increase is implemented in 2018 that Emera will continue to breakout towards $58 but not until then.
                         Signs of a Breakout
  First it must be remembered that 2016 was an good year so it will be difficult to generate large increases in 2017.So increases in revenues should not be on average as high as 25% better than 2016 as was experienced in the first quarter.The second quarter was below average but both the third and fourth quarter should return to the level seen in Q1.That will bring earnings up to between that seen in the first and in the second quarter.If this happens then this blog sees e.p.s. of $3.50 per share for 2017.This is in comparison to $1.87 for 2016.This should produce adjusted EBITDA of close to $1.5 billion for the year in comparison to $1.19 billion for 2016.In addition, Emera says that it will raise it's dividend by 8% each year until 2020.If Emera is able to increase it's dividend by 8% in Q2 2018 then Credit- Suisse will likely be right and the share price will be close to $55 in 2018 and $58 in 2019.     www.Credit-Suisse.com

WIN 20171007 16 04 26 Pro The Huronia Series of blogs

Huronia XVII A True Huronia Blog

    Huronia XVII is about the newly formed town of Saugeen Shores on the southeast side of  Lake Huron.Saugeen Shores is the combination of Southampton, Port Elgin and the Saugeen Indian Reserve.All 3 towns are close to where the Saugeen river enters into Lake Huron.This area is called The Shoreline;the shoreline goes from the Bruce Peninsula to the St.Clair river.The main towns are Saugeen Shores,Kincardine,and Goderich.On the other side of the Bruce Peninsula is Georgian Bay  and the main towns are Owen Sound,Collingwood and Wasaga Beach.The 3 counties on the shoreline are Grey, Bruce and Huron with a total population of about 200,000 almost the same size as the city of Barrie.
              Roads to the Shoreline
   One of the main reasons that there are more visitors and more population in southern Georgian Bay is that there are better roads from Toronto.Specifically highway 400 to Barrie brings lots and lots of traffic.Huronia (the shoreline) needs better connectors to southwestern Ontario both for business,cheaper costs for supplies and for delivering visitors.The area of Kitchener -Waterloo (including Cambridge and Guelph) has about 750,000 people and lots of manufacturing of goods that Huronia needs.Also there have always been strong ties between London and Huronia.London has almost 400,000 people and goods that would increase the range of goods available to be sold to tourists and visitors.The Kitchener-Waterloo,London area is not as big as Toronto but it is about 1.2 million in size. A direct connection from Kitchener-Waterloo and from London would make a big difference.However there is no express route to Huronia as there is to southern Georgian Bay.   
                The Likely Route
There is no direct route today to the Shoreline.The likely route from Kitchener is to go through Fergus and then take a county road to Orangeville.At Orangeville you would take highway 10 to Flesherton and then a county road to Durham.From there highway 9 goes right into Hanover and finally Walkerton.Walkerton would be my new transit town as existing roads in Walkerton will take the driver to Kincardine on Highway 9 and to Port Elgin by county road 3.Both of these roads need a little work with the present traffic but would need more work  as the traffic from Kitchener-Waterloo and London descends on the shoreline towns.The total distance is about 225 kilometres and more than 3 hours because of travel through so many towns .The slowest part of the journey is from Fergus to Orangeville and from Flesherton to Durham and then Hanover.Even highway 10 ( a good,direct highway) could use 3 lanes in the busy sections.
        It is true that the easy way is to go down highway 10 and take highway 21 in Owen Sound over to the shoreline.But highway 10 does get a lot of traffic and improving these other roads would cut  traffic and travel time,especially to Saugeen Shores and Kincardine.                           

       Back to the Saugeen Shores
  Improving the roads and the traffic would result in only half the gain.This should reduce the costs of food (especially produce) and other materials.But what can be done to improve employment in Saugeen Shores?There has been a marina added lately in Port Elgin and it is a beauty.This ,however, is only for leisurecraft.But it could be expanded as the traffic has picked up here.There are also two bus companies that have headquarters in Port Elgin,namely,Can-Ar and Grey Bruce Airbus.Neither has a visible loading terminal;Ralph's Shopette used to be  the pick-up spot for both buslines.And the city would do well to rent a part of the parking lot for the bus lines.This might pick-up traffic for both bus lines and increase traffic for Ralph's.Other than this there does not seem to be any other likely ways to improve employment and income.Increasing the size and income of Saugeen Shores seems linked to transportation.
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Intrinsyc Technology goes from software to hardware

   Intrinsyc Technology is a junior technology company and one that is not covered often by this blog.But Intrinsyc seems to have transitioned away from software internet services to hardware,at least partially.Intrinsyc (ITC) says that it "is a leader of solutions for the development of embedded and IoT products"On August 9 it had it's second quarter results and it is clear that it's growth in revenues has levelled off.This is not too surprising as it's software products are now in a mature market and it's hardware products are still in the growing stage of the product cycle.Unfortunately hardware is a capital intensive product and Intrinsyc will have to invest more or make more acquisitions.However it is clear that it is introducing new products.       

The Growth Trajectory

Intrinsyc is making several kinds of computing modules.Their biggest seller appears to be the Open-Q embedded computing modules.But it has several types of computing modules as well as a hardware kit that it sells to individuals.Intrinsyc still sells some software services but not as much as hardware.Revenues were $4.6 million a 2% increase from $4.5 million in Q1.And revenues dropped from Q2 in 2016.Adjusted EBITDA showed a small drop from $113,000 to $85 ,000 in Q1 2016.                                   Revenues for 6 months were down from $9.1 million in 2016 to $9 million in 2017.While adjusted EBITDA dropped from $250,000 to $187,000 in 2016.However ITC is still on track to hit almost$1 million in adjusted EBITDA for 2017.

Options for the Future

It is this blogs opinion that ITC must make a few acquisitions or be acquired partially or totally.However no decision has to be made immediately.If hardware revenues don't pick up by the end of 2017 or Q1 in 2018 they had better have a small acquisition lined up.For example, DCM has Iotum telephony technology and would be an excellent hardware combination.ITC has the ability to make a sizeable secondary offering and raise the required cash.There are other possibilities around but ITC must be aware that it has positive EBITDA and could be a target itself of bigger technology companies.Most junior technology companies with similar revenues have negative adjusted EBITDA and are of less interest.http://intrinsictechnology.com/  ;

Algonquin Power shows "big numbers" and a small price increase

Algonquin Power is a bit of a mystery these days.It recently released it's second quarter report and it had some "big numbers".However investors barely reacted to it;the stock chugged ahead to $13.80 while it had been $13.25 before the report.It certainly isn't because AQN is not doing it's work.They have been very busy!Recently it announced that it had completed the acquisition of Empire District Electric and this took about  18 months to wrap up.It also(in this quarter) bought a few generating stations in California.Consequently AQN revenues were up 103% over the same quarter in 2016.

Earnings, earnings,earnings

All categories of earnings were up over the same quarter of 2016.Net earnings at $47 million was up 92% to$47 million for the second quarter and for six months at $74 million up from $67 million in 2016.Adjusted EBITDA went from $99 million  in 2016 to $198 million .For the six month period  adjusted EBITDA went from $247 million to $452 million.While adjusted funds fiom operations went from $78 million to $120 million for Q2 and from $197 million to $328 million for six months.This is a good earnings report.But the problem is that the trajectory of the growth in earnings is greater than the trajectory of the share price.AQN shares are chugging along but not nearly as well as the growth in earnings.

Recommendations       

This blog has two recommendations that could improve their share price.First it should be noted that the yield on AQN shares at 3.42% is below the industry average  yield.AQN's big increases in earnings could easily support a dividend increase to bring a 4.0% yield. But this will improve their trajectory only slightly.In order for Algonquin Power to reach $15 and above it will need to  release some of the equity that now appears to be locked in the American regulatory umbrella.A new equity issue from Algonquin or better from the newly formed Liberty Utilities (listed on the NYSE) would be needed to raise cash that is used to buy Canadian assets or even a small Canadian or Can -Am utility.A purchase of Atlantic Power or Alterra Power or even Boralex would show that earnings and assets under the American regulated umbrella is not locked in.An acquisition that is only slightly accretive to Algonquin's own earnings would "do the trick".Shareholders would surely approve of this strategy.            use Workathon for analysis of Cdn. utilities;use Workathon for utility solutions

Aimia works on a New Plan

      On August  9 Aimia released it's second quarter results.Investors waited patiently for the report after Air Canada announced their intention of non-renewal for the upcoming new contract in June 2020.After the announcement Aimia's share price dropped to a low of $1.40.Most investors realized that this announcement would not have a large impact on 2017 earnings but there would likely be some redemptions.In fact there were only about 2% redemptions.But Aimia did not make any major announcement on the forthcoming Air Canada non-renewal in the Q2 report.That aside Aimia did make some changes. 
                                    

Second Quarter Highlights

Aimia recorded gross billings of $20 million which is down 2% from 2016.But their 2017 guidance has been maintained.They expect gross billings of $520 million and adjusted EBITDA of $40 to $45 million.And they expect an annual free cash flow of about $54 million.They continue to make operational cuts and expect substantial savings from them by 2019.And they have suspended dividends for the forseeable future.

Other Changes

Aimia will have a new CFO in September.They have recently sold a small loyalty program with a gain of $5.4 million.And they are in discussions for new partners in their Aeroplan loyalty program.Here is where they must obtain progress and keep their shareholders aware of it.

Non-Renewal of Aeroplan

It is in this quarter that Air Canada gave notice of it's intention of non-renewal of the Aeroplan program with Aimia.This caused the stock to drop from the $9 level to $1.40 per share.But it is the position of this blog that Air Canada cannot cancel the contract with Aimia.There have been no  performance issues to cause a breach of contract.And it is hard to cancel a long term contract unless both sides agree.Doubtless Aimia did not agree.So in effect there is no "real cancellation".But Aimia cannot continue without an agreement.Soon irritations and performance issues would start to appear.It is better for Aimia to take a not as profitable amended agreement but continue on.

Recommendations

Aimia needs to hire a contract expert until the Aeroplan problems have been completely remedied.Secondly this blog strongly suggests that Canada Pension Plan take a small position here (5 to 10%)to shore up and get future capital gains on Aimia.A secondary and smaller position by Caisse Populaire would strengthen the stock price almost immediately.This blog sees Aimia's share price at the $3.25 to $3.50 level by Christmas.

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Chorus Aviation develops a new set of Wings

     In July Chorus Aviation announced two new leases for newly acquired aircraft.The first for 2 Embraer 190 aircraft and the second for 3 Q-400 aircraft.The terms of the lease are not known at this time.But this blog believes this is what is called a long term full-maintenance lease.The new subsidiary called Chorus Aviation Capital has now acquired 11 fully leased aircraft this summer.6 aircraft were leased in June.The operating margin on these leases is not yet known.Revenues for the first 6 ( but not the last 5 aircraft) will be included in second quarter results.       

                   A good Second Quarter
           This blog is expecting a good second quarter for Chorus Aviation.For example, above is a new CRJ-1000 produced by Bombardier and leased by Chorus Aviation Capital.And revenues on the Amended C.P.A. with Air Canada should have levelled off. Also we expect revenues from the planes leased to Air Canada Express will be as high as in Q1.The new investments in Voyageur Airways,their charter operation, will be slightly higher.But the second quarter will be the first quarter to show earnings from their new subsidiary Chorus Aviation Capital.This is the subsidiary that has long term full maintenance leases.
                By the numbers
    There is some controversy over Chorus' earnings.Several financial websites show earnings for 2016 at $.60 to $.90.This includes Scotiatrade and Qtrade.This raises the price/earnings ratio and makes the stock look more expensive.This blog believes that these are cash flow figures, not earnings.The best estimate of earnings comes from  using Adjusted EBITDA.Last year earnings (adjusted EBITDA) were around $230 million and so e.p.s were about $1.80 per share.This means that the price/earnings ratio is about 3.75 times.That makes Chorus a cheap stock relative to stocks on the TSX index.
     A Workathon post of January23,2017 see this blog for prediction of earnings predicted 2017 earnings of $235 to $250 million for 2017.The wild card here will be the new revenues from Chorus Aviation Capital coming; so this figure might be a little low.The most likely figure would be $250 million and this makes e.p.s at $1.95 to $2.05 per share.With a price/earnings ratio of 3.75 to 4 this should drive the stock price up to the $7.50 to $8.00 area by yearend.This blog picks this stock as one to watch in the second half of 2017.                 

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Huronia XVI- The Miracle on 10th Street

         This is another in my Huronia series;this discusses Grey County.The two largest towns in Grey county are Owen Sound and Hanover.Huronia XV  talked about Owen Sound and this one talks about Hanover. And of course the main street in Hanover is called 10th street.Hanover is in the southern part of Grey county.It was first settled in 1832  and as usual had a lumber and feed mill. It sits on the Saugeen river which is about 150 kilometres long and flows into Lake Huron at Southampton.The town grew very slowly until 2000.And between 2001 and 2011 it grew from 6900 to 7600.The population sign in Hanover shows a population of 7650 but it hasn't been changed for about six years.This blog estimates the population at about 25,000.
          A new kind of Huronia Blog
   Most of my Huronia blogs are based on me giving suggestions on possible improvements to towns that I visit in Huronia.But this one shows the changes that have been made that I noticed rather than suggested.Hanover has an old part that hasn't changed much in many decades;it is the same old Hanover.But there has been new construction that has been made in the last five or six years.It looks like the first change was a new Mcdonald's restaurant and maybe a new A and W restaurant.Possibly the Independent food store space was expanded to become a plaza but there were no stores in the plaza.Then stores were added all around this basic structure and the plaza filled in with newer popular stores.Perhaps a year later the Canadian Tire plaza was built.Lastly the Walmart plaza was built.Now there is a whole new south end of Hanover.And the population has increased to match the new construction.
     Once the main plazas were filled and solid "anchors" put in the plazas there were some "infills".Wightman Electronics started up in the A and W plaza and DJ's furniture came onstream.In the newest plaza Mark's Work Wearhouse and Crabby Joe's restaurant opened up.Now there truly was a Miracle on 10th Street.
      Grey County moves up in Class
    According to Wikipoedia Grey county has about 95,000 people.About half of them live in two towns-Owen Sound and Hanover.Hanover has about six small industries to employ people that use these service centres.One of the big employers in both Hanover and Owen Sound are feed mills.But the majority of customers for both towns comes from the rest of Grey county.The money spent here (and in the south end of Owen Sound) takes care of the rest of both towns.          

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EFN wins race with DH Corp

     
Earlier blogs on Workathon talked about an implied competition between Element Financial and DH Corp (see March 6 and April 7,2016)www.blogale-workathon.blogspot.com/.Those blogs predicted that another financial institution might get a share but not all of DH at the right price.It also predicted that e.p.s for Element Fleet Management might hit $1.25 and the shares would be trading at $15 to $17.Some of this has happened and some has not.It's hard to see perfectly into the future.
                                    

 Why My Forecasts were not Better

Forecasts are always based on certain assumptions so one or two of my assumptions were incorrect.I thought that the forecasts of e.p.s given by Google  and Yahoo Finance for DH were low;$.36 per share of earnings seemed low but it must have been high.Customers saw DH as a sinking ship and got off .The price remained at $25 a share but earnings must have dropped off.It's market capitalization was $2.8 billion but it sold(reportedly) for $2 billion.Now it has merged with another financial technology company and  new

company is called Finastra.So if there was a race then DH lost it.

    This blog predicted e.p.s of $1.25 per share for EFN but it came in at $1.00 per share.Still this was enough to pay their dividend and have positive cash flow.But many investors may have thought that EFN was not paying off it's debt fast enough.Although it's fundamentals are still solid it headed towards $9.00 instead of $15 per share.EFN will need another solid quarter this time to inch it's share price back towards $12.EFN won the race but it is not moving very fast.

Conclusion 

Both companies expanded quite rapidly and both took on a lot of debt.DH made a lot of it's new acquisitions in USA.And it is possible that infamiliarity with it's new, sophisticated market may have surprised DH and then helped to close it down.EFN  has taken on a lot of debt also but is paring it down.This blog thinks that neither is likely to make any acquisitions soon.So EFN won the race as DH isn't running anymore.It is always important to consolidate new acquisitions with the existing structure before expanding again. 

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Computer Modelling hangs tough in a rough environment

       Computer Modelling (CMG) is another one of the new companies that I am watching more closely now.On May 19 it released it's  fourth quarter and annual results for 2017.The report was interesting for it's operational results as well as the clear description of  it's activities and processes.Computer Modelling develops and runs reservoir modelling software for Canadian and international oil and natural gas companies.It also does consulting and training on the use of its' software.It states that it is developing new tools, one of which is simulating the entire hydrocarbon recovery process including  the production of hydrocarbons.
          Operational Mathematics

Both CMG and producers realize that simulation is less costly than discovering and extracting oil and natural gas.Especially if the well is a dry one.And CMG is constantly improving it's simulation tools as it spends 22% of total revenues on research and development.And 90% of revenues come from licensing it's software.But Computer Modelling has been able to remain resilient when oil prices have fallen by at least 60%since 2015. It's revenues and EBITDA have only fallen by 15% since 2015.This compares to most oil service companies whose revenues have fallen by 60 to 80%.One of the reasons for this resilience is that CMG has customers in both the Eastern and Western Hemisphere.Another factor is that it gets revenues from training and consulting.              It raised 600,000 shares of equity in 2017 for proceeds of about $6 million and now has 75 million shares.This caused it's e.p.s to fall only from $.32 to $.31 per share.And it's adjusted EBITDA fell only from $37.5 to $34.5 million or less than 8%.And CMG is in a pretty solid situation as it literally has no debt on it's balance sheet.

Recommendations

Computer Modelling does have a sizeable investment in Pulse Data.This blog does not know how big it is but it could easily increase it's investment as PSD present price is fairly low.The combination would help to make their reports less of a simulation and more the exact data clients need.Also CMG has special GEM software that is used for enhanced recovery (EOR).This blog recommends that more R and D be spent here.There should be a larger market for  enhanced recovery solutions (waterflooding and other liquid solutions) with these low oil and gas prices.Lastly this blog recommends that less emphasis be put on simulation techniques and oil recovered and all reports emphasize the additional dollars that can be earned.This is after all what the client needs to know.Most of these recommendations(if followed) should increase revenues for the next quarter.If CMG tightens up it's operation this blog expects revenues of $20 million in the next quarter and being on track to hit $80 to $85 million.This will put Computer  Modelling on the path to be trading at $11 per share by Labour Day.  use Workathon for business forecasts  ;use Workathon for business forecasts  use Workathon for business consulting    

Pulse Data needs to expand it's market

               Pulse Data is a stock I have started to follow more closely just recently.It's revenues and earnings have fallen a considerable amount since 2014 and even from 2015.It's big item is it's data library sales as there is less need for precise data on the size of oil pools when the oil price is down so much.But it appears to have bottomed out and taking a positive bounce upwards.Revenues have increased by 54% -from $1.8 million to$2.7 million for the quarter.Cash EBITDA has grown from $266,000 to $1.3 million while free cash flow is up from $255,000 to $1.3 million.So it is possible that oil and natural gas producers are starting to see Pulse as a way of cutting costs in a rough pricing environment.
       Financially Speaking
  Pulse has not been  dormant however;it has purchased and cancelled 584,000 common shares at an average price of $2.41 per share.It is now debt free and in fact has cash on hand of almost $8 million.These financial metrics are good but will not bring Pulse Data back to it's 2014 price level.In order to do that it must increase it's data library sales and introduce some new products.Just as Bombardier did by developing and introducing it's CRJ 1000 seen here in this picture.Pulse needs something  of a new revenue producer.        

A Pristine Balance Sheet

           Pulse Data has what is considered to be a pristine balance sheet.It has no debt at all and it has just reduced the number of outstanding shares on it's balance sheet.But it must find a way to increase it's revenues, and hence earnings to the level in 2015.With a conventional oil play an oil producer needs to know the size of it's pool only once ( or maybe twice) but many oil plays have extended pools that are associated with the main pools.Finding extended oil pools is much less costly than discovering a new yet nearby oil pool.Also there are in certain oil or gas bearing formations several layers of hydrocarbons.In these cases Pulse must be able to zero in on the dimensions and exact location of the pools on all layers.This may make the difference between a little or a substantial profit for the producer.Not only should Pulse do this but market it so that it's client base know of this fairly new profit-producing product.
                                     Outlook for 2017         

         This blog sees Pulse Data gradually rising to the $3.00 -$3.25 area in 2017.The next two quarters will likely see increases in revenues above the level seen in this quarter.It is also true that Pulse has a considerable amount of cash on hand and an unused $30 million revolving credit facility.This blog sees that it will likely put more invested cash into it's subsidiary DCM and maybe ENT or PRW.The prices of all three subsidiaries is at historically low levels and Pulse has lots of cash.       use Workathon for business forecasts use Workathon for business consulting  use Workathon for business consulting

WIN 20170525 10 37 18 Pro Northland Power (a different perspective)

Algonquin Power reaps the benefits of Liberty

  On May11 Algonquin Power released it's quarterly results and it was better than a good report.Quarterly revenues were $558 million compared to $342 million in 2016 and cash provided by activities was $84 million compared to $53 million in 2016.More importantly adjusted funds from operations (FFO) was$208 million compared to $122 million in 2016.Adjusted funds from operations is on track to hit $900 million for 2017. And adjusted EBITDA was $255 million for Q1 and is on track to hit $1050 million for 2017   

     Liberty Utilities
   Finally on January1, 2017 Algonquin Power acquired in full Empire District Electric.This acquisition was ongoing(getting regulatory approvals) for sometime and finally closed.It formed the backbone of their newly formed subsidiary called Liberty Utilities.On January 11,2017 Bakersfield II (a solar facility)achieved commercial operations. And in February Deerfield wind facility was added to it's stable.These two acquisitions added 160 MW of power.And on February15 another 50 MW of power was added by the Luning solar facility.These have all been added to Liberty Utilities.The total value of Liberty Utilities can only be guessed without a listing.
   An earlier Workathon Blog
   On December1,2017  my Workathon blog  gave some of the details of the details of the Empire acquisition.It cost $3.2 billion plus acquired debt of $.9 billion and an estimated further $2.0 billion for future renovations.This blog has suggested that AQN get a listing on the NYSE and now it suggests that it get a listing on the NYSE for Liberty Utility.This is an excellent source of cash from a secondary equity issue;perhaps as high as $1 billion U.S. Algonquin Power can afford to sell off a 25 to 35% stake in Liberty and by doing it gain some liberty for itself (financially speaking).This money could be used to diversify and improve other facilities (including other Liberty facilities).     use Workathon for business solutions ;use Workathon for business solutions ;  use Workathon for business solutions

Element Fleet Mnagement runs a steady race

          An earlier blog on Workathon discussed the competition between Element Fleet Management and DH Corp.Both are in the financial industry and both have specialty niches;they are not banks.A later blog talked about at this time DH Corp appears to have won the race.Its' earnings per share are bigger but it's assets are smaller.But EFN has done very well.In fact, DH just reduced it's dividend while EFN raised its.
       Highlights of 2016
   Element Fleet Management has had an eventful year.Most importantly it separated into two companies-ECN Capital and Element Fleet Management.And Element Fleet informs it's shareholders that it has made 4 major acquisitions since 2012 and  makes considerable income.Before tax income was $428 million but only $385 million was attributable to common shareholders.In order to make these acquisitions it has issued a lot of equity and has considerable earnings but e.p.s is only $1.00 compared to DH's $1.52 per share.EFN however has increased it's e.p.s from $.69 per share in 2015 for a 40% gain.
       The Split-up
     On October3, 2016 Element Financial split into companies;it had been discussed for some time and finally did split into Element Fleet Management and ECN Capital.The original price was about $13 a share and it trades at almost that now.EFN has taken large restructuring charges  in the last two quarters($238 and $203million) in order to complete the break-up.Steve Hudson, their CEO, says that EFN "has taken heavy integration and separation costs and intends to improve their performance indicators in 2017".
       Summary
   DH has been heading the wrong way and will likely divest assets in order to reduce it's debt.On the other hand,EFN has taken on a lot of debt also and has made 4 major acquisitions.So firstly EFN has considerably more assets,especially tangible assets,but it's return on assets is larger.In a case like this adjusted EBITDA is not the best measure of performance.EBT must be used and I (interest payments) must be deducted.Using EBT to calculate e.p.s. DH comes out a little better with EFN growing faster.That is why this blog thinks EFN is heading towards $14 to $17 per share  and DH is probably staying in a tight range around  it's present price.   

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DH Corp .might win the race with Element Fleet Mgmt.

      A  blog done on Workathon on March 6 asked the question "who will win the competition between DH and Element Fleet Management"?Well DH just reported it's annual results on March 6.And it did pretty well.The results are listed below.
     Annual Results
 DH reports that it's performance was at the upper end of  gyuidance for 2016.Revenues increased 11.5% to $1.679 billion from $1.506 billion.Primarily due to a full year of operations for  it's GTBS  segment acquisition and growth in their Land IC segment.Adjusted EBITDA decreased 5% to $450 million from $475 million.However there was a consolidated net loss of $94 million or $.88 per share compared to a net loss of $68 million or $.63 per share;this was primarily due to an impairment of goodwill charge.On the other hand, net cash from operations  increased by 33% to $293 million  from $221 million.Debt was down to $1.9 billion from $2.1 billion.And in fact they repaid $31 million in the fourth quarter and $131 million since the acquisition of Fundtech.Total debt to EBITDA was 3.276x in December31,2016 compared to 3.451x in April30,2015(after acquiring Fundtech).In addition they reduced their dividend from $.32 to $.12 per share for a quarter.
     Strategic  Review
      There will be no guidance on the future direction until the process is complete.There are a number of options open but one is to seek financial guidance.Another option ( and one preferred by this blog) is to divest assets for which a capital gain is embedded.The proceeds would be used to reduce debt further;a good goal would be 3.00x EBITDA.In order to aid this goal DH will provide it's 2017 results in segments or subsidiaries with segment revenues and EBITDA. This will help to point out the weaker segments.They will provide the EBITDA outlook for 2018 also.                     

 Our Forecast

It is not likely that DH will accept a firesale price as the stock price has recovered from a low of $14 in November of 2016.However allowing a financial institution of some kind to take a small but substantial share is not out of the question.Should the price not be to DH's liking then the most likely step is to unload one of their older acquisitions that has some capital gain built in.In other words it is likely that they will have a small change in direction not a big one.DH may trade between $22 and $27 per share for most of 2017.Element Fleet Management is recovering from the split from ECN Capital and has made a major joint venture.This blog sees EFN moving up to the $15 to $17 level by mid-2017.                          use Workathon for business forecasts;use Workathon for business forecasts

Northland Power expands it's investment in the North Sea

     On March 10 Northland Power gave a press release stating that it will undertake a new wind farm project in the North Sea just offshore the German mainland;it will be called Deutsche Bucht.It will be about 125 kilometers from the mainland and the total cost will be $1.2 billion Euros.This will nicely expand the Northland Power footprint in the North Sea.It should  be completed by mid 2017 and dovetail nicely with the coming onstream of their Nordsee One (332 MW) project.Deutsche Bucht is in advanced development stage but NPI will  need to add a further $500 million to aid in it's completion.This blog believes that if Northland does a good job here and helps to delivers 252MW of power to the German mainland that this could be  helpful in getting regular approvals required to begin full commission of Nordsee One.Nordsee One is expected to come onstream in mid-2017. It may even help speed up  full approval of Nordsee Two and Three that Northland Power is expected to  build later in the North Sea area.                    

    More work to Do
      Northland expects more work will have to be done on installing the turbines and the offshore cable.The additional construction costs may go as high as $400 million.NPI's previous experience should be useful here.Northland intends to use it's Gemini (another North Sea project) contractor and it's supply vessel to help;Van Oord was very effective in building their Gemini project on time and should be able to meet the mid-2017 schedule.Once the project is operational Deutsche Bucht should be immediately accretive with a fixed feed- in tariff for 13 years.Once completed and financing arranged Northland will own 100% of this third wind farm.      use Workathon for business news;use Workathon for business news

DH Corp. versus Element Financial who will win?

     Annual reports and fourth quarter reports will be out soon and many investors want to see which company will do better- DH Corp. or Element Financial.Both are financial niche players and both are going in different directions with different approaches.Both are in the financial sector dominated by large multi-functional banks.Right now DH trades at $24 per share while EFN trades at almost $15 per share.But do these companies merit this big a difference in their price?
     All  About DH corp.
  DH was a small Canadian cheque production company. It expanded by acquiring several medium-sized American financial technology companies in 2014,2015 and 2016.It's revenues and earnings grew every quarter so that it was trading at $40 per share in the summer of 2016.Bad news and a dividend reduction from $.32 to $.12 per quarter sent the stock price down to a low of $14 per share in November 2016.A number of renovations sent the stock back to it's present price.A blog post in Workathon dated December26,2016 ( see details in workathon post) predicts that DH price will fall to $18 to $20 area without earnings growth.There is no doubt that DH trades on it's past earnings potential but it has a substantial P/E ratio now.Qtrade, and Yahoo Finance, for example predicts 2016 earnings of $.36 to $.37 per share.
      EFN takes a big Step
 EFN was part of Element Financial until October 3 and then split into Element Financial Management.It had a good and steady growth path until the split.After the split it had almost $15 billion of assets;it specialized in financing of fleets of trucks and cars.And in the first 9 months of 2016 it signed up 100 new clients.Adjusted EBITDA was $.35 for the third quarter and expected to be $.65 for the second half of 2016.E.P.S. were estimated at $.99 per share for 2015.This blog thinks it is on track to hit $1.25 to $1.30 on an annualized basis for 2016.It's joint venture with an American financer of fleets of trucks may dilute 2016 eanings.Still this blog is expecting solid revenues and earnings growth.
      The Annual Report
  All eyes will be on upcoming annual reports of both companies.Will DH get some of it's old earnings back?Will the new American partner dilute EFN earnings and if so by how much?Will EFN raise it's rather low dividend in 2017?This blog expects that the likely outcome being that DH earnings per share will be above the 2016 estimate of $.37 per share and EFN earnings per share will be higher than theYahoo Finance $.99 estimate and below my estimate of $1.25 per share.This will bring DH closer to $22 per share and EFN closer to $15 per share so closing the gap somewhat.                             

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Tucows makes profit while it's competitors struggle

  Tucows recently reported it's fourth quarter and annual results.Tucows which provides internet  services is a "small cap" in a very competitive business.It's market capitalization is about $625 million compared to $2 billion for Kinaxis and $4 billion for Shopify.But there is a very clear difference;Tucows is profitable and the others are not.             

       A Good but not Stellar Quarter
       Tucows released it's fourth quarter results on February7 and it had another good quarter.Revenues were up 9% but net income and earnings per share were down 9 and 7% respectively.E.P.S was only $.27 compared to $.29 for the same quarter last year.But their yearly results were well above average.Annual revenues were up 11% to $190 million while net income was up almost 50% to $16 million and annual earnings per share went from $1.04 to $1.53.This compares to their competitors who all have negative earnings except for Intrinsyc Software (a smaller competitor).
      There is always room for Improvement
    As mentioned before Tucows is in a competitive business.It provides domaine names,mobile network access and other internet services.Kinaxis is largely in cloud computing while Shopify is in e-commerce software.This blog recommends that TC will have to expand into one of these other areas soon.In order to do so it will likely have to do another small equity issue (perhaps 2 to3 million shares) and make a few small acquisitions. 
  On the other hand,Tucows is increasing it's revenues by at least 10% every quarter.Also e.p.s was up almost 50% on an annual  basis in 2016.With a few new acquisitions this blog sees annual e.p.s at $1.70 to $1.80 per share.With a new equity issue of 3 million shares earnings would be diluted by 25 to 30% and still be around $1.10 to $1.20 per share;this compares to negative earnings for Kinaxis and Shopify.The new funds would allow them to enter the less profitable cloud computing area but also give them more stability.                                            use Workathon for business consulting ;use Workathon for business solutions