Aimia is getting back on Track Again

  Aimia released it's third quarter results and it is starting to look like their trouble with it's Aeroplan program never happened.Principally revenues increased by 6% and net earnings at $22 million were up $61 million over 2017 while cash from operating activities were at $46 million.And adjusted EBITDA, the main performance indicator was $56 million for Q3.Their Aeroplan loyalty program has been sold and all liabilities taken care of.
      Q3 in Detail
    Consolidated revenues were up 6% to $372 million while gross billings were down only 4%.Adjusted EBITDA was ahead by $3 million over Q3 in 2017.It is true that free cash flow is down about $13 million over 2017.And Aimia is till spending some of it's adjusted EBITDA on restructuring (after Aeroplan).The cost of loyalty awards is up in 2018 not down now.But Aimia has made a concerted effort to reduce operating expenses as Q3 operating expenses have come down from $76 million in 2017 to $66 million.
            Aimia is Ready for Q4 

   Aimia sold Aeroplan for $450 million plus all liabilities and in this blog's mind this is not much for a loyalty plan that was once valued at $2.5 billion.So  Aimia should explore all loopholes to remain in an equity role and get a share of profits; this would be their best strategy. It is realized that Aimia management is beefing up their positions in their other loyalty programs and this is bringing in increased revenues.But a new,improved Aeroplan will be able to throw off a lot of profit and Aimia should have a "preferred position" here.This blog believes that until July 2020 (the end of the present Aeroplan contract) Aimia has an excellent chance to improve their position.And Q4 is a good time to do this.Like the lumbermen in the caption below AIM should probably do it in stages.         

         In Summary
    An earlier blog on Workathon expressed the opinion that it is probably not legal to cancel unilaterally a long running contract where there is no performance issue.At least Air Canada certainly does not have a strong ethical position. Aimia got $450 million but the value of it's liabilities could be valued at $1 billion with $.50 on each dollar of liabilities.And the blog on Workathon dated Feb.8,2018 expressed the opinion that Aimia should have a solid equity position in Aeroplan.The time to strike a bargain is before the present contract runs out on July,2020.
      That aside Aimia is getting back on track financially.All of it's financial indicators are ahead of those in 2017.In addition, Aimia's guidance shows expected free cash flow of $155 to $175 million for 2018.Things could be done in stages here also;Aimia should announce a small dividend will be paid in Q1 2019.Only then will investors be confident that Aimia is indeed back on track.
              Forecasts of past Blogs
       Workathon has had quite a few blogs covering  Aimia.Workathon dated 10/02/2018 announced that debt has been reduced to $208 million.Workathon dated 18/08/2017 forecasted a price of $3.25 to $3.50 by Christmas and  that expenses would be cut back.And my other blog Blogdaleupsome dated 14/08/2018 forecasted adjusted EBITDA for this quarter of $51 to $53 million and a forecast of $5.00 for Q1 of 2019.In fact, adjusted EBITDA will be $56 million and the other forecasts have largely come true but it is not likely Aimia will be at $5.00 in Q1 without the announcement of a small dividend.           http://www.caissepopulaire.ca/ http://www.canadapensionplaninvestmentboard.com/

Fiera Capital grows by Cleaning up Odds and Ends

                    It is very rare to find a stock that grows in a straight line.Usually there are pauses and corrections.Fiera has made a correction from the $15 level down to $11 to $12 range.And it has made a number of changes to start moving it upwards again.And assets under management (AUM) has  gone from $125 billion in 2016 to $139 billion  now.In 2017 it bought pieces of Natcan for a purchase price of $60 million. (see https://www.blogger.com/) Now it has just exchanged 5.5 million shares of CGOV for an unknown amount of FSZ shares at an excellent price.
     Fiera has a sharp business eye as there is a paucity of players in Canada that can be acquired for $25 to $100 million.Another such player is Canoe Financial and it has just bought $785 million of Fiera's smaller funds.In many cases the existing  Fiera manager will stay and Fiera may even collect a small fee here.This blog sees this as an opportunity to view Canoe's goods.Later on Canoe may be a candidate for acquisition itself.Fiera is certainly familiar with the funds just sold.                              

          2018 is Shaping up
   In early 2017 Fiera was trading at around $15 per share but like many financial players the price fell off.It was as low as $11.00 per share at one time but has rebounded to it's present $12.50 level.It continues to make these small purchases and sales and so will  likely show gains in revenues and small gains in earnings for the year.FSZ has purchased about 12% of  Natcan Funds each year since 2015 and will continue until it is owned 100%.It also owns about 27% of CGOV Asset Management and may buy another 5 to 10% by yearend.This blog sees Fiera buying most or all of Canoe Financial by 2019.So you see many junior funds grow by leaps and bounds but Fiera Capital grows by odds and ends.
                                       https://www.fairfax.ca/;https://www.omers.com/

Is CWB being punished for good perfromance?

  On September 15, Canadian Western Bank (CWB) released it's third quarter performance and what a quarter it was.The normally staid Canadian Western Bank showed double digit loan growth,higher net interest margins and adjustable cash earnings per share of $.75 per share which is up 9%.In addition, it raised it's  quarterly dividend to $.26 per share which is up 8% over the same quarter in 2017.What could be better than that?Well actually the share price could go up,not down!Before the quarterly report the share price was about $38/share and now it trades at $33 per share.

Second Quarter Highlights

Total loans reached $25 billion for the first time in the second quarter.This was achieved by 12% loan growth over the second quarter in 2017.And the CEO expects 2018 to have double digit loan expansion.Once again their growth in Ontario has been a significant part of this loan expansion.Shareholder's net income for Q2 was at $62 million which is up 11% over 2017;and for 9 months was $2.23 per share.Consequently adjusted earnings per share is on track to hit $3.00 per sharefor 2018.CWB tells us that their acquisition of ECN Capital assets contributed $.04 per share to total earnings.And that there was a significant contribution for their expansion into Ontario.

Safety Concerns

CWB is not only a bank with good growth but it is safe for investors also.It has very strong Basel III capital ratios.All capital ratios are at the upper limit of requirements.Also it's provision for loss income is up by $111 million or 10%.On the other hand, impaired loans now make up only .53% of assets compared to .74% in 2017.The dividend has been raised but the payout ratio remains in the 30-36% area which is considered very safe.And it's price/earnings ratio is at 12 which is quite conservative for Canadian banks which on average is higher.

Recommendations for Price Improvement

It could be that CWB  is suffering from the new kid on the block syndrome.It is growing faster than most of the established banks in Canada.After their strong second quarter results this blog thought CWB  would be trading at $40 to $41 per share.It is in effect, catching up.So it is possible that the other banks are selling off their stake in Canadian Western Bank to slow their growth.And there may be more selling to come but CWB must keep making improvements.With that in mind CWB must continue it's expansion into Ontario and even add another  branch here.This blog would like to see a separate identity called Canadian Western Trust (CWT) which would contain many of it's divisions such as CWB Maxium,CWB Optimum Mortgage,CWB National Leasing and CWB Franchise Finance.And their online divisions put together and called Mango or some such thing.Lastly in order to get more attention it could buy a small mutual fund dealer at today's cheap prices.These moves might reduce their loan growth and earnings growth which is substantial but raise their stock price.Unfortunately until retail investors join it will be a tough ride to get to $35 per share by January.

http://www.manulife.com/;https://www.fairfax.ca/

Power Financial has Simpler balance sheet plus Wealthsimple

     Power Financial has always been closely connected to Power Corp. and their finances are intermingled.But the wedge is in and now they are becoming more differentiated.For example, Power Financial hasa yield of 5.8% and market cap of $21 billion while Power Corp has a yield of 5.3% and market cap of $13 billion.Yet the biggest contributor to Power Corp.'s net earnings is by far Power Financial.And Power Corp. tells investors that it still owns 65.5% of Power Financial.And now POW tells it's shareholders that it owns 100% of Sagard Holdings and Sagard China which appears to be largely a mutual funds operation.But the big change is that Power Financial shows that it owns 81% of Wealthsimple a very large broker in Europe.As of yet no accounting has been made for  it's income contributions to Power Financial.
                  The Second Quarter
 Firstly Power Corp had a very good quarter and the main contributor to this good quarter was of course, Power Financial.PWF had a good quarter mainly because of Great West Life Insurance.Great West Life reported net earnings of $831 million and contributed $562 million to PWF.IGM Financial contributed $121 million and Pargesa Holdings a further $36 million.Total Q2 net earnings were $658 million the highest amount in corporate history.Putnam Investments, another holding, had a very good quarter.PWF had a record high assets under management (AUM).But as already mentioned ther is no mention of income contribution from 81% owned Wealthsimple.This new platform started in Canada but has spread to U.S.A and England.But as of today has only $2 billion in AUM.
                 Potential Changes
  One of the most natural changes is to make the quarterly report more investor-friendly.About the only information on the report is net earnings and the contribution from other companies to it's net earnings.Surely this is a holdover from the days when POW and PWF were so closely intertwined.Not so much information was required.This blog would like to see cash flow and free cash flow and payout ratios.Also the contribution from Wealthsimple is needed.                                                                                       
                                                                  
                       

     This blog is surprised to see that POW still owns 65.5 % of PWF.An earlier blog on Workathon showed the ownership at 61%.And frankly had hoped that the ownership would now be down to 55to 59%.This is the greatest use of funds that PWF could have.As POW takes almost 70% of their net earnings.One of my blogs on Blogdaleupsome states that the next best use of funds would be increasing ownership in Great West Life it's greatest contributor of net earnings (see Blogdaleupsome 04/05/2018).Qtrade,a small financial broker,shows that  PWF cash flow in 2017 was about $1.7 billion.That will be minus the $800 million paid to POW.This is still a tremenduous amount of cash that can be used to pay down POW ownership  in PWF and increase ownership of GWO and also expand investment in Wealthsimple.Power Financial moves slowly and so there will not likely be large changes made in 2018.Look for PWF to stay in a tight range around $30 in 2018 but also look for news about increasing ownership of Great West Life or decreasing ownership from POW.                                https://www.powerfinancial.com/en/

Algonquin Power continues Independent Venture outside of Liberty Utilities

Algonquin Power has shown good increases in earnings since 2015  but it's price has not reflected this growth.Consequently it's price/earnings ratio is around 8 times and much lower than the average P/E ratio for the industry.This although revenues and earnings  have shown good growth. One of the main reasons for this dichotomy is that many investors find that their earnings are locked in to the American regulatory system.Much of it is tied up in their largest American investment called Liberty Utilities which is a huge utility mostly in Kansas and Missouri.AQN has wrapped many of it's other American utilities (both regulated and non-regulated) into Liberty which I think has a listing on the NYSE.This blog has called for Algonquin to float a large secondary issue of Liberty shares and use the funds to make investments and move out from under the American regulatory umbrella.

Outside of the Umbrella           

To be fair AQN has made a number of moves outside of the umbrella recently.First it has acquired a number of  American wind farms which are not regulated;they have a power purchase agreement (PPA)But in comparison to Liberty Utility and the AQN regulated assets these properties make up only a small percentage.But Algonquin has made another move by raising money in a secondary AQN equity issue and investing it in a Spanish utility called Atlantica Yield.In fact, it owns about 35% of this quite large European utility.And in a rather strange event a regulator has allowed Liberty Utilities to pursue the development of up to 600 MW of wind power which usually is unregulated.

A Higher P/E ratio

AQN's adjusted EBITDA(earnings) has almost tripled since 2015.But their stock price increased by only 33% from $9 to $12 a share.This kind of growth  in earningsshould produce an above average P/E ratio and then a higher price.But AQN's P/E ratio has remained at about 8 times which is below the industry average of 15.As AQN moves out from under the regulated umbrella it's P/E ratio will rise perhaps to 11 or 12 in 2019.

https://www.fairfax.ca/

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Transalta lost money in Australia;now is a good time to buy

                                                    Introduction
                        Australia has beautiful,quiet beaches like the one in the picture above and Transalta built 2 power projects near the beach in Australia in 2017.They built the South Hedland gas transmission project and the Solomon Power Station.But they lost the contract to supply power from the Solomon Power Station and had to sell the power station at a loss in 2018.They took a small loss in the first quarter and a very large loss ($105 million) in Q2.There may be a another small loss in Q3 but it appears that the worst is over.In addition, prices for power and other  Transalta services have moved up in Alberta. In total,Q2 showed mixed results as although free cash flow was higher by $66 million over 2017 adjusted EBITDA was down by almost 20% over 2017.
                                              Q2 and 6 Months   
    The second quarter showed funds from operations at $188 million almost the same as in 2017.But free cash flow showed a 220% increase from $30 million to $96 million.And for 6  months free cash flow increased from $209 million to $334 million.While net debt decreased by $345 million resulting in a debt/equity ratio of 3.0.At the same time TA acquired two construction ready wind projects in United States.TA also purchased and cancelled 587,300 common shares.And TA's interest in Transalta Renewables reduced from 64 to 61%. TA exercised the early redemption of 6.40% debentures due November,2019 for $425 million funded from a coal bond offering of $345 million at a lower interest rate.These pretty good results were somewhat marred by the charge against income from The Solomon Power Station sale.         

                                                   Overall Results
    Transalta Power has improved  it's finances considerably since 2015.For example, it has acquired  3 or 4 wind projects which have been transfrerred to Transalta Renewables which kept it's majority interest in RNW.And it has produced a steady cash flow that has been used to reduce it's debt and was up this quarter.Transalta was trading higher until the first quarter of 2016 when it reduced it's dividend and the stock fell to the $4 area (see workathon 22/02/2017 and 25/10/2016).It has gradually climbed back to the $7.50 level.The cash flow used to pay it's dividend has been used to pay down debt  for which  in total $1.2 billion has been eliminated since 2015.Transalta Power will continue it's steady climb back to $8.50.The loss on the Solomon power plant will slow it down temporarily.But more importantly this climb will be helped by the increase in oil prices and power prices in Alberta.
                                                   https://www.otpp.com/home  https://www.canadianbusiness.com/                                              

Intrinsync Technology sees no End to Revenue from Open-Q Computing Modules

Intrinsyc Technology keeps  piling up sales for it's main product,Open-Q computing modules.In fact revenues were up 40% over Q2in 2017 and it's backlog was equal to a year's sales.EBITDA was US $450,000 in comparison to US$95,000 in Q2 2017.And for 6 months  EBITDAwent from CDN.$276,000 to CDN.$970,000.But unlike many junior technology companies it's growth rate over the last 5 years has been relatively ordinary.And it is not expanding it's product line very much.Although it has taken a small position in a company called Stream TV Networks.

A Connected Product Line

This blog has suggested to ITC several times that it cannot afford to rely solely on it's Open-Q computing modules.Although this product has done well and is growing.Can they count on Qualcom to continue to invest in and improve this line that apparently has few customers.What they need is complimentary product lines to augment this relatively successful technology product.With this in mind this blog has suggested it look at small telcos that have an online business.No news has been forthcoming here.If this has happened then expect revenues to start to grow even faster than in the past.However margins may be lower and earnings will take more time.             

Conclusion 

Intrinsyc is a very interesting company and it is at a crossroads.It will face more and more risk 2 and 3 years down the road from it's  present relationship with Qualcom.At the same time there is some risk from investing in a new area.ITC is trading in the $1.50 area now and could easily hit $2.50 with news of a new product line.Another strategy is to add expertise so that they do not rely so much on Qualcom.Either way ITC is dependent on technical news to move past the $2.00 level now.

https://www.fool.com/  ;  https://www.omers.com/  

Fiera Capital is one of the Fastest growing Financials Period

  

Fiera Capital has been analyzed in a couple of  my other posts on Workathon (see 10/23/2017).It has grown since that blog so that now it has $139 billion in assets under management (AUM) which is an 11% increase over it's AUM in the last blog.This is a very substantial growth rate for a Canadian financial institution.In addition, quarterly revenues grew 15% over Q2 in 2017.Although adjusted EBITDA per share remained constant at $.35 per share.The increases came from the acquisition of CGOV Asset Management and Clearwater Capital.

6 Month Performance

              Fiera had a good second quarter with revenues up 15%;the main factor causing the increase was the acquisition of CGOV and Clearwater Capital.It also renegotiated the terms of it's credit agreement so that now it's  capacity is $600 million.Revenues for the 6 month period were $350 million up 22% over 2017.Earnings were ahead also by 20%.
                         Comparison of Junior Financials
   In a previous blog on Blogdaleupsome (Sept. 22,2017) 3 junior financials are compared,that is, AGF Management,Guardian Capital and Fiera Capital.Later we took a quick look at Goeasy Financial.All 3  have dropped in price from a year ago.Fiera Capital showed the biggest increase in AUM from less than $125 billion to almost $140 billion.But it issues shares to make it's acquisitions and this dilutes earnings.So adjusted EBITDA per share was  flat  since Q2 of 2017 and adjusted net earnings per share was actually down slightly.The other two showed slight increases in earnings but nowhere near the same growth.A company just recently included with this group is Goeasy Financial.It is smaller in market capitalization but has a growth rate even surpassing Fiera Capital.Down the road there may be some consolidation and Fiera and Goeasy will likely remain
      This appears to be a tough market for junior financials.AGF's price has withered as has Guardian Capital.Fiera Capital's price has also stalled.But there can be no doubt that Fiera has had the largest growth in AUM  and revenues.Fiera's problem is that e.p.s. has remained flat.In comparison, Goeasy Financial has had  good growth in revenues and earnings and it's price has flourished.
                                        www.sprottassetmangement.com www.themotleyfool.com

Emera will have 7 annual dividend increases

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Emera has had 4 years of 7% annual dividend increases and has given guidance that there will be 3 more years of 5% dividend increases.Consequently it's yield now is 5.6% and is one of the highest yields of major utilities.A good part of this dividend program has been created by the acquisition of Teco Energy,a Florida utility.Even though it is true that owning Teco has caused greater investment expenditures than planned for.                                                                                               Emera's CEO says that their payout ratio will stay in the range of 45-55% of adjusted funds from operations.And that means that Emera has paid for these continuous dividend increases by  having continually increasing revenues and earnings.For example,revenues have more than doubled from 2014 to 2017 and earnings have more than doubled also in this same period. 

The Second Quarter

Second quarter net income was $.38 per share compared to $.47 in  Q2 of 2017.While e.p.s for 6 months was $1.56 compared to $1.95 in 2017.And adjusted net income for the 6 months was $313 million or $1.35 per share versus $269 million or $1.27 per share.But these are derived or accounting measurements;more importantly operating cash flow

  increased from $703 million to $767 million or almost $.35 per share for the 6 month period.

                Right from the start Emera found that it underestimated the investment required by the condition of the plant and by the regulated authorities.This year Emera says that it has $1.7 USD billion " of regulated rate base investment opportunities".That will include a $850 million USD investment to modernize it's Big Bend Power Station  in Tampa Bay, Florida and building a number of solar power stations.Also more money will be put into it's Maritime Link that connects Maine to the grid.

The Second Half 

Increases in earnings are expected in Emera Maine,Nova Scotia Power,Emera Florida and the Maritime Link.Very likely, little revenues will be generated from their new solar projects in 2018.But this blog expects operating cash flow to increase by 10% over 2017.EMA has traded in the $42-$43 price range  for most of the year and a 9-10% increase in e.p.s should send the price to the $45 area sometime in the second half.

                                             http://www.cppib.com/en/ ;https://www.zacks.com/

Aimia fields a New Offer

  Above is one of Bombardier's new CRJ-1000s.And they have become more popular recently and so has Aimia'sAeroplan loyalty program.It got an original offer from Mittleman Brothers but that does not cover the redemption obligations of Aeroplan.The new offer is from Air Canada and several of Aimia's banking partners.The value is for the cost of it's obligations plus $250 million; in total the value would be $2.25 billion.RBC has come out recently stating that Aimia should take this offer so that it can cover all of it's Aeroplan  obligations.This blog prefers an amended deal.
      The Success of Aeroplan
          Aimia has worked on the success of Aeroplan for a long time.For many years many investors thought that the only equity Aimia had was in it's Aeroplan program.And now Air Canada and it's partners want it's main program for $250 million equity and covering it's costs.In fact, one of the main problems that Aimia had is that Aeroplan was so successful that it did not need partners.No one has equity in Aeroplan but Aimia.TD and CIBC and VISA have equity in the credit card program but not in Aeroplan.The saving of the plan can be done by ensuring that Air Canada has some equity in Aeroplan.A 25 to 50% share taken by Air Canada would ensure that both partners would be working for the future success of the program.Now a $250 million payment would be greeted popularly by Aimia investors.This blog would not take a position on the equity to be acquired by Air Canada but 25% might be low and 50% might be high.Because this would save the credit card program TD and CIBC and Visa should not be too unhappy.
                   The Future of a New Improved Aeroplan
    Aeroplan was launched in 1984 and became a full subsidiary of Aimia in 2005.It generated enough income several years ago so that the stock traded at $25.And now it has 5 million customers.                             Aimia was working on improvements before the Air Canada offer.Air Canada air  miles will be able to be switched with other carriers and perhaps  have a better rewards program.More improvements will likely be coming so that the value of Air Canada's investment will increase in the future.In fact, Air Canada should insist on improvements and an increase in total customers once it has equity in the plan.Both parties would like to see Aeroplan generating enough income to raise Aimia to a fraction of it's old peak of $25 a share.And this blog suggests that the new Aimia Aeroplan contain all the customers presently in the Air Canada Aeroplan program.
                   The Exact Value
  It is clear that Aimia made a mistake by not having Air Canada have any equity at all in Aeroplan.It is also clear that Air Canada (and it's partners) now expect to get a bargain.That is why the best deal for Aimia is to have Air Canada buy some equity now and not risk that the obligations will be redeemed  in July 2020 or only partly redeemed.Primarily some kind of deal must be made to prevent any substantial redemptions but should Aimia have to lose all of it's equity earned since 2005 to do this?An initial investment now (byAugust 2)could be arranged and an agreement to review a further investment in 5 years at a new value.This would almost eliminate redemptions for a 5 year period and delay the exact valuation of Aeroplan until 2025.After all the unilateral non-renewal of a 15 year contract (July 2020) when there are no performance issues is at the least unethical and at the most illegal.             

  www.brookfield assetmanagement.com; www.canadapensionplan.com

Huronia XVIII- New crops and New industries

      This is a continuation of the Huronia series (Huronia XVIII) and this one covers the area of Kincardine and Saugeen Shores and Owen Sound.This is another example of an area that used to rely heavily on tourism and now has seen it's tourist dollars dry up.It needs a new focus in order to grow.Once again this blog turns to agriculture just as it did when originally settled.Owen  Sound  now does have a couple of feed mills but could use more and newer equipment.The point of this blog is that growth in population and income can be achieved through the use of new crops and new industries.This exact topic is coverd in an earlier blog on Blogdaleupsome dated 06/06/2018.        

                     Some of the New Crops  
       Above is a picture of an apple tree growing with an abundance of apples.This is one of the new crops suggested.Ontario is the  province with the largest  production of apple cider; production was valued at $200 million in 2016.Apples are grown commercially on the other side of Owen Sound in Meaford and Thornbury.Farms in this area cannot all grow hay,corn and graze cattle or start lumber planing operations with lumber from local sawmills.Experimenting  should be done with new  crops like wheat,  barley,rye and hops (for beer) and looking for new uses of corn.There is also room for chicken slaughterhouses  and small meat processing operations like Beefway in Kincardine. The agricultural processing that arises can increase considerably gross county income.For example, a small pet feed mill in Owen Sound creates income of $500,000 a year and a small craft beer mill can make $5 to $10 million a year and employ 15 to 20 people.While a small hardwood mill can make $2 to $5 million a year.And a small apple cider plant(like in Thornbury) can make $10 to $20 million after 3 to 5 years of operation.
                           Soil and Growing Conditions 
   The soil in this area is not like in the Holland Marsh around Newmarket which has that deep black soil and can grow all kinds of vegetables and fruits.However it can grow corn and hay and some kinds of wheat and barley and maybe hops.Also lots of places can grow softwood in great quantities to have softwood mills.But hardwoods grow in smaller quantities and can grow in sufficient quantity around Lake Huron.Hardwoods can be grown for more of a finished product and a small hardwood mill can produce $2 to $5 million a year.But reforestation is required to ensure the future of the mill.
    Lots of corn is grown in this area but primarily for cattle feed;it is not grown for corn meal and corn byproducts needed for pet feed.Apples are grown around Owen Sound enough to run a small cider plant in Thornbury.And they can be grown here also.Maybe also some seasonal strawberries and raspberries.It is also possible to grow small quantities of soyabeans for soyabean oil and meal.
                        Forget the old Crops        

Above is  a field of corn.You cannot drive anywhere on Bruce county,Grey county nor Huron county  roads and not see field after field of corn and hay.In fact the land is used too much for these crops and not for cash crops that can increase income and the population..Mostly corn and hay is being used to feed livestock and not as a cash crop.But corn can be sold for human consumption as well as for cornmeal which can be used for pet feed and other uses.But in order to do this a corn processing plant must be built.Apples are a natural as they make cider just on the other side of Owen Sound.There is no reason not to grow apples commercially in Port Elgin.Also oats and some kinds of soyabeans and hops can be grown to produce cereal, soyabean meal and beer.

info@thesuntimes.ca;webmaster@thestar.ca;info@canadianmoneysaver.com

Emera consolidates it's Teco acquisition

In 2016 Emera acquired a quite large American utility called Teco;it had divisions in Florida, New Mexico.Maine and the Carribbean.It had total assets of about $8 to $10 billion.And now Emera which is headquartered in Nova Scotia has total assets of about $29 billion.And late in 2017 it invested about $1 billion in it's Maritime Link connecting Newfoundland and Maine to it's grid.But these large projects take a bit of time to properly digest .Consequently 2017 showed inconsistent results but 2018 is off to a better start.

The first quarter 2018

As the various divisions of Teco become integrated  within the Emera system the earnings are starting to improve.Although the net income was only $271 million compared to $312 million in Q1 2016.More importantly adjusted net income improved to $202 million from $152 million in 2017.That is because accounting adjustments are being minimized.Consequently adjusted earnings per common share were $.87 compared to $.72 per share in 2017 for a 22% increase.With the improved system and earnings this blog sees adjusted earnings per common share on track to hit $3.50 to $3.90 per common share for all of 2018.Which end of the earnings'range will depend on the profitability of their new Maritime Link mentioned above.For example, the Maritime Link earned $15 million in Q1. and this number is expected to increase in Q2.

Divisional Results

Emera now has 5 main divisions;(1)Florida and New Mexico,(2)Nova Scotia Power,(3) Maine,(4)New England and (5) Caribbean.The largest increase was recorded by the Florida-New Mexico division and New England but there was a substantial contribution from Nova Scotia Power.And as mentioned previously a small contribution from the Maritime Link.Future gains are expected from Florida-New Mexico,Maine and the Maritime Link.This should bring earnings per common share to the range of $4.75 to $5.00 and adjusted earnings per share to the $3.50 to $3.90 range.

Annual Results

Annual results have been inconsistent since 2015.The general trend is that net income has risen over this period but 2016 and 2017 have not moved with trend.In addition, some quarters have shown negative results while others have been above trend.Part of the reason is that Teco was so big;it was close to 50% of the value of Nova Scotia Power.Secondly it was so spread out;part in New England and part in New Mexico and another part in Florida.It takes time to manage such a well spread out giant but this blog suspects that the amount of investment required to make Teco run smoothly was more than originally counted on.On the other hand,adjusted EBITDA has moved up considerably since 2015.And now e.p.s. has started to move towards the upward trend.The earnings projection of $3.50 to $3.90 per share is based on no extraordinary items and Emera has minimized these items gradually.At $3.50 per share this would put their P/E ratio at a reasonable 12 times earnings.

The 2018 Price

With the Teco acquisition completed the CEO stated that there would be a dividend increase every year until 2019(see Blogdaleupsome-Blogger.com dated 24/08/2017)Emera states that "operating cash flow increased $96 million,or 28% to $444 million in Q1 2018."This leaves lots of room for a 7% increase.There is little doubt that Emera has improved their operations so a corresponding price increase to the $48 range should not be much of a surprise.But it will be a slow rise.       https://www.credit-suisse.com/ca/en.html  ;https://www.brookfield.com/

Laurentian Bank is on the Comeback Trail

       Laurentian Bank was trading around $60 per share just 5 to 6 months ago.It had a relatively small mortgage debacle and the stock fell at first to the $50 level and then fell again to the present $45 level.CMHC had to buy back quite a few mortgages(probably at a discount) and then CMHC sold about $115 million mortgages back to Laurentian (probably at a deeper discount).An earlier blog on Workathon estimated that the total cost at perhaps $.10 to $.20 per share.However now it is clear that the loss of confidence in Laurentian Bank management is at the root of the matter.As Laurentian Bank just released it's second quarter report on June1 which was a good one and the stock fell another $1 per share.
                But it was a Good Second Quarter
   Total  revenues increased by $21 million to $260 million from $238 million.And net income was $60 million or $1.34 per share compared to $1.19 per share for Q2 2017.And diluted earnings per share were $1.47 up from $1.39.And most importantly the quarterly dividend was raised $.01 to $.64 per share.In addition, they raised their Tier1 capital ratio went from 8.1 to 8.6% showing a higher degree of safety for shareholders.
    LB made other changes as well.They sold their agriculture loan portfolio for a net gain of $5 million.Their loans to business customers was up almost 20% and they acquired Northpoint Commercial Finance (NCF)  and CIT Canada.This brings their total assets to $48 billion and AUM(assets under management) to $31 billion.                                     

More Work to Do

Investors have seen the quarterly report which came out on June 1 and have not bid the stock up.It is not likely that they were unimpressed with LB performance but perhaps not sure if there will be more underwriting problems on their mortgages.In effect, their underwriters have underestimated the risk of default.This blog suggests that investors need more time to see if these problems have been remedied and if their new acquisitions will be accretive also.However adjusted net income for the six months period was up 23% and adjusted net income per share up 5%.So it is likely that the stock price will move towards $48 by the third quarter report.Hopefully the underwriting problems will all be resolved by then.          https://accweb.mouv.desjardins.com/identifiantunique/identification?domaineVirtuel=desjardins&langueCible=en;https://www.brookfield.com/

Northland Power climbs the Ladder

The caption above shows men at work on a rig;there is considerable risk in drilling for oil these days.Northland Power took a larger risk in  constructing two large offshore wind farms in the world's strongest winds in the North Sea.But now they are both built (600 MW and 332MW) and fully commissioned revenues are coming in.Their recently released first quarter report shows that they have been very successful  here and they are awaiting future results from one more wind farm with a constructed 252 MW of power capacity.However the stock price has not yet kept pace with the new construction and the new revenues.It too must climb up the ladder.

First Quarter Highlights

Sales increased 34% or $122 million to $486 millionand adjusted EBITDA increased 47% or $92 million to $290 million.This was even partially offset by the expiry of the Kingston power ourchase agreement (PPA).There will be no large increases in power output until 2019 when their other wind farm has been fully constructed.But NPI will get pre-completion revenues from their new project in 2018.They have also executed a 20year power contract with Taiwan for 60% ownership in 300 MW starting in 2024.So Northland continues to line up large foreign power contracts.Lastly the blog 4-C Offshore says that in 2014 when they acquired Nordsee 1 they also acquired the rights (along with the German firm RGE) for Nordsee 2 and 3which will be beside Nordsee1.The combined power capacity here will be 760 MW.However no final word has come on these two wind farms.                       

Climbing the Ladder

Northland has built 1092MW of capacity in the last 2 and a half years.About 750MW of which they now own.Annual revenues have grown from$760 million in 2014 to $1376 million in 2017 while over the same period adjusted EBITDA has grown from$349 million to $980 million.It's guidance for 2018 is for adjusted EBITDA of $900 to $950 million and free cash flow per share of $1.70 to $2.00 per share.But the stock price has not kept pace;in short, it has not climbed the ladder.It has not done what the men in the caption above have done;they moved across the river in stages.Based on the revenues and earnings ladder Northland Power should have climbed up to the $28 per share level.

https://www.brookfield.com/;https://www.google.ca/search?ei=M3EFW4m6F9CYzwLfjLvIDQ&q=canada+pension+plan+login&oq=www.canadapensionplan.com&gs_l=psy-ab.1.4.0i71k1l8.0.0.0.25799.0.0.0.0.0.0.0.0..0.0....0...1c..64.psy-ab..0.0.0....0.6cLVwYmLtO0

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AGF Finance is shaping up

     AGF Finance is one of the three new finance companies that I looked at in a blog on August15,2017.It has made some improvements as has the other two,namely,Guardian Capital and Fiera Capital.Both the price of Fiera Capital and AGF are down since August ;Fiera is down about 15% and AGF about 20% and Guardian Capital is flat.Fiera is the larger company with $128 billion of assets under management (AUM) while AGF has AUM of $37 billion.Guardian is the smallest.But AGF just had a good first quarter as adjusted EBITDA,net income and e.p.s. grew at an above average rate.And all 3 have been helped by the interest rate increases.But what will happen for AGF for the rest of the year?Well AGF has made some improvements worth describing.          

Annual Highlights

61% of their AUM performed above the median rate for the last 3 years.Adjusted e.p.s. increased 27% compared to 2016 .Also AGF is expecting a $16 million cash refund arising from a transfer pricing case.This should raise adjusted EBITDA to about $40 million for Q2 or about $.45 per share.AGF also started two new ETFs on the NEO exchange.And lastly AGF announced fee reductions across several of their funds. Consequently AGF recorded $20 million of sales(net of redemptions) and $58 million expected for March sales.                        

Who will Outperform in 2018?

Guardian Capital is smaller and has smaller price movements.However it might move up to the $26 -$27 price range as it has a good steady cash flow.Fiera has the best yield at 6.9% compared to AGF at 4.9% and Guardian at 2.1%.And Fiera is adding to AUM faster but it's income trails.So it is Fiera that has the highest P/E ratio at 12.This blog looks for  annual e.p.s. of $1.05 to $1.30 for AGF(especially with the $16 million cash refund) and at a multiple of 8.5 this gives it an expected price of $8.50 to $9.00.This makes it the likely winner with a gain of almost 50% and would likely beat Fiera which may not hit $15 in 2018.

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Tecsys shows flat third quarter results

    On March1, Tecsys reported it's third quarter results and earnings were good but revenues were flat.Third quarter revenues were $17.2 million compared to $17.4 million for 2016.On the other hand, third quarter adjusted EBITDA was $1.3 million compared to $1.9 million in 2016 but there was a $.4 million foreign exchange loss.But for 9 months adjusted EBITDA was up 10% and e.p.s up 70% from 2016.While adjusted EBITDA for 2017 was up 40% and e.p.s was up 40% from 2016.
              A Transition for Tecsys                     

           Tecsys provides supply chain and warehouse management but it also operates three or four junior construction companies.Two of them are in western Canada.This blog believes that it has a small position in one or two junior construction companies around north Toronto.Revenues in the oil patch might  have been volatile for the last two or three years.So the supply chain management business has acted to stabilize revenues.This blog has recommended in the pst to focus on the construction business and sell off parts of the supply chain management business.
           Financially Speaking
           Tecsys is a small company with 13 million shares and a  market capitalization of about $210 million.Long term debt is down about 40% from 2017 while share capital is up about 7 to 8%.It now has 13 million shares.There has been a reduction in retained earnings of about $500,000 over 2016 and chiefly a gain in equity to the owners of $11 million.The reason debt has fallen is principally because they issued 767,000 shares and raised $11 million;some  of it has been used to repay debt. However this blog finds their capital structure restrictive and it limits their growth.
                              

Future Prospects

Tecsys has come a long way in the last 5 years.Revenues and net income and adjusted EBITDA have steadily moved up;it is a growth stock.And this growth has commanded a fairly good P/E ratio.The price/earnings ratio for 2017 will be above 30 as e.p.s will be about $.45 to $.50.This is with their present 13 million shares.And this blog has called for an increase in equity which will increase revenues and earnings but will it increase e.p.s?On the other hand it's debt has fallen considerably.Tecsys must find a way to increase it's equity along with a small increase in debt.It has small but not controlling positions in several construction companies and a substantial interest in a supply chain management business.The increase in capital must be used  to increase one or both businesses.  

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Aimia sells non-core assets to bolster balance sheet

             This is another of those slightly unusual situatuons that are best covered in Workathon instead of Blogdaleupsome.Aimia is in a bit of a credit crunch and so did what most other companies would do.They sold off (and may still be selling off) some non-core assets.In this case they sold their Nectar business with joint owner Sainsbury's.Sainsbury's sells grocery, financial,energy, clothing and general merchandise.And Nectar is their largest issuance and redemption partner.Nectar and their research business plus 50% of their stake in Sainsbury's was sold for $105 million. There was no mention of the net proceeds from the transaction.    

               Other non-core Assets
        Aimia is not completely cornered yet as it has a few cards in it's hand to play.It's financial statements show $100 million of investments in unconsolidated assets and a further $400 million of other investments(including government bonds).Down the road these may be disposed of for working capital or repayment of debt.Their latest press release shows $208 million of debt remaining on their balance sheet.If push comes to shove some of these assets may be sold off but the profit recorded will vary with the strength of Aimia's hand.
             A Weird Press Release
           This press release talks about a$174 million transfer of cash and a working capital settlement.If their Nectar loyalty business was sold there would be no cash involved they would merely be maintaining a reserve fund for redemptions.If there was a  cash transfer then maybe Aimia has a small position in Sainsbury's which is a  $5.5 billion company.But this is unlikely in Aimia's present position.More than likely this is the kind of press release that one puts out on April1.Selling off non-core assets is just what Aimia should be doing in order to bolster it's position before June 2020.As Aimia still does not have an amended agreement with Air Canada as this blog has suggested.However if there is any substance to this  press release it will all be detailed in their upcoming first quarter report.
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Tucows needs a New Strategy or a New Management Style

                     Tucows has been  a stockmarket darling for the last 2 to 2/12 years.It was trading at about $12 per share two and a half years ago and moved up to the $48 to $50 area.And in the last year or so has moved from $48 to $50 area to $90.But in the last month it has fallen to $68.This blog and other investors find it's approach too eclectic.It's business is selling internet services, domaine names and mobile services.And it has one software  subsidiary called ENOM.But it also has a position in several small internet and ecommerce software companies .And it gets much of it's revenues and earnings from here.
     This blog thought recently that it was heading for $100 a share and that it's eclectic management style was being successful.But in the last 1 to 2 months it has dropped about 20%.Part of this is due to a couple of lawsuits that have been made against TC. But this blog believes another factor is that perhaps too much of it's revenue comes from government contracts.This can be remedied easily.It needs to have it's revenue more concentrated and take majority or control positions in 3 or 4 of it's more successful subsidiaries.Then it can focus on one or two internet areas instead of  being in 8 to 10 companies.This can be easily done by raising more equity.Presently it only has 10 million outstanding shares and this blog believes that situation has added to the instability of the stock.Very few technology companies with a billion dollar market capitalization have such a small number of shares outstanding.So one of our recommendations is to raise more equity and use the funds to solidify their postion in three or maybe four of their internet software companies.They need to streamline like the rapid transit train below.    

Areas of Improvement

What got Tucows from $12 to $50 a share did not get it from $50 to $90 a share. This management style is described in posts on Workathon dated December19,2016 and February 20,2017.And now it needs to change it's management style.This blog believes that most of it's subsidiaries are in e-commerce software and it needs a larger position in both 3 or 4 of these companies and in their resources.This can be done by raising more equity which will broaden it's equity base.It has fourth quarter results coming up soon and investors will be looking for some of these changes to be implemented as well as satisfactory EBITDA. This blog is looking for adjusted EBITDA of $30 to $34 million and e.p.s. of more than $3.00 per share.         use Workathon for analysis of technology  companies;use Workathon for news on technology companies

Street Capital Bank my worst forecast of 2017 and worst performing bank

   
     

    If Kirkland Lake Gold was my best forecast for 2017 then Street Capital Bank was the worst.As in the caption above the train is only pulling away from the station.It was trading around $2.00 per share in December 2016 when I bought shares and forecasted a large price improvement after February when it got it's Schedule 1 bank licence.Now it trades at $.98 per share.However parts of my forecast were correct.It is taking on deposits and it has increased it's customer loans by 50%.But revenues and operating income have fallen by about 50% over 2015.Although net income has remained almost constant.It still has a long way to go but it will have a credit card availability this year and interest margins will increase in 2018.
       A Banker's  Dip in 2017
      Often a junior company after a major revenue-creating event will slow down or even move backwards for a period of time.This often happens when a new banking licence is obtained or a patent or even a new major oil field.The reason being that the new company shows more established companies that it is open for business.And this gives them more attention and causes more competitive pressures.Once the new company adjusts to this increased competition it will return to it's natural growth path.And SCB is still adjusting.For example,both revenues and operating income must grow for Street Capital Bank to reach 2015 levels.
  Revenues and operating income are expected to be flat with 2016 levels in 2017.While net income may be a little less than 2016.However loans and deposits and the interest rate margin will be better than 2016.The interest rate margin has improved in the second half of 2017 and again in 2018.      

                Improvements
         As shown in my blog on Linkedin entitled If They Only Knew  SCB had about 130,000 customers at the time of getting their licence.Now I an guessing they have about 150,000 customers and their loans have increased by about 50%.This blog expects only average results for 2017.But they will introduce credit cards in 2018 and have higher interest rate margins.So look for Street Capital Bank to move closer to it's natural growth path.It is mereley an adjustment process.
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Kirkland Lake Gold -- stock of the year(2017)

Yes,Kirkland Lake Gold has had a very successful year.But it all started with Crocodile Gold.Crocodile Gold bought for  small compensation two (supposedly almost depleted) Australian mines,

namely Stawell and Fosterville to accompany their existing Cosmo mine.And then Crocodile Gold bought Newmarket Gold and  the new company became Newmarket Gold.Kirkland Lake bought Newmarket and that was when Kirkland Lake discovered that the Fosterville mine was much bigger and had a richer grade of ore than originally thought.
                Financial Results for Q4 and 2017 
   KL acquired St. Andrew's Gold and Newmarket Gold in 2016 and the stock increased in value by174% in 2017.Total consolidated production in 2017 increased from 543,000 ounces to 597,000 ounces.As well  KL beat their own production guidance but revenue figures are not yet available.And Q4 production also increased by 10% over 2016 production.This enabled KL to pay down convertible debentures in June and December of 2017.The debentures were converted into 4.5 million common shares at a lower share price.In addition, they doubled the size of their dividend to $.02 per share.
                 The Fosterville mine
     It is highly unusual that the stock price moved up 174% simply because of a 10% increase in total production.So this blog believes that most investors realize the gold reserves at Fosterville are larger than recorded.Their annual production statement shows the Fosterville reserves at 1.03 million ounces but an earlier statement in 2017 by KL stated the Australian reserves at about 3.7 million ounces.With .7 million ounces at Cosmo and almost no reserves at the Stawell mine that means that they estimated in 2017 there were 3 million ounces at Fosterville.This blog believes that this is a low estimate. As Crocodile Gold way back in 2013 said that the Fosterville ore deposit was bigger than 2.5 million ounces.My blog in Workathon dated October21,2016 shows that,Newmarket Gold,  before selling the company discovered 2 new faults called the Lower Phoenix fault system and the Eagle fault system.And the ore grade is richer than in the existing Phoenix fault.This blog calculated that  the total reserves at Fosterville were now about 4 to 5 million ounces.But Fosterville has extensions at each of their major faults.So it is possible that the size of the ore body (with extensions) can be as big as 5 to 6 million ounces.This cannot be said with certainty but it is certain that it is not 1.03 million ounces.
                             The best Estimate             

         Kirkland Lake Gold's share price had a good year in 2017 but it will likely do well in 2018 also.It has ,for example, moved up $2 in the last month.But it is not moving on the increase in production alone.This blog believes that most investors understand that the ore body at the Fosterville mine is much  bigger than reported.In their annual production report KL claims that Fosterville has a reserve of 1.03 million ounces and earlier they estimated the mine size to be 3 million ounces.This blog believes that 6 million ounces may be high but 4 to 5 million ounces is a reasonable estimate and at current prices of gold that is worth about $6-$7 billion.My earlier blog in Econothon II dated  December2,2017 states "the fair market value of the Fosterville mine has not yet been realized".And this is still true, so 2018 should be a good year for Kirkland Lake Gold.
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