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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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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