Go Easy earnings shoot up but needs a New third Division

         On May7 Go Easy reported it's financial results.Revenues were up by 22% but e.p.s was up by 53% and net income by a whopping 65%.Go Easy calls these  record  results.For example, Scotiabank shows 2018 e.p.s at $3.97 and the P/E ratio at 12.84.But now based on Q1, e.p.s are on track to hit $5.00 per share.At present P/E levels this will move the stock price to about $63 per share.Even with a slight reduction in the P/E ratio as growth dampens this should bring the stock up to the $60 level.It's present price of $51 shows it as  considerably undervalued.

     

And Now for the Rest of the Story

This blog was not too surprised by these favorable results.Go Easy has a very successful consumer loan division.Most readers have seen their advertisement on television showing people paying bills (not Goeasy consumer products).This helps to explain how their consumer loan portfolio increased from $600 million to $879 million in Q1 2018.But one of my blogs on Website123.com suggested that Goeasy make some kind of combination with the faltering Street Capital Bank as well as with Pinetree Capital.Both are represented in the picture above.It is true that SCB has been losing money lately and will need some GSY  investment to shore up SCB finances.But Goeasy must pick and choose the functions that it will push on consumers.For example, mortgages may be considered too competetive to invest heavily in.Nevertheless Goeasy will be a successful operation with more tools to use now. 

https://www.omers.com/  https://www.otpp.com/

Is Atlantic Power poised for a Recovery?

        Atlantic Power is an utility that has been covered in several of my Workathon blogs.The financial literature (both online and offline) is full of blogs that say that ATP is ready for a comeback.It was $13/share in 2013 and has traded as low as $1.45/share.but their new CEO has done a lot of things to improve Atlantic Power and so some pundits are suggesting there may be a comeback.This blogs' answer is no-not yet.                

              Changes since 2013
    It was starting to look like ATP would rebound in 2019.The stock had moved up to the $3.50 level.Debt had been cut almost in half although the dividend was gone now.It had a power generating capacity of 2138 MW of which it owns 1500 MW.But back in 2013 it owned 28 power plants and now it owns 23 (2 are in Canada).ATP just released it's Q1 results and almost all financial indicators were down from Q1 2018.It appears that Atlantic Power is suffering from the closing of four plants in northern Ontario. Although there has been some compensation from the province as a result of their Go Green platform.So the price has fallen off from their January and February highs.Recently Atlantic Power has made arrangements to sell it's 300 MW Manchief natural gas power plant.But in return it bought from Altagas their share of two biomass plants which generate about 85MW of power.
        Slow Growth
     Atlantic Power had 28 generating plants in 2013.Now it has 23 and selling one more in 2022 ( 300MW).It is not totally replacing the generating power that has been lost.But it is buying 50% interests in 2 biomass plants with 85 MW of power this year.On the positive side it has reduced total debt by about 50%.There is credit capacity to buy or to build more generating capacity.However there is another option!ATP  would make an excellent fit for one or two Canadian utilities with significant foreign (especially American utilities).One is Emera and another is Algonquin Power.This blog has suggested an acquisition with Algonquin but it is possible that Algonquin sees too many problems.Also they just made an investment in Bermuda.There would be connection or combination problems as well as internal ATP problems.But Emera could also be a good fit and has a very substantial cash flow (about$700 million).       http://algonquinpower.com/ http://www.emera.com/en/home/default.aspx

AGF Management increases sales while Keeping Earnings Steady

         

 AGF Management

 released it's first quarter results and it was steady as she goes.Investors must have been pleased to see an almost 3 % increase in sales while the industry is growing so slowly.Income was $105 million compared to $110 million for Q1 2018.E.P.S. was $.14 compared to $.14 in 2018.AGF reported improved results for it's U.K. subsidiary and an increased   investment in it's InstarAGF Asset Mangement - one of it's new North American funds.Largely AGF is diversifying with new funds in new locations.
                 The Same Trend for 2019
 AGF had a quite good year in 2018.E.p.s. were $.92 per share while income was $450 million and adjusted EBITDA was $110 million.Part of this success was due to a tax provision release of $24 million.Additionally they bought back almost 1 million shares.Income in the first quarter of 2019 at $105 million was only down slightly from Q1 in 2018 at $111 million.Adjusted earnings were $.14 per share compared to $.17 in Q4 and $.14 in Q1 for 2018.Still free cash flow improved to $17 million from $10.5 million in 2018.
         There were some successful highlights that point to an encouraging 2019.Assets under management (AUM) were almost 5% higher and mutual fund sales showed good increases.Net redemptions were in line with 2018 figures.       
         The Share Price for 2019
       This blog sees 2019 as a building year for AGF Management.Sales will continue to be healthy and AUM on an annual basis should grow to $40 billion.Income will be around $450-$460 million just slightly ahead of 2018.But because of the tax provision release in 2018 of $24 million e.p.s. will be down somewhat.So a forecast of $.70 to $.80 per share seems probable.AGF did not give a breakdown on foreign subsidiary income in Q1 but an increase here might put earnings at the top end of the range.Without a small acquisition or a capital gain from a sale of a subsidiary this will likely put AGF Management only in the $6.00 to $6.50 price range.    https://www.omers.com/  https://www.otpp.com/  

Northland Power continues to build Offshore

       Workathon has covered every step of Northland Power's expansion.It took a huge step in 2015 by planning to and then building it's first offshore wind farm called Gemini,a 600MW behemoth.Then came the smaller Nordsee One at 332 MW.Both were built in the North Sea which reportedly has the strongest winds in the world.This went well and now they are completing the third one called Deutsche Bucht.But the focus now is on the China Sea and 3 new wind farms,each 300 MW.
                  The Fourth Quarter
  Most financial indicators were lower than Q4 in 2017.Revenues and adjusted EBITDA were lower than 2017 which was a quite good quarter. While free cash flow was greater by about 22%.                Net income and free cash flow were tight while NPI was building Geminin and Nordsee One, each costing about $2.5 billion.In 2015,2016 and 2017 financing costs were high and revenues were not yet reported.Now,in effect, Northland is over the financial hump.
                   2018 Financial Highlights
   Sales increased from $1.4 billion to $1.6 billion in 2017.This was primarily because of a full year of production from the 332MW Nordsee One.And adjusted EBITDA increased from $765 million to $891 million (the top end of guidance).Net income had a huge increase(47%) over 2017.While free cash flow increased 30% over 2017 to $1.90 per share.And management expects that e.p.s will be in a range of $1.75 to $1.95 again in 2019.Adjusted EBITDA should increase from $890 to the range of $920 to $1010 million.Their new offshore projects will make up the difference.
                  Construction Updates
      Most Northland Power shareholders are not terribly interested nor surprised by the Q4 results. They are more interested in the development of the new offshore wind farms.Their last wind farm constructed in the North Sea called Deutsche Bucht is now contributing pre-completion revenues and will be finished on time in 2019.It is about 270MW and will cause a significant jump in revenues and earnings in late 2019.They also have 3 new offshore projects in the China Sea off Taiwan.And they have all permits and approvals for the first called Hai Long 2A;permits and approvals and their PPA is expected for the other 2 in 2019.This overcomes the main slowdown that NPI had in the North Sea.Where it completed all it's construction but had to wait for approvals and it's PPA.This blog expects that pre-completion revenues will be coming in from Hai Long 2A in Q4 and for Hai Long 2B and 3 by mid-2020.
                Huge Increases in EBITDA
   Northland Power has a reputation of building big ($2-3billion) offshore wind farms on budget and on time.And each wind farm ,when completed,produces very large increases in EBITDA.Their Deutsche Bucht project will be finished in 2019 and is even adding pre-completion revenues now.The blog 4-C  Offshore says that there is no construction started on Hai Long 2A yet.But this blog believes that there may be pre-completion revenues by Q4 of 2019.So consequently adjusted EBITDA will be at the upper end of the range of $950 to $1025 million.While free cash flow is expected to be $1.65 to $1.95 per share.Look for NPI to be around $26 to $28 per share where it was in 2014.   https://bam.brookfield.com/  https://www.otpp.com/

Elliot needs to clean up his Act

        Here Elliott refers to Elliott Noss,the CEO of Tucows. As most people know Tucows ia a Canadian technology company that I have spent a lot of time on.And it has just reported it's  fourth quarter and annual results.The annual results were quite good as Elliott has done a good job here but the report itself is quite amateurish.Tucows is now a billion dollar company and an annual report that says earnings come from domaine names and Ting a small mobile telco is ludicrous.This could actually hurt the stock price if investors

  were not able to see that the company is a bonafied software company that is actually doing  very well.It is true that   2019 e.p.s came down from e.p.s of 2018 but it's results are ahead of almost all Canadian technology companies.It seems to be very well managed.For example, it's adjusted EBITDA exceeds both Kinaxis and Shopify.

          The Quarterly Report
            This quarterly report also has annual results but all the Tucows' quarterly reports have little useful information in them.And they talk about making revenues and profits from domaine names and a small mobile company called Ting.They apparently made a small acquisition in another company that sells domaine names called Enom.If this was true then they would likely be as profitable as Go Daddy and have the same market capitalization.The quarterly reports cover the real software business that has been so successful.
     However the figures in the report as well as it's performance is quite impressive.Elliott must work hard to earn his impressive salary.Yet most of the Q3 figures are down from the third quarter of 2017 except for adjusted EBITDA.Revenues are down 6%,net income is down 60% and cash flow is down 24%.This is not a good trend and means that some of that abundant cash flow should be spent on new initiatives.That aside, the annual figures show better.
         Conclusion 
      My last blog on Workathon on Tucows dated (20/02/2017) stated that although Tucows was performing well it did need to show that it was more sophisticated than selling domaine names.The quarterly reports cover up the real business;it manages  a number of software companies and makes revenues from online advertising(as with Yellow Pages).It is the belief of this blog that it's P/E ratio and the stock price would come down if this was not true.Furthermore mentioning Ting as a major activity is also not conducive to a high P/E ratio.So in conclusion, their earnings are good but their description of activities performed must be improved or Elliott must go.This is good for the long term valuation of Tucows.This blog feels that this should be mentioned at the next A.G.M.(Annual General Meeting) and be the basis of a challenge against  Elliott as chairman.        
                                    https://www.fidelity.com/

The Emergence of A New Health-Care Star- Medical Facilities (DR)

  Medical Facilities (DR) is a health-care company with an  unique approach that has grown rapidly over the last 2 years.It was $10 per share a year ago and has grown to it's present price of $17.50 per share.It has a market capitalization of about $550 million.And it has a very interesting and unique business model that should allow easily for future growth.To that end, Medical Facilities just had a good third quarter. All DR facilities are located in U.S.A.
       Third Quarter Results
 Total revenues were up 17% over 2017 to $104 million with organic growth of 7.5% Adjusted EBITDA kept pace with a 17% increase.While income from operations was $17 million ahead by 33% over Q3 2017.Medical Facilities has an unique niche as it does surgical work for hospitals, health-care facilities,doctors and insurance companies.Bigger organizations out-source some of their work to Medical FacilitiesBecause on the one hand it does surgical operations faster than many larger hospitals.On the other hand,it does surgical operations more cheaply and in some cases more complex than what  smaller hospitals can do.In order to do this Medical Facilities has to and does have a very lean and competent operation.
     Nine Month Results
   Revenues increased by 13% to $308 million.Income from operations increased 16% to $49 million.But the big change was the increase in e.p.s. from a loss of $.11 to a gain of $.07 for an increase of 164% for 3 months.And for 9 months e.p.s grew from $.33 to $.39 per share.                          

      Capital Structure
  Medical Facilities has  a market capitalization of $537 million but  has only 31 million shares outstanding.It is a very tightly held stock; approximately 30% -50% of it's share are held by insiders.Consequently in 2017 net income before minority interests were $60 million but $30 million was paid out to minority interests.Net income declared was only $30 million.It is not clear what effect this has on the stock price;it does lower the P/E ratio but it looks like investors buy on the P/E before minority interests are paid.For Qtrade shows the P/E at 18 and Scotiatrade shows it at 25 but if net income is taken before the minority interests the P/E ratio should only be about 8 times earnings.However minority interests certainly do reduce the free cash flow as their net income is taken off the top.This blog believes that it is incumbent on management to lower the minority interest percentage to 33% over time.
             Outlook for 2019
  Medical Facilities will probably have steady growth in revenues and earnings in 2019 as it has a special niche that will only get bigger.However DR needs more investment to put in new facilities.This will require a new secondary equity issue.And the stock price will move ahead slowly as a good chunk of earnings will continue to go to the minority interests.Management needs to ensure that enough new shares in any new secondary issue go to  non-insiders so that the minority interests get a reduced share of their controlling interest.If the return on equity on the new investment matches the existing return or exceeds it then the stock price will rise and insider's share will gradually drop.Look for gradual changes in the capital structure and the share price to move up to $20 with increased earnings.             https://www.zacks.com/    https://www.fool.com/

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/