Western Forest awaits Q3 Results

Western Forest Products (WEF) has had a rough time for the last 2 to 3 years.In March of 2020 it hit a low of $.61 and even in August of 2020 it traded only at $1.20.Lumber prices had been trading around $250-$500 per 1000 boardfeet. But in the summer of 2020 the lumber cycle reversed and prices climbed to a high of $1500 per Mbdft.The revenues for Q1 and Q2 of 2021 were at record highs.With the wait in delivery times and bills being paid a considerable amount of June Q2's high prices will be reflected in Q3 not Q2.But then the price dropped to the $500 per Mbdft. area and only now is recovering to the $750 area.

  Recap of Q2 Highlights

 Q1 revenues and earnings were well above the rate seen in Q1 2020.A traditional level of earnings would have been $.03-$.05 in the 2018-2020 period.But in Q1 2021 WEF produced $.14 per share.This helped to move the almost stagnant stock price.And WEF reported e.p.s. of $.21 in Q2.So in Q2 the stock price moved up to the $2.00 level after reporting e.p.s. of $.09 per share in Q4 2020 and $.14 in Q1 2021.And in Q2 WEF started to divest all it's non-core assets like partnerships with indigenous people and a stone quarry.This money came to about $45 million and Western used it to pay off debt.Now it's debt/equity ratio is a reasonable 12%.However as the lumber price came down in Q3 WEF retreated to it's former level around $2.00.Now it awaits Q3 results but investors have bid the stock price up to the $2.35 level.This blog believes that investors will be rewarded as e.p.s. should be in a range from $.11-$.15 per share.Scotiabank foreacsts annual e.p.s. of $.47 for WEF in 2021.This blog expects $.51-$.55 per share .Because of the cyclical nature of lumber stocks their P/E/ ratio tends to be lower than the TSX average.But with a P/E ratio of 6 times investors should expect the stock price to move towards $3.00-$3.25 by December.Now WEF shareholders only have to wait until November3 to see Q3 results.     

  Dale Mcintyre  M.SC is a freelance writer working with Zacks Research.

Keeping up with Interfor and Canfor

         Western Forest has made a lot of improvements in the last 18 months.Mostly to clean up it's B.C. coastal operations.Now it's debt has been reduced and it's liquidity is solid.But it has not made acquisitions to bolster it's diversity against another shock from the lumber price cycle. WEF needs to solidify it's supply chain  by 2022. Zacks Investment Research: Stock Research, Analysis, & Recommendations              MoneySense

Acuity Ads is getting ready for Ad Automation Technology

  Acuity  Ads is a company that has been covered by this blog two times on two separate websites ( in Blogdaleup (wordpress) on October30,2019 and in Workathon (google blogger) on December15,2020).Acuity Ads has come a long way since October30,2019.Back then it's headquarters was in Halifax and thev stock traded at $1.50-$2.00 per share.It's market cap was about $75 million while now it is trading around$9.50 a share with a market cap of $375 million.In 2021 it has traded as high as $26 per share before falling to it's present price.So it has had a market cap in February of $1.5 billion.Now the market cap is about $.5 billion.Many investors had great expectations for Acuity Ads at the start of 2021.

    A good part of the reason for this change was explained in the blog dated December15,2020 in Workathon.It suggested that Acuity Ads acquire 3 "content" and advertising small caps.And it appears that they did soAn earlier blog on Wordpress (Blogdaleup dated Oct.30,2019 suggested that AT could benefit from hiring a few new recent graduates with some online experience to work with these 3 new companies.The last blog on Workathon suggested further, that after consolidating operations with the new "content" companies that AT could move to the $13-$15 price range.And this,in fact, occurred.In fact, the stock price moved to as high as $26.Furthermore Acuity made a successful equity offering on the Nasdaq index accompanied by a listing on Nasdaq.       

 

      However the future looks like AT will generate more revenues from Ad Automation Technology which uses an AI platform.In fact, in the last quarter Acuity generated almost 20% of revenues from Ad Automation.This has acted to increase margins and lead to a 15p4% increase in adjusted EBITDA over 2020.A previous blog of mine suggested that AT would be wise to acquire an AI technology company like Nex J Systems (market cap of $15 million).As AT only has 60 million shares outstanding.A new equity issue could bring in sufficient capital to purchase a small cap like NexJ.But more equity could dilute earnings.So this blog suggests because AI is such a new field that it engage a few headhunters (likeRobert Half) and hire 10 to 25 new staff including recent graduates and this will cost less and not dilute earnings.

   Price Behaviour  

      For quite a few years Acuity Ads traded around $2 a share.But about a year ago it moved up to a high of $26 in February and then drifted down gradually to it's present $9 level.Earnings have not matched the price behaviour. Scotiaitrade shows their present earnings at $.18 per share.But AT believes that Ad Automation will increase revenues and margins.Perhaps so but only slightly in 2021 without new customers.This stock is expected to stay in a range between $8-$10 a share until  yearend without news of an interesting acquisition or a major new customer.The goal of Acuity Ads management is to convince investors that the prospects seen in January and February will be regained in 2022.  

              https://www.fool.com/ https://www.zacks.com/

Dale Mcintyre is a freelance writer that works with Motley Fool and Zacks Investment Research.

Topicus Software is Constellation Software's 20 year old European Baby

 Topicus was started in 2001 and it was a Dutch company  focused on the pan- European market since day1. It was acquired by Constellation Software on January,2021.It is headquartered in the Netherlands and has offices in about 10 other European companies.It has a market cap of $4.7 billion compared to about$47 billion for Constellation Software. On a fully diluted basis there are 129 million shares.39.4 million of those outstanding shares trade on the public market.About 39 million remain with the original Dutch shareholders. .There were 39.4 million preferred shares owned by Constellation that were converted to subordinate voting shares in February,2021.                                                                          Topicus is in the business of vertical market software which models a business's operation from the start to the delivery to the customer.This allows the Topiucus customer to improve his operation for every stage and the overall turnaround time.This then speeds up processing time and reduce individual operation cost and overall cost.

    Second Quarter Highlights

   This blog and many other analysts are betting on Topicus (TOI) following in  the footsteps of it's highly successful parent Constellation Software.To this end TOI had a 54% increase in revenue to EUR178 million in Q2 compared to EUR 116million in Q2 2020.While net income increased to EUR169million compared to EUR 14 million in Q2 2020.This translates into $.12 per share.A number of acquisitions were completed for cash considerations of EUR 5.2 million during the first half.And subsequent to Q2, TOI completed a number of acquisitions for cash considerations of EUR 50 million. Consequently TOI still has a negative free cash flow.               

 

     The Constellation Software model 

 The voting structure for TOI is complex but Constelleation Software (CSI) owns subordinate and super voting shares.Consequently CSI controls 50.1% of TOI voting shares.And as a result Topicus has been active on the acquisition trail.In Q2 it bought a number of acquisitions for cash consideration of EUR 5.2 million.And subsequent to Q2 it completed the acquisition of a number of businesses for EUR50 million.So it is following in the footsteps of it's parent CSI.

    But Topicus is different than almost all other Constellation purchases.Traditionally CSI will include the acquired property under the Constellation Software umbrella.But Topicus was given more independence and handled as a spin-off.And it too is acquiring small businesses and making them part of the Topicus operation.All of their acquired properties to date have been in Europe.And Constellation is keeping a close eye on the new operation.

    This blog has no forecast on the expected price by yearend.But it notes that the price has already come up from $57 to $128 in 2021.Investors should be cautious here until Q3 results come out especially when TOI is showing negative free cash flow (because of the expenditures on acquisitions).        https://www.woodbridgegroup.com/ 
 

Oceanagold gets Didipio mine back

    Oceanagold,in a press release,on July 16 announced that the Phillipine government which had closed the Didipio mine to study the effect on the local environment had now  given a new 25 year arrangement (FTAA) to continue operating the gold and copper mine.No date was given on the new startup date nor when normal operations would resume.However OGC said ,in it's press release,that milling would begin "as soon as possible".The staged restart will begin over the next several weeks.And in full operations it will produce 10,000 ounces of gold and 1000 tonnes of copper in a month.This will have an immediate impact on OGC earnings and stockprice as the Didipio mine contains a stockpile of 19 million tonnes of ore.The total value of the stockpile of copper and gold is estimated by this blog at $17 million or $.025 per share.

       Past Blogs

    This event has been covered by several other of my blogs including Workathon dated May2 and January 25,2021.There was some speculation that the Phillipine government might be asserting  that it intended to take an ownership position in the Didipio mine.This blog suggested that OGC might ask the Australian government to intervene on it's behalf to sign a new FTAA agreement.But none of that took place and OGC has remedied the problem by returning 1 - 1.5% of it's gross revenue to the Phillipine government in order to assuage the environment problems that might occur from the mine.And according to the OGC managerment Didipio will be sarting up again in several weeks.Furthermore Oceanagold management has increased it's production guidance by about 20,000 ounces for 2021 because of the startup.

   Q2 Highlights 

 Oceanagold had a good second quarter aside fron signing a new FTAA agreement. Revenues were $183 million versus $149 million in Q2 2020 while adjusted EBITDA was $95 million and e.p.s. was $.05 per share compared to $.02 in Q2 2020.First half production was at $177,000 ounces and as a result management revised annual guidance to 350,000-370,000 ounces excluding production from Didipio.While Didipio is expected to produce 18,500 ounces of gold and 3500 tonnes of copper in the fourth quarter.

     Back to Work 

    Oceanagold had a setback when the Phillipine government shut down the mine almost 2 years ago.But it was not dormant during this period as it developped the Martha Underground Project and the Waihi mine.Also it bought a lot of property surrounding the Waihi mine.So production has not fallen during this period;it has actually increased.And, in addition,it has a stockpile of gold and copper ore on the Didipio mine worth about $17 million.It has been suggested that OGC pay 1-1.5% to the provincial government but this may only last for 1-2 years.But the new production is expected will add up to 18,500 ounces and 3500 tonnes of copper in the last quarter.As a consequence this blog sees that e.p.s. may hit $.16 -$.20 per share in 2021.This should be enough to gradually push Oceanagold shares back to 2019 levels when it was trading around $3.50.Right now the price of gold has fallen but should not stay down with all the government liquidity still pouring in to the economy.

https://www.woodbridgegroup.com/
 

Crescent Point (CPG) buys Duvernay assets and sells Saskatcewan non-core assets

   Crescent Point Energy is another property not previously covered by any of my websites.It is also a stock that has traded as high as $11 in 2018.Crescent Point has been a casualty of the fallen price of oil.Yet as the oil price has regained most of it's lost ground crescent Point (CPG) has not recaptured it's old price.But most analysts agree that it will gradually move closer to it's old price level as prices and earnings and cash flow start to rebound.

  Crescent Point sold it's remaining non-core assets in southeast Saskatchewan for $93 million.And it used it ,with other funds, to reduce debt by $220 million.As the oil price rebounded this property was becoming more profitable.But CPG preferred to acquire the largely unexplored Kaybob Duvernay asset which CPG says is immediately accretive to earnings.

                      First Quarter Highlights

  Production for Q1 was 119,380 boe/day which was made up of mostly oil and natural gas liquids.Guidance for 2021 was given as between 132,000-136,000 boe/dayThis is largely because CPG is enhancing with water injection may of it's formerly inactive wells.This increase in production will flow through to earnings,especially with the increased oil price.Adjusted funds flow of $263 million translates to $.49 per share.And Cresent Point management expects to generate 2021 cash flow of $525-$650 million at a price of $55-$65 a barrel for 2021.                         

 

                           The Price of Oil                                                                                                                 Crescent Point management has been quite conservative in their price of oil and forecast of excess cash flow. This blog expects the price of oil to be $70-$75 a barrel for 2021.This would mean excess cash flow will likely be $600-$725 million for 2021.This is significant because CPG reduced debt by $135 million from excess cash flow in Q1.And has reduced $750 million of debt from it's total $2 billion debt since 2020.It is entirely possible that Crescent Point could reduce another $400-$500 million in 2021.Then it's debt/adjusted cash flow would be around 1 for the first time in several years.

                        Stock Price for 2021  

    CPG earned $.49 of adjusted cash flow per share in Q1.But production is expected to rise with it's new wells drilled and new wells to be drilled. in Q2,Q3 and Q4.Also production from it's Duvernay assets will be coming onstream soon.Crescent Point predicted $525-$650 million of excess cash flow with the oil price at $55-$65 a barrel.But this blog sees $70-$75 a barrel as more likely.There is also an outside chance that oil hits $80 a barrel in the hot summer.Therefore a forecast of $1.12-$1.20 of excess cash flow per share is a fairly conservative prediction.And this excess cash flow could even further reduce debt.In addition, with a P/E ratio of 6 to 8 times earnings this means that the price should be in a range of $6.75 -$9.00 with a median price forecast of $8.00.   https://www.zacks.com/,Home - Ontario Teachers' Pension Plan (otpp.com)

    

Enerplus increases N. Dakota acreage by 4 times and increases Dividend

  This was the first time that Workathon has covered the Enerplus story.And this coverage  was partly because Enerplus had a very active year in 2020.Enerplus is a rare entity as it gets a substantial amount of it's oil and gas production from American properties.Enerplus acquired two sizeable pieces of acreage in the Williston Basin in North Dakota.In fact, their acreage in North Dakota which is a core asset, is now 4 times bigger than in 2020.And the oil produced in the Bakken area in North Dakota earns W.T.I. prices not Western Canadian Select prices.Their timing appears to be excellent as oil prices have increased by almost 60% since the summer of 2020.Enerplus management has seen their stock price move from $2.50 a share in the summer of 2020 to $8.50 in 2021.  

First Quarter Highlights

 Production  showed a slight drop in output from Q1 2020. While funds from operations (FFO) increased from $1.51 in Q1 2020 to $2.08 in 2021.Most importantly e.p.s. went from $.01 to $.06 in Q1 2021 while adjusted net income went from $.09 to $.023 per share.And cash flow was robust enough to increase their dividend by 10% to $.033 per share which is considered a quite substantial dividend hike. 

 Williston Basin Properties

Enerplus produced only 6300 barrels from their first acquisition called the Bruin property in Q1 .It should probably get 35,000-40,000 barrels of production for the rest of the year.It also got 204 MMcf of natural gas from their Marcellus property.Since the acquisition, ERF has drilled 3 new producing wells in the Williston Basin.And Enerplus tells shareholders that it intends to spend 80% of their capital budget in the Williston Basin drilling 42 new well during 2021.

Annual Guidance

It is hard for ERF to accurately estimate what their production of oil,gas and liquids will be for the rest of the year.They offer an estimate of 111,000-115,000 of Barrels of Oil Equivalent (BOE) for total production in 2021.If true this would indicate a 20-30% increase.But this likely includes very little production from their new producing wells plus their wells just being drilled.And likely their revenues and earnings forecasted will be low as this blog sees further increases both in the price of oil and natural gas in 2021.The price of natural gas has doubled since the summer of 2020 as it moves with the price of crude oil.This blog sees that the adjusted net income reported for Q1 ($.23 per share) should be increasing every quarter of 2021.Consequently adjusted net income should be in a range of $1.10-$1.25 for 2021.And the P/E ratio could be as high as 8 to 10 times so this could put the price by yearend at $10-$12 per share.Investors need to watch the production and net income results in Q2 to see if this forecast will be accurate.

Zacks Investment Research: Stock Research, Analysis, & Recommendations

Oceanagold increases reserves in U.S.A (Martha Underground) and New Zealand (Golden Point) will meet Annual Guidance

First Quarter Highlights

On May11, Oceanagold (OGC) reported it's first quarter results and they were better than expected.By now all OGC shareholders know that their Didipio mine in the Phillipines was closed by the Phillipine government in late 2019.See the blog on April8,2020 in my Wordpress EconothonII website.And now it is being studied for environmental damage by the Phillipines Ministry of Environment.Didipio contained 1.3 million ounces of proven reserves.But shareholders are starting to learn that OGC has replaced their lost reserves with previously undiscovered reserves in their U.S.A mine (Martha Underground Project)and their New Zealand mine( Golden Point in the Macraes discovery).But even less shareholders realize that production in 2021 is up from 2019.

Quarterly Highlights

Total production of gold by Oceanagold  in Q1was 83,000 ounces and this is up from 80,000 ounces in Q1 2019.And adjusted EBITDA is also slightly ahead of the 2019 value.While earnings per share has recovered from a ($.04) loss in 2020 to a $.02 profit in 2021. Q1Yet the share price remains about half of the price before the Didipio mine closing.                

Meeting their Guidance

Oceanagold has  replaced both the lost reserves and production from it's Didipio mine in the Phillipines.And this blog believes possibly that the ore body at the Macraes mine is still underestimated.That aside,production at this point is sufficient to meet annual guidance given at the first of 2021.In addition,the price of gold is moving up again slowly partly dependent on the huge American deficit.Many analysts,including this blog, see the price of gold breaking old price records.So OGC should be back at $4.50 where it was in 2019.And earnings per share is on track to hit 2019 levels.

The only drawback facing Oceanagold now is the slow decision by the Phillipines to return the Didipio mine to production.Oceanagold trades on the Canadian TSX exchange.But it is listed in Australia also.This blog feels that asking the Australian government to negotiate with it's smaller neighbour,the Phillipines, might speed up the return to production.And any news here will send OGC back to it's 2019 levels or maybe even $5.00.

 https://www.moneysense.ca/