Fiera Capital increases Assets under Management by 25%

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

The Natcan Deal

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

Fiera's Share Price

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

Emera Utilities is in a Breakout Pattern

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

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

WIN 20171007 16 04 26 Pro The Huronia Series of blogs

Huronia XVII A True Huronia Blog

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

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

Intrinsyc Technology goes from software to hardware

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

The Growth Trajectory

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

Options for the Future

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

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

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

Earnings, earnings,earnings

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

Recommendations       

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

Aimia works on a New Plan

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

Second Quarter Highlights

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

Other Changes

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

Non-Renewal of Aeroplan

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

Recommendations

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

                                                       use Workathon for industrial solutions ;use Workathon for financial solutions