Opinions
Lyle Stein
Canaccord Financial Inc
CF-T
COMMENT
May 09, 2017
Stock price when the opinion was issued
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It has struggled. Investment banking last year drove this company; they also the rode and cannabis and blackchain wave. Not a cheap stock. Don't add here. They're in a tough world of small caps with limited capital. They've done
fantastically well with cannabis, so kudos for them.
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Despite it being 90% up this year, it is still relatively cheap at 9x earnings. They also added to their dividends in the peak of the pandemic. They blew estimates away and the stock has seen some upgrades. Growth may slow but it has some more runway. Unlock Premium - Try 5i Free
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The stock has been sliding since releasing results that were largely positive. They beat on both earnings and revenues. Revenues only grew 3.8% however. The valuation remains cheap. Management has noted facing headwinds from broader markets and recent weakness in markets have assisted with the selloff. Unlock Premium - Try 5i Free
The company is being taken out. Unhappy with that? Welcome to Canada. Why is management doing this when we're heading into the biggest bear market since 2008? CF wants to break it up; the asset management business would trade higher on its own. And the brokerage business is very cyclical in general. Has never owned this or talked to management. A curiosity.
Management wants to buy it out but there are two conflicting groups of shareholders. The employee shareholders want the lowest price possible while the outsider shareholders want the highest price possible. This type of conflict is not good. Value it as a whole, not on the split-up of parts.
Preferred C. This will reset at the 5 year Canada rate, around 3.75%. Why is it at $18, instead of $25, which would normally be the issuance value? 5-6 years ago, the rage was Reset Preferreds because rates were low and if rates went up, there would be a higher yield when it reset. Instead of going up though, rates fell. Therefore at reset, at 3.75% over our Canada 5 year of about 80 basis points, it is going to be reset with a 4.5% yield. The risk doesn’t necessarily correspond with a 4.5% yield that you would get on other safer preferreds. The market doesn’t like that, so it is not going to pay you for value. As long as interest rates stay low, it is a great thing for the issuer because it is a cheap preferred. Unfortunately, it will trade at around $18 for a while.