Opinions
Robert McWhirter
Clearwater Seafoods Inc.
CLR-T
COMMENT
Jan 06, 2017
Stock price when the opinion was issued
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He exited this about 9 months ago after a couple of bad quarters. He thinks the majority owners, who hold over 50%, will likely look to take this private at some time. They have missed several targets lately and he does not like the debt levels as they may trigger covenants in the future.
(A Top Pick Aug 29/17, Down 46%) He sold earlier in the year. They have a fair amount of debt and people thought they had monopolies but recently there were a couple of cases with licenses being awarded to other groups like first nations. Investors got worried about the balance sheet.
They used to hold this, but sold it a year ago following a couple of choppy earnings quarters. They had taken on sizable debt on an acquisition and have yet to see the fishing volume be in line with expectations of the street. They recently reported 5 times leverage on the balance sheet despite better earnings. This is not something they are interested in.
He doesn’t think the new tariffs will hurt the stock because they sell into Europe and Asia. However, the US has opened a lot of fishing areas, which has significantly depressed clam prices. The Canadian government also took away one of Clearwater’s clam licenses and gave it to an indigenous nation. However, there were ethical issues in that process and the license is coming back up for bids. In the meantime, it is going back to Clearwater for a year. That will help. In general, it is a good company that is facing a lot of headwinds. It also has a lot of debt. He isn’t ready to buy YET. He wants to see a turnaround in the pricing of their products.
High Liner (HLF-T) or Clearwater (CLR-T)? Both stocks have had about a 22%-25% haircut in the last 90 days. Both are free cash flow generators, 8.2% for this one and 6.1% for High Liner. This has $55 million of free cash, about 50% more in absolute dollars versus High Liner. Analysts are more optimistic on earnings estimates. The big difference in the coming year, is on the ROE, where it is forecasted to be 32% for this company. In comparison, this one appears to be better value with better growth prospects.