Paul Tepsich Canexus Corp CUS-T TOP PICK Apr 25, 2016

A chemical company. Had excess land in Alberta, where they decided to build a rail terminal connection. Spent a lot of money and there were huge costs overruns. With the drop in crude and more building of crude by rail terminals, he doesn’t expect they will get the price that they were hoping for. There is some value on their chemical assets that could either be bought by a strategic buyer or private equity. Debt levels are still too high so you are looking at a possible dividend cut. Dividend yield of 13.9%.

When there is a takeover, there is deal risk. It could fall through. Sometimes the regulator intervenes. There is some talk that they may have too large a share of some chemicals in some markets. Some assets might have to be sold including one of the lowest cost production facilities of sodium chloride.

It is hard to believe that shareholders won’t agree to the takeover by Superior Plus (SPB-T). This is clearly a broken company, but with very good assets.

Owns this in his “growth” portfolio. The stock has started to accelerate again. It has basically been building a base. Trading at about 40X earnings, so is very expensive and probably scares a lot of people off. Have been growing earnings at about 40% a year, so from a price earnings to growth ratio, you are paying a reasonable valuation. However, if there’s any type of hiccup the stock will sell off.

*Debenture D 6.5%*. (A little bit worried about the markets in the short term, and wants to give viewers some things that won’t have too much downside if the market trades down.) You want to move up the capital structure sometimes. This debenture is trading at $0.97 on the dollar. There is a hostile takeover in the works by Chemtrade (CHE.UN-T), and if it goes through there is a “change of control” provision which puts it up to Par, plus you get your 6.5% while you wait.

Trying to be taken over by Chemtrade (CHE.UN-T), and has had all sorts of problems. It will survive if it has to go alone.

This has had tremendous momentum in revenue growth and sales growth. Provides logistics software to large multinational companies to help them manage delivery of product to customers. In a company that has had high momentum, if you disappoint you get punished. It appears Samsung is not going to continue to pay for their product. If you own, use its recent strength as an exit.