Canexus Corp (CUS.TO)

Challenged over the last months with execution problems and executive changes. Be cautious on this name. When yields are high in this space it is for a reason. She thinks the market will shift to higher quality names.

They have a collection of pretty decent businesses. His issue is that they carry too much debt leverage. This will continue to be a pretty volatile name until they deleverage a little. The slightest downturn can really hurt them. The previous CEO got fired as a result of the rail terminal. Long term there is a great opportunity in developing the rail terminals for oil, but this was a new area for them. Put in a lot of capital spending to develop it and had a high leverage to begin with. New CEO will probably sell one of the businesses which will be interesting. Too risky.

Having a little dispute right now with MEG Energy (MEG-T). Bringing on a big new rail facility which longer-term will work well if they get over this litigation. The dividend is a little bit suspect. If they can move ahead, the dividend may be sustainable, but there is some question that they may have to cut it.

Trying to build a basic oil shipping terminal and there have been some issues with delays and costs. There is a dispute between them and MEG Energy (MEG-T) which refused to connect a pipeline. It is concerning that they are having a legal fight with their anchor customer. Feels this could be worked out over time and thinks it will get resolved. A high risk situation. Would not be a buyer until it got below $4.

Recently looked at their financial information a little and took a pass on it. Predominately a chemical company, but are also building a unit train oil terminal. Had some cost overruns and problems with that, and thinks they are a little capital constrained and need to sell a portion of it. They are still not done building this. Too messy a story for him. 7.5% dividend yield.

(Market Call Minute.) He lost quite a bit of money on this and he would stay away from it for now. A couple of quarters away from really showing that it has coped with the Capital Cost question.

Had this as a C+ rating, but lowered it to a C, which is a “Don’t Buy”. Not attractive on very many matrix right now. They cut their dividend. Diluted shareholders quite substantially this past year. Had cost overruns on some of their projects. Better to wait until all the problems are fixed. Any time a company cuts its dividend, the remaining dividend is always suspect.

They could sell their chemical division and crude by rail business. They are trying to find a CEO at this point. Thinks there is a risk of a dividend cut.

Have had some troubles. CEO left and they have had a CapX expansion on their loading terminals, which has gone over budget. Cut the dividend because of their CapX overruns and haven’t been able to lock up 100% flow-through capacity on the rail. Only have about 70% contracted capacity. Also, chemical pricing has not been that robust. Probably a reasonable company, but he doesn’t tend to buy companies where he doesn’t see dividend growth going forward.

A two-part company of manufacturing pulp chemicals and building trans-shipment oil terminals to ship heavy oil bitumen down south. Unfortunately, the latter has been over budget and behind schedule. As a result, the balance sheet leverage has run up. Dividend may not be safe and may have to be cut and that would cause a bit more downdraft. Stock is relatively cheap and he thinks there is probably value in it but in the short term look for more negative news.

(A Top Pick May 23/13. Down 43.1%.) Sold her holdings at around $6. This was a chemical company, paying out a high dividend and paying out most of their cash flow. They wanted to get into the “crude by rail” business and had to raise quite a bit of capital to do it. Had some cost overruns and part of their chemical business weakened. Management did a horrible job of communicating with the marketplace.

Had a $90 million cost overrun and news that the CEO is departing had people fearing that they may be going to cut the dividend. That turned out not to be with their earnings that just came out. Stock popped a little bit, but not that much. Payout ratio is high at 139% for 2013 but he sees it going down 106% on 2014 if they execute and if they contract 100% of the NATO development and it adds to the EBITDA. For risk adjusted portfolios, you can Buy this.

Really liked this about a year ago and had a big position in it. It began to erode on him. Liked what they were doing with oil on rail. He was side-wiped by the weakness in the chemical division and then it turned out that although NATO (North American Terminal Operations) was a good idea they had really big cost overruns on it. They essentially lost control of their CapX. If you have some courage, it is probably in a range, but there is a chance that if they can’t complete the work they need to do, they might have to cut their distribution.

The executive member stepping down today took the market by surprise. Is waiting to find out more about why the executive left. It has been a slower market for them. Margins have been impacted by increased costs. It is a question of profitability.

Still believes in this. At these levels, it is very attractive. You’ll hear a lot of back-and-forth from various analysts about whether the dividend is safe or not. The key to look for is, does the path of cash flow support the dividend payout. Current payout ratio and debt ratio is going to be stretched but will be reversed as you start seeing significant free cash flow generated from its North American Terminal Operations (NATO), which will be using a large part of their infrastructure for the oil by rail story. They will be wrapping this up quite significantly and are currently 65% presold.