Transalta Corp (TA.TO)

There are 2 things that are really a problem for the company. It is using coal to generate a lot of its power, which is a real no-no. Also, the government has changed the rules and put a deadline on the closure of coal fired plants. Thinks the company will stay at this low price for a while. Also, this will be a target for people wanting to do tax loss selling. He is staying away from this.

Chart shows a long downward trend and has just formed a double bottom. The interesting thing about power in Alberta is who is going to pick up the slack from the phase out of coal. This is not just a coal business, but has really been impacted by that. It will become clearer in the next few months. Watch the base and see if it breaks.

The stock, rightly so, has been punished for its high debt, poor cash flow and a negative ROE. He wants stocks with good price momentum, good valuation, and this stock has neither. The fear has been a dividend cut and more dilutive equity financing. There is a sum of the parts story that can get you a higher valuation than the current cash flow metric would presume. Alberta put out their climate change report which basically pushed out the phase-out of coal to 2030, so that gives them lots of time to transition their business to renewables, which they have been doing. About a month ago, they press released that they were in talks to be acquired. This fell through. prefers to play their preferreds giving less dividend risk.

This has a yield that tells us it is going to get cut. Double digit yields are really not sustainable. The renewables is probably worth $5.50-$5.75, so you get the coal asset for free. That is intriguing. Dividend yield of 8%. He is watching this.

A tough one to call. The share price has declined significantly. They have a significant stake in TransAlta Renewables (RNW-T), which if you back it out accounts for most of the share value of $6. The big concern is the new government in Alberta that is focused on climate change which may force early retirement of coal facilities which this company owns. Then you have to wonder how they are going to generate cash flow growth beyond 2018. In this environment, were highly leveraged companies are getting punished, there is some pressure on the stock and some speculation they may have to cut the dividend. If it got down to $5.50, he might start to nibble away at it because it would represent pretty good risk/reward.A tough one to call. The share price has declined significantly. They have a significant stake in TransAlta Renewables (RNW-T), which if you back it out accounts for most of the share value of $6. The big concern is the new government in Alberta that is focused on climate change which may force early retirement of coal facilities which this company owns. Then you have to wonder how they are going to generate cash flow growth beyond 2018. In this environment, were highly leveraged companies are getting punished, there is some pressure on the stock and some speculation they may have to cut the dividend. If it got down to $5.50, he might start to nibble away at it because it would represent pretty good risk/reward.A tough one to call. The share price has declined significantly. They have a significant stake in TransAlta Renewables (RNW-T), which if you back it out accounts for most of the share value of $6. The big concern is the new government in Alberta that is focused on climate change which may force early retirement of coal facilities which this company owns. Then you have to wonder how they are going to generate cash flow growth beyond 2018. In this environment, were highly leveraged companies are getting punished, there is some pressure on the stock and some speculation they may have to cut the dividend. If it got down to $5.50, he might start to nibble away at it because it would represent pretty good risk/reward.A tough one to call. The share price has declined significantly. They have a significant stake in TransAlta Renewables (RNW-T), which if you back it out accounts for most of the share value of $6. The big concern is the new government in Alberta that is focused on climate change which may force early retirement of coal facilities which this company owns. Then you have to wonder how they are going to generate cash flow growth beyond 2018. In this environment, were highly leveraged companies are getting punished, there is some pressure on the stock and some speculation they may have to cut the dividend. If it got down to $5.50, he might start to nibble away at it because it would represent pretty good risk/reward.A tough one to call. The share price has declined significantly. They have a significant stake in TransAlta Renewables (RNW-T), which if you back it out accounts for most of the share value of $6. The big concern is the new government in Alberta that is focused on climate change which may force early retirement of coal facilities which this company owns. Then you have to wonder how they are going to generate cash flow growth beyond 2018. In this environment, were highly leveraged companies are getting punished, there is some pressure on the stock and some speculation they may have to cut the dividend. If it got down to $5.50, he might start to nibble away at it because it would represent pretty good risk/reward.A tough one to call. The share price has declined significantly. They have a significant stake in Transalta Renewables (RNW-T), which if you back it out, accounts for most of the share value of $6. The big concern is the new government in Alberta that is focused on climate change which may force early retirement of coal facilities which this company owns. Then you have to wonder how they are going to generate cash flow growth beyond 2018. In this environment, where highly leveraged companies are being punished, there is some pressure on the stock and some speculation they may have to cut the dividend. If it got down to $5.50, he might start to nibble away at it because it would represent pretty good risk/reward. accounts for most of the accoutsaThey have a significant stake They They have a significant stake in TransAlta Renewables (RNW-T), which if you back it out accounts for most of the share value of $6. The big concern is the new government in Alberta that is focused on climate change which may force early retirement of coal facilities which this company owns. Then you have to wonder how they are going to generate cash flow growth beyond 2018. In this environment, were highly leveraged companies are getting punished, there is some pressure on the stock and some speculation they may have to cut the dividend. If it got down to $5.50, he might start to nibble away at it because it would represent pretty good risk/reward.

They have had a difficult time for several reasons. Alberta has had a difficult time with a much lower oil price. They also have coal plants and this is not the favourite way of producing electricity. They have also struggled with their capital cost and overall performance. There have been other alternatives that seemed like better buys. They have good assets, but an uncertain environment including the new government. Be patient for 6 months or move to something else.

The company has had so many issues. They just have not had a focus point. There are so many other companies that have done so much better on execution. They still have coal burning plants. They are not best in class. Prefers CPX-T and BLX-T.

Switched his holdings into Transalta Renewables (RNW-T), which has done a little bit, but Transalta has done significantly worse. What was not seen was the election of the NDP. The NDP said that they would like to speed up the removal of coal fired plants. That is really the overhang on the stock. That needs some clarification before you consider going into this.

On his Watch List. They are looking at possible legal problems which could hurt them. Also, the resource sector is hurting them. He is happy to stay away from this right now.

There is no growth and they cut their dividend in half earlier this year. She won’t comment on whether the dividend is safe now. They are having difficulty in growing cash flow. Don’t buy it for the yield. She prefers pipelines, REITs or Canadian bank stocks for yield.

(Has a small Short.) Scores very poorly for him on just about every metric. Negative ROE and the balance sheet is stretched. If you own, he is not sure he would Sell down here. Doesn’t think it is a company that is going bankrupt. They have options on the table.

Owns about 75% of Transalta Renewables, which is a drop down vehicle for them, meaning that if they have renewable assets they have developed, they will sell them to Transalta Renewables and use the cash flow to either repay debt or reinvest. Stock is not acting very well and has sold off quite substantially. Most of this has to do with political uncertainty, i.e. the NDP government in Alberta, that could potentially accelerate the phase out of their coal fired facilities. Also, recently got booted out of the S&P/TSX 60 Index, so there is 6.5 million shares that are going to be sold. This will overhang the share price in the next 2-3 weeks. It could be a great buying opportunity, because they own 75% of Transalta Renewables. If this gets down to $4.50 or lower, he thinks it is a really good buying opportunity. Thinks you will get your chance because of the index exclusion. Thinks the dividend is fine.

This just broke to a new low a couple of days ago. It has yet to show signs of bottoming. It is currently underperforming the TSE Composite and is also trading below its 20 day moving average. Short-term momentum indicators are also trending down. Wait until you have some technical signs that the stock is actually reaching a low.

Owns a little, but has exited most of his holdings. He is not selling the rest now because it looks incredibly cheap and the dividend is quite nice. Not sure they can maintain the dividend. They managed to get themselves into trouble with the regulators in Alberta, by cutting power back at a time when they could replace it with more expensive power. This is going to survive, but he wouldn’t add to his holdings. If it went back to $10, he would probably Sell.

Wouldn’t be looking at this one today, with corporate taxes going up in Alberta. There are so many uncertainties there. This company has had its problems in the last few years, and he is not sure that they have been entirely mitigated.