Canexus Corp (CUS-T)

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.

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.

*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.

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.

A chemical company. Waiting for approval of a merger with Superior Plus (SPB-T). This is an all share deal. Once the regulators approve this, shareholders will end up with .135 shares of superior for each share they own. Trading at a 15% discount right now. Thinks there is huge upside synergies once the 2 companies are merged. Dividend yield of 2.84%.

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.

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.

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%.

Likes their NATO project. Because they had the expertise to put chemicals on rail, he thought that building a terminal to put oil on rail would be within their capacity. Several bad things happened. CapX blew out on their NATO terminal and ended up spending a lot more than they had planned, so it became a very expensive project that was delayed. Also, the margins on the chemical business didn’t come back the way they thought they would. These 2 things caused them to put NATO up for sale, and he thinks the prospect of someone buying this for what they have in it, are greatly diminished by recent events in the oil patch. Doesn’t think the dividend is safe.

(A Top Pick Oct 4/13. Down 44.92%.) At the time this was a Top Pick, it was a great Canadian growth story, but when you miss the mark this badly, there is clearly something wrong. Thinks management has done a fantastic job of eroding capital and shareholder value. Have laden the balance sheet with a tremendous amount of debt.

A chemical company that has built an “oil to rail” terminal called NATO, which has had stupendous cost overruns, and they are trying to sell it. Stock has collapsed from $9-$10. Feels they are 1) going to cut their dividend, probably early next year and 2) will sell their NATO terminal, but it may be for less than what it cost them to build. This is one to avoid. He is more interested in who buys their terminal.

3-year chart is showing a break down.

One of the low-cost sodium, chlorate and alkali producers, which is used mainly in the pulp and paper business, as well as the treatment of water. They have a small division called North American Terminals Operation, which is involved in the loading of oil into tank cars. They just lost a contract which will reduce the utilization rate by 40%, and will hit the earnings. Debt is way out of whack relative to equity. Yield of nearly 11%, and is going to go down.