SafetyinNumbers

I added a little more PPR.TO. I’m not sure how sustainable these oil prices are but I’m calculating about $0.12 in cash flow for Q3 (before the impact of FX and hedges). Annualized, that’s about $0.48 vs the current share price of $0.36. They have been guiding to end the year with debt of around $0.50 but that should be lower if these prices persist. Is that cheap enough for anyone to care? That part is not clear!

There is an assumption that these DC.PR.E will all be put next June but it’s unlikely to happen. These same preferred holders have had chances to put their preferred twice already and have undersubscribed to that option each time. These will probably end up trading DRM.PR.A, slightly above par as everyone who wants to put does and everyone else sits and does nothing.

The only thing they have said publicly about the problems in Nicaragua were at the AGM as far as I know. It’s a sensible strategy as no one knows who is going to end up being in charge in the long run. Management indicated they are unaware of any power assets that have been nationalized and they do not expect this to happen. Unlike other resources, like gold and oil where stuff is taken out of the ground and sold outside of the country, all of PIF’s power is sold in country and mostly to retail buyers. If anything, the political changes indicate a push to more centre right policies from leftist policies which may end up being constructive for the country. They are obviously biased but I think their conclusions follow logically from the fact set that we can see looking in. The CEO said he would buy stock if he wasn’t restricted and I believe him.

wow. How did this company go from $500/share to a microcap in five years? Issued a bunch of debt and then struggled starting up operations. The debt had to be restructured and they issued equity for the convertible debentures followed by a share consolidation.

Added some PIF.TO today. The stock has recently been weak based on unrest in Nicaragua. There are a multitude of reasons why there is unlikely to be a nationalization or impairment of the asset but uncertainty often provides opportunity. Ironically, the company's financial and operating performance is currently the best it's ever been and the stock is trading around 4.3x EV/EBITDA 2019E EBITDA. which is pretty low for a renewable asset with a PPA. Every multiple point increase is worth about C$5/share. I attended the AGM today and management seems to be considering all of their options for their extra cash, including a NCIB/SIB and investing in projects outside of Nicaragua (this is something they have talked about for years so it's not a reaction to the events in Nicaragua). They also maintained that they will keep a 40-50% payout ratio and move towards a US$1.00 dividend from US$0.60 currently within the next 12-18 months which is about a 10% yield at the current share price/exchange rates. They are reporting earnings in the second week of August so expect updates on all of these initiatives at that point.

Probably the guy who asked about the share buyback.

Agreed on Delonex. Apparently they expect a well to be drilled this calendar year, so a reasonably near term potential catalyst. Do you mind sharing his response to being pushed on the prefs? I understand the company not buying back the common at this point. I don't understand insiders staying out of the market -- not even a nibble -- and I really don't understand why the company doesn't at least make an attempt at taking out some of those prefs. Instead, they're talking about building out a merchant banking business. Do they seriously think they can outlay capital in any manner that competes with the risk-free return they'd get from buying the prefs? Of course there's very likely not enough liquidity for them to buy much anyway, and I don't know the costs of maintaining a buyback program. Maybe those are big factors. But my guess is that they overestimate their ability as investors/businessmen and are simply being irrational. The pushback was mainly that capital is finite and that they need the liquidity for paying off the DC.PR.E (which by the way shows no fear like the rest of the capital structure does) and running the business. I think they are just afraid of spending the capital on enhancing shareholder value in the short term and then having to do something dilutive later on. He did say that he is considering buying some common and preferred personally but didn’t say what he was waiting for.

I pushed him on buying back the pref over the common primarily because it reduces future cash outflows and is effectively a risk free after tax return (to them) of over 12%. The catalyst here could be whatever Delonex ends up reporting. That royalty could be a home run.

They were asked about buying back stock and they are reluctant while they are still trying to improve their liquidity position. If someone was hoping that was a near term catalyst perhaps that would prompt an exit.

So from what I can tell, the interest rate on the debs varies between 8.5-13.5%, depending on the (weekly) spot market price of uranium oxide. Management doesn't expect the price to exceed 54.99 by 2020, the price above which the interest rate increases (and price is currently at 22.75$, from Google). Any reason to be optimistic about a bull market in uranium? Yes, I think so. The current Uranium spot price is too low for anyone to make money. Most producers locked into long term contract pricing much higher than spot which are expiring over the next few years. In response, Cameco and other large producers have decided to cut production and use existing inventory and buy in the spot market to fulfill production in order to preserve their resource for higher prices. Utilities will have to negotiate contract pricing soon and it will likely come in well above current prices. It’s a classical deep cyclical play that is complicated by an opaque market, two tiered pricing and extremely long lead times. I bought more yesterday with the stock surging higher and a holder of the debentures being forced to sell for what I can only assume are liquidity reasons.

I bought some EFR.DB-TSX yesterday. It’s a pretty interesting piece of paper to have access to a potential Uranium bull market while getting paid to wait. Maturity is Dec 2020, strike is C$4.15. Implied vol of the outstanding warrants is over 60% while the debs trade at par. The debt issue is also a small part of the capital structure and I don’t think they will have a problem raising money but of course I think the debs could be a multibagger.

Added a little more PPR.TO. I think this article shows that we are getting closer to formalization of Quebec hydrocarbon rules and that the government is serious about the rule of law. QEC.TO indicated in quarterly result that they expect the formalized rules to be out by end of Q2. I also expect Q2 cash flow to show significant improvement over Q1 with higher realized prices and lower costs/boe (on higher production) leading to higher netbacks. https://www.ledevoir.com/societe/environnement/528583/quebec-veut-faire-taire-l-opposition-a-l-exploration-petroliere-en-gaspesie

Bought some PPR.TO. Probably the worst performing oil stock in the world. Has operational and financial leverage with two potential catalysts with its QC assets. Q1 was awful but Q2 cash flow should really step up and be an inflection point.

Nah he would have just put the politician in the region in jail.

It might but I would think the changes in lending rules and the higher interest rates have changed the behaviour not any change in the way Torontonians think about buying vs renting.

I bought some ATU.V as well. We must have been most of the volume from the buy side since not much traded.

I think it’s important to note that holders chose to redeem less than allowed at previous redemption dates of DC.PR.E and that will likely be the case on June 30, 2019. Its possible, they will trade like DRM.PR.A which trade at a premium to par and are puttable at any time.

It makes no sense the CRA makes Canadian residents do this for foreign securities held in Canadian brokerage accounts. Isn't the point to capture all income that wouldn't be captured by T-slips? I use Quicken so it lets me produce reports that makes it a lot easier. Also, all foreign dividend income should be captured by T5 slips.

Checking in on this combo pick for 2018, at the end of Q1, they are up an average of 20.51% since posting. I wish I had only owned these names personally for Q1 as I am about flat YTD. I still like them all but took some profits on ASND between $1.10-1.20 but have recently bought some back below $1. It still trades at less than 2x EBITDA. PPR is particularly interesting as it’s basically flat and is 3 months closer to resolution of its arbitration vs the Canadian government which could be worth US$1/share vs the current share price around US$0.33. Management indicated in its AIF, filed late last week, that they expect a ruling in 2018. It’s also 3 months closer to Quebec coming up with its regulations on hydrocarbon development in the province. PPR’s closest peer in terms of acreage in QC is Questerre which enjoys a market cap 8x as big while having similar exposure and less cash flow and reserves from producing assets.

Adding to JAG.TO. Update today about increasing production from Pilar mine and putting high cost Roca Grande mine on care and maintenance. Overall no change to guidance for 2018 but implication is lower costs. I see it trading around 2x EBITDA with gold potentially breaking out.

E-L Financial (ELF.TO) Market cap around C$3.2b but 70% owned by insiders and trades at over 35% discount to NAV. About a third of NAV is a life insurance company in Canada, called Empire Life, and the rest is a global value portfolio.

It's worth noting that the B shares will reset next year and given the 5-year bond is at 2.15%, that would produce a 13% yield on the B's at $12.00. And would anyone be that surprised if the 5-year was 3% by next year? If we reset at 3% then the yield on the B's will be very close to 15%! Also if you own the Ds at that point you can ask to convert to the Bs if you want to lock in for 5 years.

I am long as well. Didn’t want to give the impression I didn’t agree they were cheap but was trying to answer the question.

I'm surprised less than half of those that were allowed to redeem at par did so! They could have redeemed at par and bought their position back below par. The yield on the D's prospectively is closer to 11.3%. It lags the move in 3 month t-bills and changes every 3 months as I'm sure you are aware. The BIR.PR.C has a YTM close to 11% (as they are puttable) that are close to that yield. There are some listed bonds with similar YTMs as well.

ASND.TO just put out 2018 guidance this morning. The company has a market cap of US$45m and their guidance is EBITDA of US$32-40m and FCF of US$14-20m. I’m not sure what the right multiple is but it seems too low right now or even up 50% from here. https://web.tmxmoney.com/article.php?newsid=6899444052652449&qm_symbol=ASND