Stock Pickers Digest Hotline – Friday, August 26, 2011

COMPUTER MODELLING GROUP LTD., $12.43, symbol CMG on Toronto, makes software and supplies services that help its clients get as much oil as possible from their existing wells. The company makes mostly recurring revenue from software licences and consulting contracts. That gives it long-term stability.

In the three months ended June 30, 2011, Computer Modelling’s revenue rose 32.2%, to $15.9 million from $12.1 million a year earlier. Licence revenue rose 42%; that more than offset a 19% drop in consulting and professional services revenue, due to the strong Canadian dollar.

Earnings rose 57.6%, to $6.7 million, or $0.18 a share, from $4.2 million, or $0.12 a share.

Already a leader in complex heavy-oil and tar-sands simulations, Computer Modelling should profit further as oil and natural-gas producers continue to develop other unconventional sources, such as shale gas, coalbed methane and stranded gas.

Computer Modelling holds cash of $38.3 million, and has no debt. The company raised its quarterly dividend by 5%, to $0.11 a share, with the June 2011 payment. The new annual rate of $0.44 yields 3.5%.

Computer Modelling is still a buy.

Computer Modelling Group was recently covered in the August 2011 issue of Stock Pickers Digest. Click here to access it.

Computer Modelling Group was recently covered in the Stock Pickers Digest Hotline for June 30, 2011. Click here to access it.

MOSAID TECHNOLOGIES, $39.99, symbol MSD on Toronto, received a $38-a-share, all-cash takeover offer from Wi-LAN Inc. (symbol WIN on Toronto) last week. This week, the company rejected the offer as too low.

Mosaid mainly licenses patented computer chip and telecommunications technology, including patents for technology used in smartphones and laptops.

The company has formed a special committee of its board of directors to look at ways to maximize shareholder value. It has also retained Barclays Capital Canada and GMP Securities as financial advisors, and Davies Ward Phillips & Vineberg LLP as legal advisors to the special committee.

Mosaid is now trading at $39.99 a share, or 5.2% above Wi-LAN’s bid. This indicates that investors are anticipating a higher offer from Wi-LAN or another bidder.

We’ll say more as the takeover continues to unfold, but for now, Mosaid is a hold.

Mosaid Technologies was recently covered in the June 2011 issue of Stock Pickers Digest. Click here to access it.

Mosaid Technologies was recently covered in the Stock Pickers Digest Hotline for April 1, 2011. Click here to access it.

STANTEC INC., $23.77, symbol STN on Toronto, sells a range of consulting, project delivery, design/build and technology services. The company’s clients operate in a number of markets, including industry, environment, transportation and construction.

Stantec has over 11,000 employees in 170 locations throughout North America. It also has four international offices.

In the three months ended June 30, 2011, Stantec’s revenue rose 11.1%, to $412.3 million from $371.2 million a year earlier. Acquisitions were the main reason for the gain. Earnings rose 8.4%, to $25.7 million, or $0.56 a share, from $23.7 million, or $0.52 a share.

The company continues to grow by acquisition. In May 2011 it bought the Caltech Group, a Calgary-based consulting/engineering firm. Caltech adds about 200 employees to Stantec’s workforce, and expands its business in the North American oil and gas and electricity sectors.

Stantec maximizes its sales by offering its services to existing clients. The company cuts its costs by sharing administrative expenses, financing and employee benefits between its divisions. However, continually buying and integrating new companies adds risk — including the risk of writedowns.

The company holds cash of $5.6 million, or $0.12 a share. Its long term debt of $275.6 million is a reasonable 26.2% of its market cap.

Stantec is still a hold.

Stantec Inc. was recently covered in the March 2011 issue of Stock Pickers Digest. Click here to access it.

Stantec Inc. was recently covered in the Stock Pickers Digest Hotline for March 11, 2011. Click here to access it.

PASON SYSTEMS, $12.45, symbol PSI on Toronto, rents equipment that its customers use to monitor and manage land-based oil rigs. It also provides communication systems, such as its satellite system, which companies use to remotely collect data from their drilling operations. Pason serves oil and gas companies and drilling contractors throughout Canada, the U.S., Mexico and Argentina.

In the three months ended June 30, 2011, Pason’s revenue rose 22.3%, to $62.4 million from $51.0 million a year earlier. The company benefited as its clients increased their drilling, especially for shale gas and oil.

Earnings rose 33.5%, to $8.2 million, or $0.10 a share, from $6.2 million, or $0.08 a share. The increased drilling pushed up Pason’s earnings. Strong demand also let the company raise its prices. Cash flow per share rose 21.7%, to $0.28 from $0.23.

Pason holds cash of $114.9 million, or $1.26 a share, and has no debt. The shares yield 2.9%.

The company is heavily reliant on the resource sector. However, Pason’s revenue and earnings should keep rising as oil and gas drilling recovers further.

Pason Systems is still a buy.

Pason Systems was recently covered in the April 2011 issue of Stock Pickers Digest. Click here to access it.

Pason Systems was recently covered in the Stock Pickers Digest Hotline for May 6, 2011. Click here to access it.

IAMGOLD CORP., $20.17, symbol IMG on Toronto, owns 38% of the Sadiola mine and 40% of the Yatela mine, both located in Mali; 100% of the Mupane gold mine in Botswana, 90% of the Essakane gold mine in Burkina Faso; 100% of the Doyon mine in Quebec; and 100% of the Rosebel mine in Suriname, South America.

IAMGold also owns the Niobec niobium mine in Quebec, and has a 1% royalty interest in the Diavik diamond mine in the Northwest Territories.

In the three months ended June 30, 2011, IAMGold’s revenue rose 74.5%, to $345.7 million from $198.1 million (all figures except share price in U.S. dollars). The company’s production rose, partly because the Essakane mine started up in late 2010. Higher gold prices also pushed up revenue. Cash flow almost doubled, to $0.40 a share from $0.22 a share a year earlier.

Earlier in 2011, IAMGold sold its 18.9% stake in the Tarkwa and Damang gold mines in Ghana to South African mining giant Gold Fields Ltd. IAMGold received cash of $667 million U.S. for these interests.

The company now holds over $1.2 billion U.S. in cash and gold bullion. That gives it lots of options to spur its share price. For example, it could raise exploration spending, make an acquisition, pay dividends or buy back shares.

IAMGold is still a buy.

IAMGold Corp. was recently covered in the June 2011 issue of The Successful Investor. Click here to access it.

IAMGold Corp. was recently covered in The Successful Investor Hotline for June 30, 2011. Click here to access it.

Our next Hotline will go out on Friday, September 2, 2011.