Stock Pickers Digest Hotline – Friday, July 29, 2011

ACI WORLDWIDE, $36.17, symbol ACIW on Nasdaq, makes software used to process transactions involving credit cards, debit cards, automated teller machines, point-of-sale terminals and interbank payments.

In March 2011, ACI bought ICD Corp. for an undisclosed amount. ICD has over 140 customers who use its software to authorize credit- and debit-card transactions through over 70 different payment processors, including banks and credit-card companies.

ACI’s revenue rose 22.7% in the three months ended June 30, 2011, to $113.4 million from $92.4 million a year earlier. The company earned $9.8 million, or $0.29 a share, compared to a loss of $150,000, or nil per share, a year earlier. The company holds cash of $170.8 million, or $4.98 a share.

The stock has risen 90.4% for us over the last year. It now trades at 29.9 times the $1.21 a share that ACI should earn in 2011. However, that’s not unreasonable given the company’s strong growth prospects.

As well, ACI announced this week that it will make a $540-million, cash-and-stock offer for S1 Corp. (symbol SONE on Nasdaq). S1 sells transaction software for banks, credit unions, retailers and other processors. The company has over 3,000 clients worldwide.

S1 already agreed to a merger with the Israeli company Fundtech Ltd. in late June, but that deal has not closed. S1 hasn’t said whether it will consider ACI’s bid, which offers 33% more than the value of S1 shares just prior to the announcement.

ACI Worldwide is still a buy.

DUNDEE REIT, $32.42, symbol D.UN on Toronto, has agreed to buy 29 office buildings in Ontario and Alberta for $831.8 million. The sellers are U.S.-based Blackstone Real Estate Advisors LP and Canadian firm Slate Properties. As part of the agreement, Dundee will sell off five of these properties for $142 million.

The 24 properties it will keep are worth $689.8 million, and cover 2.7 million square feet. Eleven of these buildings are in Toronto’s financial district, two are outside the city’s downtown, two are in Ottawa, five are in Calgary and four are in Edmonton. The deal should close on August 15, 2011.

Including this purchase, Dundee has now spent $1.6 billion on acquisitions in 2011. That follows $900 million of acquisitions in 2010.

Dundee’s growth-by-acquisition strategy adds risk. However, its purchases are helping it cut its reliance on western Canada. At the start of 2010, about 70% of Dundee’s properties were in western Canada. That’s now down to less than 54%.

Dundee REIT is still a buy.

DOMINO’S PIZZA INC., $26.87, symbol DPZ on New York, has reported better-than-expected revenue and earnings in the latest quarter.

In the three months ended June 19, 2011, Domino’s earnings rose 11.5%, to $25.2 million, or $0.40 a share. A year earlier, it earned $22.6 million, or $0.37 a share. Sales rose 6.2%, to $384.9 million from $362.4 million. Same-restaurant sales rose 4.5% in the U.S. and 7.4% internationally. The consensus estimates were for earnings of $0.36 a share on sales of $372 million.

The company paid more for food ingredients, but that was offset by lower costs for labour, rent and interest.

Domino’s continues to boost its sales by aggressively promoting its “New Inspired Pizza.” The company has changed its main pizza recipe by adding new tomato sauces and cheeses, as well as seasoned crust.

Domino’s Pizza is still a buy.

FIRSTSERVICE CORP., $34.43, symbol FSV on Toronto, serves the following areas of the real-estate market: commercial real estate; residential property management; and property improvement.

In the three months ended June 30, 2011, the company’s revenue rose 12.8%, to $565.5 million from $501.4 million a year earlier (all figures except share prices in U.S. dollars).

The company saw higher revenue across all of its divisions: the commercial real-estate division’s revenue rose 13%; residential-property-management revenue jumped 16%; and property-services revenue rose 8%.

The higher revenues pushed up earnings per share by 12.5%, to $0.54 from $0.48.

FirstService’s long term debt of $343.9 million is a reasonable 34.4% of its $1.0-billion market cap.

The company should report higher revenue and earnings as the economy continues to recover. The stock trades at 17.6 times this year’s forecast earnings of $1.96 a share.

FirstService is a hold.

NISSAN MOTOR CO., $21.24, symbol NSANY on Nasdaq, has reported an operating profit of 150.4 billion yen ($1.84 billion U.S.) in the three months ended June 30, 2011. That’s down 10.4% from 167.9 billion yen a year earlier.

Still, that’s a strong performance in light of the production slowdowns, disruptions and one-time costs that the company experienced in the wake of the Japanese earthquake and tsunami. The estimate is also higher than the consensus operating profit estimate of 70 billion yen ($884.3 million U.S.).

Nissan’s sales are rising in all of its markets, including Europe and the U.S., as well as China and emerging markets, like India, Russia and Brazil. Vehicle sales rose 10.6% in the latest quarter, to 1.056 million vehicles from a year earlier.

The company aims to nearly double its vehicle sales in China by 2015. That would increase its share of the rapidly growing Chinese auto market to 10% from 6.2% today.

To achieve this goal, Nissan and its Chinese partner, Dongfeng Group, plan to spend $8 billion to launch 30 vehicles in China over five years.

Nissan Motor is still a buy.

SYMANTEC CORP., $19.06, symbol SYMC on Nasdaq, sells Internet-security technology, including anti-virus and Internet and email-filtering software, to businesses and consumers.

In the three months ended July 1, 2011, Symantec’s earnings rose 6.8%, to $172 million from $161 million a year earlier. Earnings per share rose 10.0%, to $0.22 from $0.20, on fewer shares outstanding. If you exclude unusual items, mainly asset writedowns and restructuring costs, earnings per share would have risen 14.3%, to $0.40 from $0.35. That beat the consensus earnings estimate of $0.37 a share.

Sales rose 15.4%, to $1.7 billion from $1.4 billion. The company gets 52% of its sales from overseas. If you disregard the positive impact of exchange rates, sales would have risen 9% in the latest quarter.

The company continues to see strong demand for its products. That’s partly due to concerns about data security in light of several high-profile online attacks against big corporations and governments.

Symantec is a buy.

Our next Hotline will go out on Friday, August 5, 2011.