Search

WESTJET $24.77 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493- 7853; www.westjet.com; Shares outstanding: 125.8 million; Market cap: $3.0 billion; Div. yield: 2.3%) recently took delivery of the first of its four Boeing 767 extended-range wide-body aircraft.

Over the next several months, this new plane will fly between Toronto and Calgary; the other three aircraft will arrive separately over the next eight months. The next two 767s will fly from Alberta to Hawaii and between Toronto and Montego Bay, Jamaica, beginning in December 2015.

The fourth and final aircraft, which features 262 seats and an 11-hour range, will arrive next spring to launch WestJet’s new service to London, England, in May 2016.

...

REITMANS (CANADA) LTD. $4.62 (Toronto symbol RET.A; TSINetwork Rating: Extra Risk) (514-384- 1140; www.reitmans.com; Shares outstanding: 64.6 million; Market cap: $303.1 million; Dividend yield: 4.3%) owns 794 women’s clothing stores across Canada.

The chain consists of 333 Reitmans, 135 Penningtons, 107 Addition Elle, 80 RW & Co., 69 Thyme Maternity and 70 Smart Set outlets. It also has 21 Thyme Maternity boutiques in Canadian Babies “R” Us stores.

In the three months ended August 1, 2015, Reitmans’ sales fell 2.1%, to $253.0 million from $258.3 million a year earlier. That’s because the company closed 51 less profitable locations. Same-store sales gained 1.7%, with brick-and-mortar stores decreasing 0.6% and e-commerce jumping 70.1%.

...

LEON’S FURNITURE LTD. $14.00 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 71.2 million; Market cap: $996.6 million; Dividend yield: 2.9%) has steadily opened new stores, growing from 27 in 2003 to 80 today.

However, the company more than quadrupled in size overnight with its March 2013 purchase of its main rival, The Brick, for $700 million. The Brick has 223 locations across Canada; the chains continue to operate separately.

In the three months ended June 30, 2015, the company’s sales rose 2.1%, to $484.3 million from $474.5 million a year earlier. On a same-store basis, sales gained 1.7%.

...

ALIMENTATION COUCHETARD $60.49 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couchetard. com; Shares outstanding: 567.4 million; Market cap: $34.1 billion; Dividend yield: 0.4%) is at new all-time highs after reporting improved profits in the latest quarter.

In the three months ended July 19, 2015, Couche-Tard’s sales fell 2.2%, to $8.98 billion from $9.19 billion a year earlier (all figures except share price and market cap in U.S. dollars).

The fall came from lower gasoline prices, while the higher U.S. dollar cut the contribution from its European operations. That was partly offset by a full quarter of sales from The Pantry, which Couche-Tard bought for $1.7 billion on March 16, 2015.

...

MENTOR GRAPHICS CORP. $25.25 (Nasdaq symbol MENT; TSINetwork Rating: Extra Risk) (503-685-7000; www.mentor.com; Shares outstanding: 116.3 million; Market cap: $3.0 billion; Dividend yield: 0.9%) makes systems that improve the design of electronic products and speed up their development. Its products are used in a range of industries.

As an example, Mentor’s software lets automotive component and chip makers use less wiring, identify potential safety and security issues and minimize electromagnetic effects on sensitive modules. The auto business is one of the company’s biggest growth areas because it’s quickly shifting from mechanical to electronic systems: electronics now make up roughly 40% of a car’s cost.

Whether or not regulators ever approve a true driverless car, research on those vehicles is rapidly accelerating advanced driver assistance systems, such as collision avoidance; infotainment, including GPS; and connectivity apps that record data about a car’s performance, sync with smartphones and notify emergency services.

...

Today, we look at a hedged ETF, a BMO dividend fund that Pat McKeough was asked to evaluate by a Member of his Inner Circle....

Today we look at the energy stock that remains our best buy among oil and gas companies....

Today, we look at a value stock that has the potential for a strong rebound when oil and gas prices recover. Enerflex, an independent company since it was spun off by Toromont Industries (Toronto symbol TIH) in 2011, is a major supplier of equipment to the natural gas industry. A timely U.S. acquisition in 2014 has helped Enerflex generate positive earnings despite a decline in orders, and also enhances the company’s international growth prospects. And the dividend, which yields 3.2%, appears safe.

ENERFLEX LTD. (Toronto symbol EFX; www.enerflex.com) rents and sells equipment and services for natural gas production, including compression and processing plants, refrigeration gear and power generators.

On June 30, 2014, the company closed its $431- million U.S. acquisition of two businesses owned by privately held Axip Energy Services: an international contract compression and processing subsidiary and a division that provides aftermarket services.

In the three months ended June 30, 2015, Enerflex’s revenue fell 8.3%, to $389.7 million from $424.9 million a year earlier. But earnings per share more than doubled, to $0.34 from $0.15. International contributions from the Axip businesses pushed up earnings and almost offset weaker revenue in the U.S. and Canada. However, falling oil and gas prices are now hurting the company’s orders.

...

Penny stock Semafo aims to multiply its gold production with a big West African acquisition—and we assess the opportunities and risks

Selling software to call centres has made Enghouse Systems a rising growth stock, but we see plenty of risk in its flurry of acquisitions.

Building profits with its financial information products since the crisis of 2008, Thomson-Reuters remains one of our top dividend stocks.

Mitel Networks strengthens its niche market with more telecom products in the cloud

H&R REIT builds with takeovers, Canadian REIT builds from within, and we like both for their strong dividend yields and sound prospects.

CANADIAN UTILITIES LTD. $36 (www.canadianutilities.com) has spent $617 million in the first half of 2015 to expand its power plants, transmission lines and pipelines in Alberta. However, higher corporate taxes in that province, as well as writedowns, offset the extra revenue from these operations....

MOLSON COORS CANADA INC. $94 (www.molsoncoors.com) earned $1.41 a share in the three months ended June 30, 2015, down 10.2% from $1.57 a year earlier (all amounts expect share price in U.S. dollars). Its worldwide beer volumes fell 1.9%, mainly due to the termination of deals to brew certain beers in Canada and the U.K....

GREAT-WEST LIFECO INC. $35 (Toronto symbol GWO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 996.9 million; Market cap: $35.0 billion; Priceto- sales ratio: 1.0; Dividend Yield: 3.7%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is Canada’s second-largest insurance company, after Manulife Financial (Toronto symbol MFC). It also offers mutual funds, retirement planning and wealth management. Power Financial (Toronto symbol PWF) owns 67.1% of Great-West.

As of June 30, 2015, the company had $1.15 trillion of assets under administration, up 7.9% from $1.06 trillion at the end of 2014.

Diversified operations cut risk

...

LINAMAR CORP. $71 (Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 65.1 million; Market cap: $4.6 billion; Price-to-sales ratio: 1.0; Dividend yield: 0.6%; TSINetwork Rating: Average; www.linamar.com) saw its sales rise 23.8% in the three months ended June 30, 2015, to a record $1.4 billion from $1.1 billion a year earlier.

Sales at the company’s powertrain and driveline division (79% of the total) rose 22.5%, thanks to acquisitions and the launch of new transmissions and other automotive products. The industrialproducts division’s sales (21%) gained 28.9%, mainly due to strong demand for the company’s Skyjack self-propelled, scissor-type elevating work platforms.

Earnings jumped 33.3%, to a record $1.84 a share from $1.38. In addition to the higher sales, Linamar’s earnings benefited from efficiency improvements and favourable currency exchange rates.

...

RIOCAN REAL ESTATE INVESTMENT TRUST $26 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 318.3 million; Market cap: $8.3 billion; Price-to-sales ratio: 6.5; Dividend yield: 5.4%; TSINetwork Rating: Average; www.riocan.com) has found new tenants for seven of the 26 former Target stores in its malls. It will have to remodel the remaining 19, but it expects to lease them all within the next two years.

Target’s U.S. parent company guaranteed the leases on the Canadian stores, but it has not yet paid RioCan the lost rental payments. If RioCan is unable to find new tenants, Target may have to pay the trust up to $250 million.

RioCan is a buy.

...

MANITOBA TELECOM SERVICES INC. $29 (Toronto symbol MBT; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 78.9 million; Market cap: $2.3 billion; Price-to-sales ratio: 1.4; Dividend yield: 4.5%; TSINetwork Rating: Average; www.mtsallstream.com) has acquired AWS-1 radio frequencies (or spectrum) in Manitoba from rival wireless carrier WIND Mobile. The purchase will boost its wireless networks’ speed and capacity.

Manitoba Telecom paid $45 million for these frequencies. To put that in context, it earned $10.4 million, or $0.13 a share, in the three months ended June 30, 2015. Excluding unusual items, such as costs related to a restructuring of its Allstream business communications subsidiary, the company earned $0.31 a share in the quarter, down 16.2% from $0.37 a share a year earlier.

Manitoba Telecom is a hold.

...

POTASH CORP. OF SASKATCHEWAN $34 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 834.7 million; Market cap: $28.4 billion; Price-to-sales ratio: 4.5; Dividend yield: 5.8%; TSINetwork Rating: Average; www.potashcorp.com) has offered to buy leading German fertilizer producer K+S AG for around $8.6 billion U.S.

K+S has rejected the offer, as it feels the price discounts the potential value of its new Legacy potash mine in Saskatchewan, which will open in 2016. As a result, K+S has indicated that Potash Corp. would have to raise its bid by roughly 22%.

In response, Potash Corp. may launch a hostile takeover offer. However, German regulators would probably block an acquisition, particularly if Potash Corp. plans to close some of K+S’s mines. Potash Corp. is still a hold.

...

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ IGM FINANCIAL INC. $38 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 247.5 million; Market cap: $9.4 billion; Price-to-sales ratio: 3.1; Dividend yield: 5.9%; TSINetwork Rating: Above Average; www.igmfinancial.com) had $137.9 billion worth of assets under management as of July 31, 2015, down 3.0% from $142.1 billion a year earlier. The company’s fee income rises and falls with the value of the mutual funds and other securities it manages, so its revenue and earnings decline when the price of these assets falls.

However, IGM sells most of its funds through its own salesforce. This leaves it less dependent on selling through the brokerage industry than its competitors. This salesforce also lets IGM form close relationships with clients, and keep redemption rates down.

...

TORONTO-DOMINION BANK $53 (Toronto symbol TD; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.8 billion; Market cap: $95.4 billion; Price-to-sales ratio: 3.4; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.td.com) recently agreed to pay an undisclosed sum to department store operator Nordstrom (New York symbol JWN) for its U.S. credit card portfolio. These loans total $2.2 billion U.S.; TD expects to complete the purchase by the end of 2015.

Separately, TD has agreed to become the exclusive issuer of Nordstrom-branded Visa and privatelabel credit cards.

Under the deal, which is similar to the bank’s March 2013 purchase of Target’s credit card portfolio, Nordstrom will keep receiving most of the earnings from its card operations. However, TD will also get a share, and it stands to benefit as more Nordstrom shoppers adopt the cards.

...

ROYAL BANK OF CANADA $76 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.4 billion; Market cap: $106.4 billion; Price-to-sales ratio: 3.2; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.rbc.com) continues to sell its less promising overseas operations as it shifts its international focus to the U.S., U.K. and Asia.

For example, it recently sold its retail banking business in the country of Suriname, South America.

It’s also selling its Swiss private banking operations to SYZ Group for an undisclosed sum. This subsidiary offers wealth management services to wealthy investors from emerging markets like Latin America, Africa and the Middle East.

Meanwhile, Royal aims to complete its purchase of Los Angeles-based City National (New York symbol CYN) by the end of 2015. City National focuses on wealthy individuals and lending to businesses in the entertainment, technology and health care industries. Royal plans to merge it with its U.S. wealth management operations.

...

Overall earnings fell 1.2%, to $410 million from $415 million, while per-share profits gained 2.0%, to $0.52 from $0.51, on fewer shares outstanding. Excluding currency rates, the company’s earnings per share jumped 14%.

Thomson’s sound balance sheet will let it keep developing new products, particularly ones it can deliver over the Internet or through mobile devices. As of June 30, 2015, the company held cash of $1.1 billion, or $1.44 a share. Its long-term debt of $7.0 billion is a manageable 21% of its market cap.

The stock has gained 30% in the past year and now trades at 20.5 times Thomson’s likely 2015 earnings of $2.03 a share. That’s still an acceptable multiple in light of its high market share, unique products and improving profit margins. The $1.34 dividend yields 3.2%.

...

PENGROWTH ENERGY CORP. $1.71 (Toronto symbol PGF; Aggressive Growth and Income Portfolios, Resources sector; Shares outstanding: 540.7 million; Market cap: $924.6 million; Price-to-sales ratio: 0.9; Dividend yield: 14.0%; TSINetwork Rating: Average; www.pengrowth.com) plans to spend $190 million to $210 million on its oil and gas properties in 2015, down from its earlier forecast of $220 million to $240 million.

The company also wants to sell $600 million worth of less important assets. It will use the cash to pay down its debt of $1.9 billion, which is a high 2.1 times its market cap.

Meanwhile, Pengrowth continues to benefit from its hedging program, which locks in selling prices above today’s low oil and gas prices. That should help it keep paying monthly dividends of $0.02 a share. The annual rate of $0.24 yields a high 14.0% due to the stock’s depressed price.

...