acquisition
A history of thriving on acquisitions makes Alimentation Couche-Tard a top growth stock for us and one of the best investments in Canada
New tech stocks can be among the market’s biggest winners and losers
SUNCOR ENERGY INC., $36.67, Toronto symbol SU, has launched a hostile all-stock takeover offer for Canadian Oil Sands (Toronto symbol COS). Canadian Oil Sands’ main asset is its 36.74% stake in the massive Syncrude oil sands development near Fort McMurray, Alberta. It also operates the project. Suncor already owns 12.0% of Syncrude, so buying Canadian Oil Sands would give it effective control, with a 48.74% stake. Equipment failures and other problems have hurt Syncrude’s production in the past few years, and Suncor feels its expertise running similar projects will help Syncrude improve its efficiency and profits....
MITEL NETWORKS CORP., $10.56, symbol MNW on Toronto, jumped over 16% this week after activist investor Elliott Management Corp. released a letter yesterday disclosing stakes in Mitel and Polycom Inc. (symbol PLCM on Nasdaq). Elliott, founded by hedge-fund manager Paul Singer in 1977, is urging the two companies to merge to increase their combined profits in a very competitive market. Elliott now holds 6.6% of Polycom and 6.3% of Mitel. Mitel develops and markets products centred on business telephone systems, including technology that integrates land lines and mobile phones. The company also offers call centre and videoconferencing products....
SUN LIFE FINANCIAL $44.38 (Toronto symbol SLF; Shares outstanding: 610.6 million; Market cap: $27.0 billion; TSINetwork Rating: Above Average; Dividend yield: 3.4%; www.sunlife.ca) continues to expand in the U.S. At the same time, it’s cutting its risk by focusing on highly profitable niche markets with low capital reserve requirements. In June 2015, the company bought U.S. asset manager Prime Advisors for an undisclosed amount. Prime has about $13 billion under management, mainly bond portfolios for U.S. insurance firms. In September 2015, Sun Life paid $560 million for Bentall Kennedy Group, which manages $27 billion in real estate for over 550 institutional clients across the U.S. and Canada....
Our view of one of the world’s largest mining stocks, Freeport-McMoRan, as activist investor Carl Icahn buys in and presses for change.
: Cominar REIT, $16.28, symbol CUF.UN on Toronto (Units outstanding: 169.0 million; Market cap: $2.8 billion; www.cominar.com), is Quebec’s largest owner of commercial properties.
In all, the trust holds 567 properties, including 136 office buildings, 196 shopping malls and 235 industrial and mixed-use buildings. In all, these holdings contain 46.0 million square feet of leasable space located in Montreal (57%), Quebec City (22%), Ontario (13%), the Atlantic provinces (6%) and Western Canada (2%). Cominar’s occupancy rate is 92.3%.
The trust continues to grow by acquisition: in 2014, it bought 66 properties for a total of $2.0 billion, then added three more industrial buildings in Montreal for $34.5 million in the first half of this year.
Contributions from new properties increased Cominar’s revenue by 26.3% in the three months ended June 30, 2015, to $226.9 million from $179.6 million a year earlier. Cash flow rose 28.4%, to $65.7 million from $51.2 million. The trust sold new units to help fund its recent purchases, causing cash flow per unit to slip 2.5%, to $0.39 from $0.40, on more units outstanding.
The REIT pays monthly distributions of $0.1225 per unit, for a 9.0% annualized yield. It paid out 92.0% of its cash flow as distributions in the latest quarter. However, if you exclude payouts in units to investors in Cominar’s distribution reinvestment plan, the cash payout ratio was a moderate 64.6%. There are of course, no guarantees, but Cominar’s current distribution rate appears safe.
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In all, the trust holds 567 properties, including 136 office buildings, 196 shopping malls and 235 industrial and mixed-use buildings. In all, these holdings contain 46.0 million square feet of leasable space located in Montreal (57%), Quebec City (22%), Ontario (13%), the Atlantic provinces (6%) and Western Canada (2%). Cominar’s occupancy rate is 92.3%.
The trust continues to grow by acquisition: in 2014, it bought 66 properties for a total of $2.0 billion, then added three more industrial buildings in Montreal for $34.5 million in the first half of this year.
Contributions from new properties increased Cominar’s revenue by 26.3% in the three months ended June 30, 2015, to $226.9 million from $179.6 million a year earlier. Cash flow rose 28.4%, to $65.7 million from $51.2 million. The trust sold new units to help fund its recent purchases, causing cash flow per unit to slip 2.5%, to $0.39 from $0.40, on more units outstanding.
The REIT pays monthly distributions of $0.1225 per unit, for a 9.0% annualized yield. It paid out 92.0% of its cash flow as distributions in the latest quarter. However, if you exclude payouts in units to investors in Cominar’s distribution reinvestment plan, the cash payout ratio was a moderate 64.6%. There are of course, no guarantees, but Cominar’s current distribution rate appears safe.
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Merus Labs International Ltd., $1.97, symbol MSL on Toronto (Shares outstanding: 102.3 million; Market cap: $201.5 million; www.meruslabs.com), is a Toronto-based company that acquires the rights to established drugs.
Merus mainly targets relatively small, mature products, as opposed to the newer treatments that attract the attention of larger drug firms. The company outsources its manufacturing and other operations, so it has low operating costs and few employees. By focusing on acquisitions, it also spends nothing to develop new drugs.
The company’s main products include Enablex (an overactive-bladder treatment), Sintrom (anticoagulant) and Vancocin (antibiotic). It mainly sells these drugs in Canada and Europe.
In May 2015, Merus paid Novartis Pharma $29.5 million U.S. for the rights to two more drugs: Salagen (which relieves dry mouth symptoms in cancer patients undergoing radiation therapy) and Estraderm (a hormone replacement therapy for women). In 2014, these treatments had total revenue of $10 million U.S.; this deal lets Merus make and sell them in certain European countries.
In its fiscal 2015 third quarter, which ended June 30, 2015, the company’s revenue rose 32.3%, to $9.5 million from $7.2 million a year earlier. Its two new drugs (Salagen and Estraderm) accounted for 37% of the increase.
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Merus mainly targets relatively small, mature products, as opposed to the newer treatments that attract the attention of larger drug firms. The company outsources its manufacturing and other operations, so it has low operating costs and few employees. By focusing on acquisitions, it also spends nothing to develop new drugs.
The company’s main products include Enablex (an overactive-bladder treatment), Sintrom (anticoagulant) and Vancocin (antibiotic). It mainly sells these drugs in Canada and Europe.
In May 2015, Merus paid Novartis Pharma $29.5 million U.S. for the rights to two more drugs: Salagen (which relieves dry mouth symptoms in cancer patients undergoing radiation therapy) and Estraderm (a hormone replacement therapy for women). In 2014, these treatments had total revenue of $10 million U.S.; this deal lets Merus make and sell them in certain European countries.
In its fiscal 2015 third quarter, which ended June 30, 2015, the company’s revenue rose 32.3%, to $9.5 million from $7.2 million a year earlier. Its two new drugs (Salagen and Estraderm) accounted for 37% of the increase.
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Schlumberger Ltd., $72.09, symbol SLB on New York (Shares outstanding: 1.3 billion; Market cap: $91.2 billion; www.slb.com), is the world’s leading oilfield services firm. It works with oil and gas producers from the exploration stage through to production.
Schlumberger feels its North American business is now bottoming out, although it doesn’t expect to see a big near-term rebound. Its earnings won’t likely begin improving until 2016, although that will depend on the direction of oil and gas prices and drilling activity. To maintain its profits, Schlumberger has cut 20,000 jobs so far this year and lowered its capital spending.
Meanwhile, the company is taking advantage of the downturn to buy oilfield equipment maker Cameron International (New York symbol CAM), a maker of valves, blowout preventers and other gear for controlling pressure at drill sites, for $14.8 billion.
The stock trades at 22.5 times this year’s forecast earnings of $3.20 a share. It yields 2.8%.
Schlumberger is okay to hold.
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Schlumberger feels its North American business is now bottoming out, although it doesn’t expect to see a big near-term rebound. Its earnings won’t likely begin improving until 2016, although that will depend on the direction of oil and gas prices and drilling activity. To maintain its profits, Schlumberger has cut 20,000 jobs so far this year and lowered its capital spending.
Meanwhile, the company is taking advantage of the downturn to buy oilfield equipment maker Cameron International (New York symbol CAM), a maker of valves, blowout preventers and other gear for controlling pressure at drill sites, for $14.8 billion.
The stock trades at 22.5 times this year’s forecast earnings of $3.20 a share. It yields 2.8%.
Schlumberger is okay to hold.
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AGT FOOD & INGREDIENTS $28.27 (Toronto symbol AGT; TSINetwork Rating: Extra Risk) (306-525-4490; www.agtfoods.com; Shares outstanding: 23.1 million; Market cap: $651.5 million; Dividend yield: 2.1%) has acquired Mobil Capital Holdings for $57.5 million. This business owns a movable crop-processing plant, short-line railways, bulk-loading facilities and a grain- and pulse-trading operation. Most of Mobil’s assets are in Saskatchewan.
This acquisition follows AGT’s $22-million purchase of West Central Road & Rail’s assets in June 2015. That deal included five bulk-loading sites in Saskatchewan.
Purchases like these are important because a big part of AGT’s recent success has come from its shift to more profitable products, such as ingredients and packaged foods, as opposed to simply cleaning, splitting, sorting and bagging bulk crops.
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This acquisition follows AGT’s $22-million purchase of West Central Road & Rail’s assets in June 2015. That deal included five bulk-loading sites in Saskatchewan.
Purchases like these are important because a big part of AGT’s recent success has come from its shift to more profitable products, such as ingredients and packaged foods, as opposed to simply cleaning, splitting, sorting and bagging bulk crops.
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