asset management

Royal Bank (see page 63) recently raised the interest rate on its mortgage loans, which will probably spur other lenders to do the same. That could dampen demand for new loans. Even so, we still like the outlook for all five of Canada’s big banks. That’s because interest rates are still close to historic lows....

BANK OF NOVA SCOTIA $57.83 (Toronto symbol BNS: Shares outstanding: 1.2 billion; Market cap: $69.2 billion; TSINetwork Rating: Above Average; Dividend yield: 4.2%, www.scotiabank.com) has acquired 50% of AFP Horizonte, which manages pension funds in Peru, for $260 million. This business has 1.4 million clients and $9 billion U.S. of assets under management. SURA Asset Management owns the other 50%.

Demand for pension fund services is growing quickly in Latin America. As well, Bank of Nova Scotia has a long history in this region, which cuts the risk of this investment.

The bank and SURA plan to divide AFP Horizonte in the next few weeks. Following the split, Bank of Nova Scotia will merge this business with its existing pension plan operations in Peru. The combined business will have 1.9 million clients and $10.3 billion U.S. in assets under management.
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Norbord, $33.28, symbol NBD on Toronto (Shares outstanding: 52.2 million; Market cap: $1.8 billion; www.norbord.com), is one of the world’s largest producers of oriented strand board (OSB). The company can produce more than 5.1 billion square feet of OSB at 13 plants in North America and Europe. Brookfield Asset Management (Toronto symbol BAM) owns 59% of Norbord. OSB is an engineered wood-panel product that’s used as a plywood replacement in home construction and manufacturing. The company also produces particleboard, medium density fibreboard and other engineered wood products. In the three months ended December 31, 2012, Norbord’s revenue rose 44.3%, to $365 million from $253 million a year earlier. (All figures except share price and market cap in U.S. dollars.) Earnings rose to $67 million, or $1.51 a share, from break-even, or nil per share....

BANK OF NOVA SCOTIA $57.83 (Toronto symbol BNS: Shares outstanding: 1.2 billion; Market cap: $69.2 billion; TSINetwork Rating: Above Average; Dividend yield: 4.2%, www.scotiabank.com) has acquired 50% of AFP Horizonte, which manages pension funds in Peru, for $260 million....

TECK RESOURCES LTD., $26.27, Toronto symbol TCK.B, reported lower quarterly revenue and earnings this week. That’s mainly because slowing industrial activity in China and elsewhere has hurt prices for its metallurgical coal, which is a key ingredient in steelmaking. Prices of Teck’s other commodities, such as copper and zinc, also declined. In the three months ended March 31, 2013, Teck earned $328 million, or $0.56 a share. These figures exclude unusual items, such as gains and losses on asset sales. On that basis, the latest earnings beat the consensus estimate of $0.41 a share. However, they are down 39.7% from $544 million, or $0.93 a share, a year earlier. Revenue fell 8.5%, to $2.3 billion from $2.5 billion. Even with the decline, the latest figure also beat the consensus estimate of $2.2 billion....

BB&T Corp., $30.10, symbol BBT on New York (Shares outstanding: 699.8 million; Market cap: $21.1 billion; www.bbt.com), owns Branch Banking and Trust Company, the ninth-largest U.S. bank by deposits. The bank has about 1,830 offices in 12 southeastern states and Washington, D.C. It offers retail banking, brokerage, asset management, mortgage and insurance services. BB&T continued to recover from the recession in 2012, as a pickup in loan demand boosted its interest income and increased its fee-based revenue. Stronger demand for mortgages and insurance services, as well as last year’s $570-million acquisition of Crump Group Inc.’s insurance business, also boosted its fee-based revenue. The bank continues to grow by acquisition, including four purchases in 2011 that added to its branch network in California, Florida, Baltimore and Washington, D.C....

Brookfield Office Properties Inc., $17.27, symbol BPO on Toronto (Shares outstanding: 504.7 million; Market cap: $8.7 billion; www.brookfieldofficeproperties.com), owns office buildings in the downtown cores of New York, Houston, Boston, Los Angeles and Washington, D.C., in the U.S.; Toronto, Ottawa and Calgary in Canada; Sydney, Melbourne and Perth in Australia; and London, England. In all, these holdings consist of 110 properties with 76 million square feet of leasable area. Its occupancy rate is 92.0%. Brookfield Asset Management Inc. (Toronto symbol BAM) owns 51% of the company. In the three months ended December 31, 2012, Brookfield’s revenue rose 13.5%, to $579 million from $510 million a year earlier. That’s mainly due to acquisitions and the June 2012 opening of Brookfield Place Perth, a 953,000-square-foot office/retail complex in Perth, Australia. Cash flow per share rose 15.4%, to $0.30 from $0.26....

Aston Hill VIP Income Fund, $8.70, symbol VIP.UN on Toronto (Shares outstanding: 36.0 million; Market cap: $313.2 million; www.astonhill.ca), is a closed-end fund that holds a portfolio of mostly Canadian stocks, as well as bonds and some U.S. stocks. The fund used to be called the Brompton VIP Income Fund. The Aston Hill VIP Income Fund first sold units to the public at $10 and began trading on Toronto in February 2002. Manulife Asset Management, a division of Manulife Financial, is the fund’s investment manager. The fund’s management fees are 0.85% per year. The units yields 9.7%....

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. (Toronto symbol BEP.UN; brookfieldrenewable.com) owns 170 hydroelectric generating stations, seven wind farms and two natural-gas-fired plants. In all, it has 4,909 megawatts of generating capacity. Roughly 35% of Brookfield Renewable’s generating capacity is in Canada, with another 45% in the U.S. and 20% in Brazil. The company sells virtually all of its power under agreements that are an average of 24 years in length....

Enghouse Systems Ltd., $13.23, symbol ESL on Toronto (Shares outstanding: 25.6 million; Market cap: $338.7 million; www.enghouse.com), operates through two divisions: Interaction Management, which supplies 90% of the company’s revenue, sells software that helps manage call centres. The Asset Management business (10% of revenue) provides engineering software to utilities, computer makers and telecommunications companies. Thanks mainly to companies that Enghouse recently purchased, its revenue rose 3.4% in the three months ended April 30, 2012, to $31.5 million from $30.3 million a year earlier. Earnings doubled, to $4.2 million, or $0.16 a share, from $2.1 million, or $0.08 a share. In March 2012, Enghouse paid $7.3 million U.S. for CustomCall Data Systems Inc. Based in Wisconsin, CustomCall provides billing and related services to telecommunication clients, such as phone and cable TV companies....