bce

BANK OF NOVA SCOTIA $49.75, Toronto symbol BNS, earned $980 million in its second fiscal quarter ended April 30, 2008, down 5.8% from $1.04 billion a year earlier. Per-share earnings fell 5.8%, to $0.97 from $1.03. The declines were largely due to higher provisions for loan losses, which jumped to $153 million from an unusually low $20 million in the year-earlier quarter. Revenue rose 3.2%, to $3.2 billion from $3.1 billion, partly due to acquisitions. The bank has increased its quarterly dividend 4.3%, from $0.47 a share to $0.49. The new annual rate of $1.96 yields 3.9%. Bank of Nova Scotia is a buy....

BCE INC. $33.60, Toronto symbol BCE, fell sharply this week after Quebec’s Supreme Court ruled in favour of a lawsuit launched by the company’s bondholders to block the takeover. The bondholders felt it reduced the security of their investments. BCE and the Ontario Teachers’ Pension Plan, which heads a private group that has agreed to buy BCE for $42.75 a share, plan to appeal this ruling to the Supreme Court of Canada. That will likely delay the takeover beyond the June 30, 2008 target date. It could also force the consortium to re-price or scrap the takeover. Depending on the circumstances, BCE may receive a $1 billion or $1.24 a share break-up fee from the consortium if the deal falls through. That’s equal to 3% of its market cap of $30 billion. The company could use that cash to expand its wireless and high-speed Internet services, or increase its $1.46 dividend (4.3% yield). BCE could also unlock some of its value by spinning off some of its operations....

BCE INC. $37.30, Toronto symbol BCE, earned $0.57 a share in the three months ended march 31, 2008, up 9.6% from $0.52 a year earlier. These figures exclude restructuring costs and gains on the sale of investments. Most of the increase was due to savings from the restructuring, as well as lower taxes and interest expenses. Revenue crept up to $4.39 billion from $4.38 billion, as growing demand for BCE’s wireless and Internet services offset lower revenue from its traditional telephone operations. The stock is now trading 13% below the $42.75 a share that a group led by the Ontario Teachers’ Pension Plan has offered for the company. That’s because investors fear that problems in the debt markets will force the consortium to delay, reprice or scrap the deal. However, we feel the takeover will go through by the end of the year. BCE is still a buy....

FORDING CANADIAN COAL $62.06 (Toronto symbol FDG.UN; SI Rating: Average) jumped 10% to a new all-time high recently after South Korean steelmaker Posco agreed to pay $308 U.S. a tonne for coal from BHP Billiton in the coal year that began on April 1, 2008. That’s 210% more than the industry benchmark price of $98 U.S. in the prior year. Fording is still negotiating new prices with its customers. Higher coal prices will help it offset rising labour, transportation and other costs. Fording units currently yield 3.2%. Fording is still a buy....

BCE INC. $37 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 805.3 million; Market cap: $29.8 billion; SI Rating: Above average) moved a step closer to a takeover after gaining regulatory approval. As well, a court recently dismissed a class-action lawsuit by bondholders. These rulings improve the chances that the $42.75-a-share acquisition by a group led by the Ontario Teachers’ Pension Plan will succeed. The stock still trades below the bid price, mainly due to the problems in the credit markets. That could make it harder for the consortium to issue the bonds it needs to complete the takeover. If the deal falls through, BCE’s stock would probably suffer, at least in the short term. However, we feel its long-term prospects outweigh this risk....

CGI GROUP INC. $12 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 323.6 million; Market cap: $3.9 billion; SI Rating: Speculative) is one of the largest independent information technology and business process services firms in North America. CGI provides day-to-day maintenance and improvement for clients’ business applications, and integrates and customizes technologies and software applications. The company also manages back-office business processes and transactions. North America accounts for over 90% of its revenue. CGI is a former subsidiary of BCE Inc., and BCE is its largest client at roughly 14% of total revenue....

Technology companies operate in a highly competitive and cyclical industry, so they must continue to invest heavily in research and marketing. We aim to cut tech stock risk by focusing on companies with distinct competitive advantages, such as proprietary technology, broad geographic reach and a wide client base. These advantages should help these three techs weather the inevitable downturns, and thrive when conditions improve. GENNUM CORP. $9.05 (Toronto symbol GND; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 35.6 million; Market cap: $322.2 million; SI Rating: Above average) makes equipment that lets broadcasters store, manipulate and transport video signals without losing picture quality. This business accounts for 75% of Gennum’s total revenue. The company also makes chips for computer networks. Gennum recently completed a major realignment of its operations. It sold its slow-growing hearing aid and headset businesses, as well as part of its video chip operations....

FORDING CANADIAN COAL TRUST $62.31, Toronto symbol FDG.UN, rose 10% this week after South Korean steelmaker Posco agreed to pay $308 U.S. a tonne for coal from BHP Billiton in the coal year that began on April 1, 2008. That’s 210% more than the industry benchmark price of $98 U.S. in the prior year. Fording is still negotiating new prices with its customers. Higher coal prices will help it offset rising labour, transportation and other costs. It should also let Fording increase its current quarterly distribution of $0.50 a unit, which implies an annual yield of 3.2%. Fording is still a buy for aggressive investors....

BCE INC. $34.83 (Toronto symbol BCE; SI Rating: Above-Average) is now closer to a takeover after a Quebec court dismissed a class-action lawsuit launched by the company’s bondholders. The ruling improves the chances that the $42.75-a-share acquisition of the company by a group led by the Ontario Teachers’ Pension Plan will succeed. The stock is now trading at roughly 18% below the offer, partly because the deal still requires regulatory approval. In addition, the problems in the credit markets could make it harder for the consortium to issue the bonds it needs to finance the takeover. BCE’s share price would suffer at least in the short term if the deal falls through. But at its current price, BCE remains attractive for its income and growth prospects. The shares now trade at just 12.6 times earnings, and have a dividend yield of 4.2%....

MANITOBA TELECOM SERVICES $39.63 (Toronto symbol MBT; SI Rating: Average) has announced it will participate in the upcoming auction of wireless frequencies (called ‘spectrum’ in the industry). If successful, that would let it offer wireless services outside of Manitoba. The company has formed a consortium with the Canada Pension Plan Investment Board and The Blackstone Group L.P. Each will own a third of this partnership. The wireless industry is highly competitive, but growing fast. This partnership will cut Manitoba Tel’s share of the start-up costs, and help it keep paying its $2.60 dividend, which yields 6.6%. Manitoba Tel is a buy....