cae

METRO INC. $43 (Toronto symbol MRU.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 105.8 million; Market cap: $4.5 billion; Price-to-sales ratio: 0.4; Dividend yield: 1.8%; TSINetwork Rating: Average; www.metro.ca) has about 600 supermarkets and 250 drugstores in Ontario and Quebec. In the three months ended December 18, 2010, Metro’s sales fell 0.5%, to $2.63 billion from $2.65 billion a year earlier. Metro cut its prices due to rising competition from other grocery retailers and Wal-Mart, which continues to expand its grocery offerings. As well, drug prices have fallen due to the expiry of important drug patents and new generic-drug legislation in Ontario. However, earnings rose 3.7%, to $92.0 million from $88.7 million. Earnings per share rose 7.3%, to $0.88 from $0.82, on fewer shares outstanding. These figures exclude one-time items, such as expansion costs and a lower tax bill....

CGI GROUP INC. $18.09, Toronto symbol GIB.A, is our Stock of the Year for 2011. Next week, Stock Pickers Digest, our newsletter for aggressive investors, will reveal its #1 pick for 2011. If you’re not already a Stock Pickers Digest subscriber, click here to learn how you can get one month—including the Stock Pickers Digest Stock of the Year—FREE. CGI is Canada’s largest provider of computer-outsourcing services. The company’s services help its customers automate certain routine functions, such as accounting and buying supplies. That lets CGI’s clients focus on their main businesses, and improve their efficiency. CGI is more speculative than most of our other recommendations. It does not pay a dividend, and its major shareholders control the company through multiple-voting shares. Its aggressive growth-by-acquisition strategy also adds risk....

CAE INC. $12 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 256.2 million; Market cap: $3.1 billion; Price-to-sales ratio: 2.1; Dividend yield: 1.3%; TSINetwork Rating: Average; www.cae.com) is paying an undisclosed sum for the training operations of privately held CHC Helicopter. These assets include four flight simulators in Canada, Norway and the U.K. CAE will also train CHC’s pilots and maintenance engineers under a long-term contract. The deal will help CAE take advantage of rising demand for helicopter pilots, particularly as oil companies build more offshore drilling platforms. CAE is a buy.

CAE INC. $11 (>www.cae.com) has renewed its pilot-training agreement with European aircraft maker Airbus until 2017. Under this alliance, CAE trains pilots to fly a wide range of Airbus planes at 18 training centres around the world. The need for new pilots is growing as current pilots retire. Long-term deals like this will help CAE profit from this trend. Best Buy. BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $27 (>www.bellaliant.ca) earned $0.47 a unit in the three months ended September 30, 2010, down 23.0% from $0.61 a year earlier. A charge related to the early redemption of notes accounted for about half of the decline. Cash flow per share fell 6.9%, to $0.84 from $0.91. Bell Aliant continues to lose phone customers. But it has been investing in its high-speed Internet networks. That should help it hang on to more clients, and attract new ones. Buy. CANADA BREAD CO. LTD. $45 (>www.canadabread.ca) earned $0.85 a share in the three months ended September 30, 2010, down 15.0% from $1.00 a year earlier. The company is spending more to promote its products, and develop new ones. This was the main reason for the earnings drop. Sales fell 3.1%, due to lower volumes and the negative impact of foreign-exchange rates. Hold.

CAE INC. $12 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 256.6 million; Market cap: $3.1 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.3%; TSINetwork Rating: Average; www.cae.com) makes military and airline flight simulators. It also runs commercial and military pilot-training schools in over 20 countries. In its second quarter, which ended September 30, 2010, CAE’s earnings rose 0.3%, to $40.0 million from $39.9 million a year earlier. Earnings per share were unchanged at $0.16. Revenue rose 6.1%, to $386.6 million from $364.5 million. Revenue from civilian clients rose 8%. CAE sold 16 flight simulators in the first half of fiscal 2011, and expects to sell around 25 for the full year. Revenue from military clients rose 4%....

The recession forced airlines to cut spending on new planes, flight simulators and pilot training. However, airlines will have to start replacing their aging fleets in the next few years. That should spur a surge in orders for Bombardier and CAE. BOMBARDIER INC. (Toronto symbols BBD.A $4.97 and BBD.B $4.98; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $8.5 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.0%; TSINetwork Rating: Average; www.bombardier.com) is the world’s third-largest commercial-aircraft maker, behind Boeing and Airbus. Its aerospace division supplies roughly half of its revenue. The other half comes from its transportation division, which is the world’s largest maker of passenger railcars. In its 2011 second quarter, which ended July 31, 2010, the company earned $0.08 a share (all amounts except share prices and market cap in U.S. dollars). That’s down 27.2% from $0.11 a share, a year earlier. Revenue fell 17.5%, to $4.1 billion from $4.9 billion. The uncertain economy continues to hurt demand for Bombardier’s jets. It delivered 46 aircraft in the latest quarter. That’s down from 80 a year earlier....

POTASH CORP. OF SASKATCHEWAN, $141.32, Toronto symbol POT, fell 4% this week after Ottawa said it would block the hostile takeover offer by BHP Billiton Ltd. (New York symbol BHP). However, under the Investment Canada Act, which governs foreign takeovers of Canadian companies, BHP now has 30 days to modify its bid so that the takeover is a “net benefit” for Canada. The stock is now trading at 8.7% above the $130.00 U.S.-a-share that BHP is offering. That indicates that investors expect a higher offer from either BHP or another bidder. BHP still has room to raise its bid. That’s because BHP’s shares also trade on the London Stock Exchange, and British law would require BHP to hold a special shareholders’ vote if the value of a takeover offer is more than 25% of BHP’s market cap. At the time of the original announcement on August 17, 2010, the bid represented 21% of BHP’s market cap. Right now, the offer is equal to 15% of BHP’s market cap....

POTASH CORP. OF SASKATCHEWAN, $145.00, Toronto symbol POT, has moved down from its recent peak of $160.65. That’s mostly because the Canadian government appears more likely to block or impose conditions on BHP Billiton Ltd.’s (New York symbol BHP) $130.00 U.S.-a-share takeover of Potash Corp. As well, Potash Corp. has launched a lawsuit to stop the takeover. The suit accuses BHP of making misleading statements about the potash industry to depress Potash Corp.’s share price prior to making its offer. Potash Corp. is still a hold....

DUNDEE CORP. $12 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 71.2 million; Market cap: $854.4 million; Price-to-sales ratio: 0.7; No dividends paid; SI Rating: Average) is a holding company with subsidiaries in three main areas: wealth management, real estate and resources. In the three months ended June 30, 2010, Dundee earned $51.2 million, or $0.64 a share. That’s up 71.5% from $29.9 million, or $0.39 a share, a year earlier. In the latest quarter, Dundee realized a $45.7-million gain on the sale of securities. A year earlier, these gains totalled just $120,000. That was the main reason for the higher earnings. Dundee is a hold....

TIM HORTONS INC., $37.05, Toronto symbol THI, is selling its half of its Maidstone Bakeries business to Aryzta AG of Switzerland. (Tim Hortons and Aryzta own the bakery through a joint venture.) Based in Brantford, Ontario, Maidstone supplies donuts and other baked goods to Tim Horton’s stores in Canada and the U.S. Tim Hortons will receive $475 million when the sale closes later this year. As part of the deal, Maidstone will continue to supply Tim Hortons until 2016. The company has the option to extend this agreement for another year, if necessary. That gives it plenty of time to find new suppliers, or build its own bakery. Meanwhile, Tim Hortons earned $94.1 million in the three months ended July 4, 2010. That’s up 21.0% from $77.8 million a year earlier. Earnings per share rose 25.6%, to $0.54 from $0.43, on fewer shares outstanding. The latest earnings beat the consensus estimate of $0.50 a share. That caused the stock to rise 4% this week....