cae

CAE INC. $9.71 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 256.5 million; Market cap: $2.5 billion; Price-to-sales ratio: 1.6; Dividend yield: 1.2%; SI Rating: Average) makes military and airline flight simulators. It also runs commercial and military pilot-training schools in 20 countries. CAE’s shares have held up well, despite recent stock-market volatility. That’s because it has diversified its operations over the past few years. Military clients now supply 53% of CAE’s revenue. As well, steady revenues from pilot training account for two-thirds of its civilian business. These factors cut CAE’s reliance on new simulator sales for growth.

CAE still dominates its niche market

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SUNCOR ENERGY INC., $33.08, Toronto symbol SU, owns 60% of the proposed Fort Hills oil-sands project in northern Alberta. The company received its stake in Fort Hills as part of its August 2009 takeover of Petro-Canada. UTS Energy Corp. (Toronto symbol UTS) and Teck Resources (see below) each own 20% of Fort Hills. Suncor rose 7% this week after French oil company Total S.A. agreed to buy UTS at a substantial premium. UTS’s 20% stake in Fort Hills is the company’s major asset, so the takeover helped unlock some of the project’s value. In light of rising construction costs, Suncor is still deciding whether to go ahead with the project. It expects to make a decision by the end of 2010....

CAE INC. $9.33 has won a contract to train maintenance technicians for the 17 new Hercules planes that will replace Canada’s existing fleet of military transport aircraft. The multi-year deal is worth $90 million. That’s small next to CAE’s annual revenue of $1.6 billion. However, military customers now account for just over half of CAE’s revenue and earnings. That cuts its exposure to the cyclical airline industry. Best Buy. MOLSON COORS CANADA INC. $45 has raised its quarterly dividend by 16.7%, to $0.28 U.S. a share from $0.24 U.S. The new annual rate of $1.12 U.S. yields 2.6%. Buy. MANITOBA TELECOM SERVICES INC. $28 has introduced a dividend reinvestment plan that lets shareholders use their cash dividends to buy new shares at a 3% discount to the market price. Buy....

BANK OF NOVA SCOTIA, $49.23, Toronto symbol BNS, rose 3% this week after the bank reported higher earnings and revenue in its latest quarter. In the three months ended April 30, 2010, Bank of Nova Scotia earned a record $1.1 billion, or $1.02 a share. That’s up 25.8% from $872 million, or $0.81 a share, a year earlier. The latest earnings also beat the consensus estimate of $0.91 a share. Revenue rose 7.7%, to $3.9 billion from $3.7 billion. Most of the earnings increase came from the Canadian retail-banking division, which supplies 45% of the bank’s total earnings. This division’s profits jumped 42.4%, mainly because low interest rates spurred demand for mortgages and personal loans....

BANK OF MONTREAL $62 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 557.3 million; Market cap: $34.6 billion; Price-to-sales ratio: 2.2; Dividend yield: 4.5%; SI Rating: Above Average) has purchased AMCORE Bank N.A., which is insolvent. AMCORE has 52 branches in northern Illinois and southern Wisconsin. Bank of Montreal will convert these outlets to its Harris Bank banner; Chicago-based Harris is Bank of Montreal’s main U.S. subsidiary. AMCORE has $2.5 billion U.S. of assets, including $2.0 billion U.S. of loans. As of January 31, 2010, Bank of Montreal had $394 billion of assets. The bank did not say how much it paid for these branches. However, in light of AMCORE’s problems, Bank of Montreal likely got a bargain. As well, U.S. banking regulators will cover 80% of AMCORE’s loan losses. That cuts the risk of this purchase....

TECK RESOURCES LTD., $43.77, Toronto symbol TCK.B, earned a record $908 million in the three months ended March 31, 2010. That’s up 276.8% from $241 million a year earlier. Earnings per share rose 206.0%, to $1.53 from $0.50, on more shares outstanding. One-time items, including the sale of two gold mines in Turkey and a one-third interest in a B.C. hydroelectric dam, boosted the company’s earnings in the latest quarter. Without one-time items, Teck’s earnings would have fallen 4.2%, to $205 million from $214 million. Teck’s cash flow per share fell 42.5%, to $0.70 from $1.22. However, its revenue rose 13.8%, to $1.9 billion from $1.7 billion, largely because of rising copper prices....

BOMBARDIER INC., Toronto symbols BBD.A $5.87 and BBD.B $5.88, continues to win orders for new passenger railcars. This week, the company received an order for 49 additional railcars from France’s regional public-transit authority. That’s in addition to the transit authority’s previous order for 80 railcars. In all, the 129-car order is worth $1.6 billion (all amounts except share price in U.S. dollars). That’s equal to 8% of Bombardier’s annual revenue of $19.7 billion. The company will deliver these trains from June 2013 to mid-2016. As well, Bombardier has started building a new plant in China that will make fuselages for its new CSeries regional jets. The company is also building a new plant in Northern Ireland that will make the wings, and Bombardier will assemble the planes in Montreal. So far, Bombardier has 90 orders for the new plane, worth a total of roughly $7 billion. It will begin delivering the CSeries in 2013....

CAE INC. $9.53 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 256.3 million; Market cap: $2.4 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.3%; SI Rating: Average) continues to expand its medical-simulator operations. It recently teamed up with Ornge, which operates Ontario’s air-ambulance system. CAE will use its simulators and classroom instruction to train Ornge’s paramedics to safely provide patient care in helicopters. The company did not reveal the size of this contract. But deals like this help CAE offset its exposure to the highly cyclical commercial-airline industry. CAE is a buy.

CANADIAN NATIONAL RAILWAY CO. $54 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 471.0 million; Market cap: $25.4 billion; Price-to-sales ratio: 3.3; Dividend yield: 2.0%; SI Rating: Above Average) is spending $100 million to build a new rail hub in Calgary. To put this figure in context, CN earned $1.5 billion, or $3.24 a share, in 2009. When this facility opens in 2013, it will make CN more efficient by speeding up the flow of trains in western Canada. CN Rail is a buy....

MDS INC., $8.30, Toronto symbol MDS, hopes to complete the sale of its MDS Analytical Technologies business by the end of January. This division makes mass spectrometers that detect and measure substances in blood and other patient samples. The sale will generate $650 million for MDS (all amounts except share price in U.S. dollars). It will use $400 million to $450 million of these funds to buy back shares. MDS is still looking to sell its pharma-services division, which conducts contract-drug research for pharmaceutical companies. When it does sell, MDS will probably use the proceeds for more share buybacks....