pension plan

TORONTO-DOMINION BANK, $65.33, Toronto symbol TD, had to set aside more funds to cover bad loans in its latest fiscal year. However, the bank still reported higher earnings, as low interest rates spurred strong demand for new loans. TD earned $4.7 billion in the year ended October 31, 2009. That’s up 23.7% from $3.8 billion in the prior year. Earnings per share rose 9.6%, to $5.35 from $4.88, on more shares outstanding. These figures exclude several unusual items, including writedowns of securities the bank holds, and costs to integrate U.S.-based Commerce Bancorp, which TD bought last year. On that basis, the latest earnings beat the $5.07 a share that analysts were expecting. Loan-loss provisions jumped 133.3%, to $2.5 billion from $1.1 billion. Revenue rose 21.8%, to $17.9 billion from $14.7 billion....

BCE INC. $26.39 (Toronto symbol BCE; Shares outstanding: 767.2 million; Market cap: $20.2 billion; SI Rating: Above Average) has deeply disappointed many investors at times in the past, and they’ve resolved never to buy it again. The most recent disappointment came when the company sold itself to the Ontario Teachers’ Pension Plan for $42.75 a share, but the deal fell through because of problems with financing. That news prompted the stock to plunge from $38 to $22. These disappointments help explain why BCE is now as cheap as it is. However, the stock could redeem itself in investors’ eyes and come back into fashion....

BCE INC. $27 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 767.2 million; Market cap: $20.7 billion; Price-to-sales ratio: 1.2; SI Rating: Above Average) has 7.2 million residential and business telephone customers in Ontario and Quebec. It also has 6.6 million wireless subscribers across Canada, and sells other services, including Internet access and satellite TV. BCE also owns 44% of Bell Aliant, which has 3.1 million telephone customers in Atlantic Canada and rural parts of Ontario and Quebec. Bell Aliant transferred most of its wireless business to BCE as part of the deal that created the trust in 2006. Last year, BCE began a major cost-cutting program in response to a high-profile takeover bid by a private group headed by the Ontario Teachers’ Pension Plan....

We rate BCE and Bell Aliant as “Above Average,” so they both have about the same risk level. Bell Aliant offers higher income, but BCE reinvests more of its cash flow. That reinvestment, plus its wider range of operations, gives the company better growth prospects. This makes BCE a better choice for new buying. BCE INC. $27 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 767.2 million; Market cap: $20.7 billion; Price-to-sales ratio: 1.2; SI Rating: Above Average) has 7.2 million residential and business telephone customers in Ontario and Quebec. It also has 6.6 million wireless subscribers across Canada, and sells other services, including Internet access and satellite TV. BCE also owns 44% of Bell Aliant, which has 3.1 million telephone customers in Atlantic Canada and rural parts of Ontario and Quebec. Bell Aliant transferred most of its wireless business to BCE as part of the deal that created the trust in 2006....

BCE aggressively cut its costs last year, including reducing its staff by 7%. The cuts were in response to a takeover bid by a consortium led by the Ontario Teachers’ Pension Plan. The bid failed, but BCE’s cost cuts have left it in a strong position to compete during the recession, and to profit when the economy rebounds. BCE INC. $26.01 (Toronto symbol BCE; Shares outstanding: 791.6 million; Market cap: $20.6 billion; SI Rating: Above Average) has over 7.5 million telephone and Internet customers in Ontario and Quebec. It also has 6.5 million wireless subscribers across Canada. In the three months ended December 31, 2008, BCE’s revenue fell 0.7%, to $4.49 billion from $4.52 billion. However, earnings per share before one-time items rose 19.6%, to $0.55 from $0.46. BCE’s cellphone revenue rose 7.6% in 2008, and subscribers grew by 4.5%. Wireless accounts for 25% of BCE’s revenue and 43% of its profit....

GENNUM CORP., $3.65, Toronto symbol GND, has agreed to buy Ottawa-based Tundra Semiconductor Corp. (Toronto symbol TUN). Gennum makes equipment that lets TV broadcasters store, manipulate and transport video signals without losing picture quality. Like Tundra, it also makes chips and other components for computer-networking equipment, such as modems and routers. Gennum is paying $86 million in cash and shares for Tundra, 48% more than Tundra’s market cap just prior to the announcement. The cash portion of the purchase price is $55 million, while Gennum shares make up the other $31 million. To put this in context, Gennum earned $22 million U.S., or $0.62 U.S. a share, in its fiscal year ended November 30, 2008. (Although it trades on the Toronto exchange, Gennum reports its results in U.S. dollars.) These figures exclude writedowns of investments and other unusual items. Gennum also held cash of $49 million U.S., or $1.38 U.S. a share, as of November 30, 2008. It has just $1-million U.S. in long-term debt, so it has plenty of room to borrow the extra cash it needs to complete the takeover....

NOVA CHEMICALS CORP., $7.03, Toronto symbol NCX, has accepted a friendly takeover offer from International Petroleum Investment Co., which is owned by the government of Abu Dhabi (Abu Dhabi is the capital city of the United Arab Emirates.) Nova shareholders will get $6.00 U.S. a share in cash, or 359.9% more than Nova’s closing price of $1.66 (Canadian) on Friday, February 20, 2009, the last trading day before the takeover was announced. Two-thirds of Nova’s shareholders, and Canadian and U.S. competition regulators, need to approve the deal. The plastics and chemicals company should have little trouble getting these approvals. The slowing economy has hurt demand for Nova’s industrial plastics, and it was dangerously close to breaching the covenants of its lending agreements earlier this month. If Nova didn’t agree to the takeover, its lenders could have demanded that it repay all of its loans immediately. Nova’s total debt at the end of 2008 was $1.7 billion (all amounts except share price in U.S. dollars), or roughly four times its current market cap. This includes $380 million due in 2009. As of December 31, 2008, it held $74 million, or $0.89 a share, in cash....

PETRO-CANADA $28 (Toronto symbol PCA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 484.6 million; Market cap: $13.6 billion; Price-to-sales ratio: 0.5; SI Rating: Average) has moved up from its low of $20 in November 2008, partly due to growing pressure from the Ontario Teachers’ Pension Plan, which now owns 3.3% of Petro-Canada’s shares. Ottawa has capped the amount that any single individual can own at 20%, so it’s unlikely that Teachers’ will fully take Petro-Canada over. However, the pension fund will try to persuade the company to work to improve its stock price, possibly by selling its investments in politically risky countries like Libya and Syria. This would free up cash for more promising projects, including Petro-Canada’s Fort Hills oil-sands development. Petro-Canada is a buy.

TELUS CORP. (Toronto symbols T $36 and T.A $33; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 317.8 million; Market cap: $11.4 billion; SI Rating: Above average) had considered acquiring BCE before BCE accepted the offer from the Ontario Teachers’ Pension Plan. Even though the BCE privatization has failed, Telus will probably not launch a new takeover offer. That’s mainly because the credit crisis would make it difficult for Telus to borrow the cash it would need. Telus may instead try to merge its wireless operations with those of BCE into 50-50 joint venture. There is little geographic overlap between the two systems, so a partnership with BCE would probably win regulatory approval. Combining the technical and marketing operations could also lead to substantial cost savings. Lower costs would help the combined operation compete with new companies that plan to enter Canada’s wireless market in 2009. Telus is a buy. The cheaper, non-voting ‘A’ shares are the better choice.

BCE INC. $23 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 806.2 million; Market cap: $18.5 billion; SI Rating: Above average) provides telephone service to over 7.5 million residential and business customers in Ontario and Quebec. BCE also provides wireless service to 6.4 million subscribers across Canada. In June, 2007, BCE accepted a $42.75-a-share all-cash takeover offer from a private consortium led by the Ontario Teachers’ Pension Plan. The deal required auditing firm KPMG to provide an opinion on BCE’s solvency following the takeover. KPMG’s preliminary analysis shows that BCE’s liabilities would probably exceed the value of its assets. KPMG’s report effectively killed the takeover. BCE recently stopped paying dividends on its common shares as part of deal with the consortium to help ensure that takeover would go through. Now that the deal is dead, BCE will probably resume quarterly dividend payments. The previous annual rate of $1.46 would now yield 6.3%....