pension plan
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....
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....
BCE INC. $37.24, Toronto symbol BCE, gained 7% this week 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 takeover by a group led by the Ontario Teachers’ Pension Plan will succeed. The stock is now trading at roughly 13% below the offer, partly because the deal still requires regulatory approval. In addition, the problems in the credit markets could also make it harder for the consortium to issue the bonds it needs to finance the takeover. If the deal falls through, BCE’s stock could fall to its pre-takeover level of around $30. However, the company’s operations still generate plenty of cash flow, and it could unlock value by spinning off some of its operations....
AGRIUM INC. $72.10, Toronto symbol AGU, has gained nearly 25% in the past month, partly due to a new energy bill in the United States that mandates a five-fold increase in the production of biofuels by 2022. As a major supplier of fertilizers, Agrium should profit from higher production of crops, such as corn, for use in ethanol production. The new bill may also help Agrium re-open its plant in Kenai, Alaska, which it recently shut down due to a lack of natural gas supplies. Agrium is studying a plan to convert coal into natural gas, and could receive subsidies that would offset the costs of a new facility. However, relying on the largely politically inspired ethanol boom for growth adds to Agrium’s risk. The company is also vulnerable to rising natural gas prices....
ALCAN INC. $102 (Toronto symbol AL;Conservative Growth Portfolio,Resources sector; Shares outstanding: 369.7 million; Market cap: $37.7 billion; SI Rating: Average) is trading below Rio Tinto Ltd.'s takeover offer of $101 U.S. a share (about $105 Cdn.) That’s because of investor worries that Rio Tinto may have trouble completing the takeover, given recent turmoil in credit markets and falling aluminum prices. The difference between the current price and the offer may entice some investors to buy Alcan, hoping to lock in a quick profit before Rio Tinto’s offer expires on September 24. However, we don’t recommend buying Alcan now. The stock could drop 30% or more in the unlikely event that Rio Tinto pulls out, while the most it can gain is just 3%. Current Alcan holders should tender their shares....
BCE INC. $40.46 (Toronto symbol BCE; SI Rating: Above-Average) earned $0.56 a share excluding one-time items in the three months ended June 30, 2007, up 3.7% from $0.54 a year earlier. Revenue rose 1.6%, to $4.44 billion from $4.37 billion. BCE has accepted a $42.75-a-share all-cash takeover offer from a group led by the Ontario Teachers’ Pension Plan. The difference between the takeover price and today’s trading price reflects the possibility that the deal could fall through. However, we see this as unlikely, since the Ontario Teachers’ group has secured financing commitments from several banks. So, despite rising interest rates, the group should be able to go through with the transaction, probably in the first quarter of 2008....