price to sales ratio
TRANSALTA CORP. $24 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 198.0 million; Market cap: $4.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 4.8%; SI Rating: Average) is expanding its Kent Hills wind farm in New Brunswick. That’s because it won a 25-year power contract from the provincially owned electrical utility. The company will expand Kent Hills’ capacity to 150 megawatts from 96 megawatts in partnership with Natural Forces Technologies Inc. (NFT), a local wind-power developer. NFT owns 17% of Kent Hills, and will have an option to buy an additional 17% by the end of 2010, when the partners expect to finish the expansion. The project will cost roughly $100 million. TransAlta earned $66 million, or $0.34 a share, in the third quarter of 2009....
IGM FINANCIAL INC. $42 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 263.9 million; Market cap: $11.1 billion; Price-to-sales ratio: 4.7; Dividend yield: 4.9%; SI Rating: Above Average) reported that as of December 31, 2009, its assets under management had risen 1.8%, to $120.5 billion from $118.4 billion at November 30, 2009. IGM’s clients redeemed $25.5 million worth of investments in December, so improving stock markets were entirely responsible for the higher assets under management. IGM’s fees rise and fall with the value of the mutual funds it manages, so its revenue and earnings improve when the value of these assets rises. IGM Financial is a buy.
AGRIUM INC. $70 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 157.0 million; Market cap: $11.0 billion; Price-to-sales ratio: 1.1; Dividend yield: 0.2%; SI Rating: Average) is spending $800 million to expand production at its potash mine at Vanscoy, Saskatchewan (all amounts except share price and market cap in U.S. dollars). The company earned $46 million, or $0.29 a share, in the three months ended September 30, 2009. By 2015, the expansion will increase this mine’s annual production by 37%. That will help Agrium take advantage of the improving outlook for fertilizer. Agrium is a buy. SNC-LAVALIN GROUP INC. $52 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151.1 million; Market cap: $7.9 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.2%; SI Rating: Average) is part of 50/50 joint venture that will build this expansion and provide engineering services. Its $400 million U.S. share of the contract is equal to about 6% of its annual revenue....
Lower oil and natural gas prices weighed on the cash flow and stock prices of these two resource trusts in 2009. However, recent announcements should improve their prospects in 2010. PENGROWTH ENERGY TRUST $11 (Toronto symbol PGF.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 289.5 million; Market cap: $3.2 billion; Price-to-sales ratio: 1.9; Dividend yield: 7.6%; SI Rating: Average) produces oil and natural gas, mainly from properties in western Canada. Natural gas accounts of 60% of its production; oil supplies the remaining 40%. The extra exposure to gas has hurt the trust lately, as gas prices are down more than oil prices. In 2010, Pengrowth will spend $285 million on exploration, developing its current properties, and buying new properties. That’s up 29.5% from $220 million in 2009. About 70% of this spending will go to oil projects, including $15 million for its Lindbergh oil-sands project. Lindbergh could account for 40% of Pengrowth’s reserves when it begins producing crude oil in six years. The trust will also spend $12 million on its the promising Horn River shale-gas discovery in B.C....
SUNCOR ENERGY INC. $38 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $60.8 billion; Price-to-sales ratio: 2.2; Dividend yield: 1.1%; SI Rating: Average) saw its oil-sands properties’ average daily production fall to 219,000 barrels in December 2009. That’s down 30.3% from 314,000 barrels in the previous month. The drop was caused by a fire at an upgrader, which converts the tar-like bitumen into refinery-ready crude. The outage has forced Suncor to cut daily production at its main oil-sands project north of Fort MacMurray, Alberta. However, the lower output should have little impact on the company’s cash flow. Suncor expects to complete repairs by the end of January 2010. Suncor Energy is a buy.
MANITOBA TELECOM SERVICES INC. $35 (Toronto symbol MBT; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 64.7 million; Market cap: $2.3 billion; Price-to-sales ratio: 1.2; Dividend yield: 7.4%; SI Rating: Average) has raised $200 million by selling new 10-year bonds that yield 5.625%. This cash will help the company fund a new high-speed wireless network that it is building in Manitoba in partnership with Rogers Communications Inc. (Toronto symbol RCI.B). Manitoba Telecom will spend $70 million on this new network, which should be ready by early 2011. The company also plans to spend $40 million over the next three years on upgrading its billing systems. As of September 30, 2009, Manitoba Telecom’s long-term debt was $853.9 million. If you add the proceeds from the bond sale, its long-term debt is still a manageable 46% of its market cap....
TECK RESOURCES LTD. $41 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 588.7 million; Market cap: $24.1 billion; Price-to-sales ratio: 2.8; No dividends paid since July 2008; SI Rating: Extra Risk) owns 22.5% of the Antamina copper and zinc mine in Peru. The other partners are BHP Billiton (33.75%), Xstrata (33.75%) and Mitsubishi Corp. (10%). In light of rising copper prices, the partners plan to increase Antamina’s production by 30%. Teck’s share of the expansion cost is $290 million U.S. To put this in context, Teck earned $337 million (Canadian), or $0.59 a share, in the third quarter of 2009. This project should be finished in late 2011. The partners recently increased their estimates of Antamina’s reserves by 75%. That means its reserves should last until 2029....
MOLSON COORS CANADA INC. (Toronto symbols TPX.A $47 and TPX.B $47; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 185 million; Market cap: $8.7 billion; Price-to-sales ratio: 2.9; Dividend yield: 2.1%; SI Rating: Average) is the world’s fifth-largest brewer by volume. Its major brands include Coors Light, Molson Canadian and Carling. The company gets 40% of its sales from Canada, followed by the U.S. (32%) and the U.K. (28%). In other markets, Molson Coors either licenses its brands to local brewers, or exports its beer directly. The company continues to enjoy the benefits of the February 2005 merger of Canadian brewer Molson Inc. and U.S.-based Adolph Coors Co. Canadian shareholders received exchangeable shares in Molson Coors Canada. The Canadian shares carry the same voting and dividend rights as common shares of the U.S. parent company, Molson Coors Brewing Co. (New York symbol TAP).
Lower costs continue to fuel profits
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NCR CORP. $11 (New York symbol NCR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 159.2 million; Market cap: $1.8 billion; Price-to-sales ratio: 0.4; No dividends paid; WSSF Rating: Average) has a broader product line than Diebold, and gets just a third of its revenue from making and servicing ATMs. The rest comes from selling checkout scanners, cash registers and self-serve kiosks. NCR’s revenue rose slightly, from $6.0 billion in 2004 to $6.1 billion in 2006. Revenue fell to $5.0 billion in 2007, after NCR spun off Teradata Corp., but rose to $5.3 billion in 2008. Despite the slow sales growth, the company’s earnings rose from $0.89 a share (or a total of $171 million) in 2004 to $2.13 a share (or $389 million) in 2006. Earnings fell to $1.39 a share (or $254 million) in 2007, but rose to $1.61 a share (or $271 million) in 2008. Like Diebold, most of NCR’s earnings gains came from lower costs, mainly because it outsourced much of its ATM production to other companies. It’s also cutting 10% of its workforce. The layoffs should save it $250 million a year by the end of 2011....
DIEBOLD INC. $27 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 66.3 million; Market cap: $1.8 billion; Price-to-sales ratio: 0.6; Dividend yield: 3.9%; WSSF Rating: Average) makes automated teller machines (ATMs), as well as safes, vaults and building security systems. To cut its reliance on ATMs and related equipment, Diebold is offering more services to its banking customers. These include managing ATM networks, processing customer transactions and upgrading software. Diebold now gets over half of its revenue from these types of services. The company recently sold its electronic-voting machine business (Premier Election Solutions, Inc.) for $12.1 million. That’s a lot less than the $24.7 million that Diebold paid for this business in 2002. If you account for the money that the company invested into this subsidiary over the years, Diebold incurred a $50.8-million pre-tax loss on the sale....