telus

Yellow Pages Income Fund, $5.50, symbol YLO.UN on Toronto (Units outstanding: 509.3 million; Market cap: $2.8 billion), is the largest telephone-directory publisher in Canada, where it owns the Yellow Pages and Pages Jaunes trademarks. Aside from phone directories, it prints free, advertising-based publications, including Auto Trader, Buy & Sell and Renters News, through 98%-owned Trader Corp. It also operates web sites devoted to classified advertising. The fund gets 80% of its sales from its print and online directories, which it sells in all Canadian provinces except Saskatchewan. The other 20% comes from classified advertising (both in print and on the web), which it sells in all provinces. Yellow Pages publishes over 340 different telephone directories with a total circulation of around 30 million copies. The fund prints directories for a number of phone companies, including Bell Canada, Telus and MTS Allstream Inc. It also operates a number of related web sites, including YellowPages.ca, Canada411.ca, the CanadaPlus.ca group of seven city sites and 20 sites based on its Trader publications....

TELUS INC. (Toronto symbols T $30 and T.A $29; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 318 million; Market cap: $9.5 billion; Price-to-sales ratio: 1.0; SI Rating: Above Average) hopes to improve its sales by bundling its phone and Internet services with satellite TV. Under a new deal with BCE INC. $24 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 780.6 million; Market cap: $18.7 billion; Price-to-sales ratio: 1.1; SI Rating: Above Average), Telus will sell BCE’s satellite-TV service in Alberta and British Columbia under the Telus brand. BCE and Telus will share the proceeds from these sales. The deal also lets BCE keep selling satellite service in the same region under the “Bell TV” name. Telus is a buy. The cheaper, non-voting “A” shares are the better choice. BCE is also a buy.

TELUS CORP. $29.45 (Toronto symbol T.A; Shares outstanding: 335.6 million; Market cap: $9.9 billion; SI Rating: Above Average) attracted just 48,000 new wireless subscribers during the first quarter of 2009. This is down 46% from the year-earlier quarter. Wireless accounts for half of Telus’s revenue and earnings. The recession has forced more businesses and consumers to deactivate their cellphones or switch to cheaper monthly plans. Despite the slower growth, Telus has 9.2% more wireless subscribers than it did a year ago. Recently, it has been improving the speed and reliability of its network, which should help it compete with several new wireless licence holders that could enter the market next year....

Shaw Communications, $19.48, symbol SJR.B on Toronto (Shares outstanding: 429.8 million; Market cap: $8.4 billion), is the second-largest cable-television operator in Canada. Only Rogers Communications (symbol RCI.B on Toronto) is larger. Shaw’s 2.2 million cable subscribers, located in British Columbia, Alberta, Saskatchewan, Manitoba and northwestern Ontario, represent about 30% of the Canadian cable-television market. Moreover, roughly 70%, or 1.6 million, of them subscribe to Shaw’s Internet services. The company also has 612,000 digital-telephone customers and 879,600 satellite-television subscribers through its ownership of Shaw Direct (formerly Star Choice). In the three months ended February 28, 2009, Shaw’s revenue rose 10%, to $839.1 million from $763.2 million a year earlier. Earnings, excluding one-time items, rose 13.3%, to $128 million, or $0.30 a share, from $113 million, or $0.26 a share. Shaw’s $3-billion long-term debt is a somewhat high 36% of its market cap....

TECK COMINCO LTD., $9.94, Toronto symbol TCK.B, has agreed to sell most of the gold from its Andacollo gold/copper mine in Chile to Royal Gold Inc. (Toronto symbol RGL). Teck owns 90% of Andacollo, and the Chilean government owns the remaining 10%. The mine should begin operating by the end of this year, and reach full production in mid-2010. Teck and the Chilean government will continue to own and operate the mine. Royal Gold is just buying the output. Royal Gold will pay a total of $300 million, consisting of $100 million in cash and $200 million in Royal Gold shares (all amounts except share price in U.S. dollars). Teck’s 90% share is equal to $270 million. To put this amount in context, Teck earned $1.7 billion (Canadian), in 2008. This is equal to $3.76 a share before writedowns and other one-time items....

TELUS CORP. $33.75 (Toronto symbol T.A; Shares outstanding: 335.6 million; Market cap: $11.3 billion; SI Rating: Above Average) plans to spend $500 million this year to improve the speed and reach of its wireless networks in British Columbia. This investment is nearly a quarter of the $2.05 billion that Telus plans to spend on upgrades in 2009. Most of the balance will go to improving its high-speed Internet services and installing equipment related to two large telecommunication contracts with businesses in Ontario and Quebec. Telus’s 2008 cash flow was $2.8 billion, or $8.76 a share. A faster network will help Telus attract and retain more cellphone customers. Telus is Canada’s third-largest wireless service provider, after Rogers and BCE. Moreover, it has to compete with new entrants in the wireless market, which should begin operations later this year. These improvements will also let the company offer more Internet services at greater speeds. This includes faster downloading of videos and music from the Internet....

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....

TELUS CORP. (Toronto symbols T $31 and T.A $30; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 317.2 million; Market cap: $10.3 billion; Price-to-sales ratio: 1.0; SI Rating: Above Average) has 4.2 million phone customers and 2.1 million Internet subscribers in Alberta, British Columbia and parts of Quebec. Telus also operates a national wireless service with 6.1 million subscribers. Wireless provides roughly half of Telus’s revenue and earnings. This is a much higher percentage than other Canadian telephone companies. In 2008, Telus’s revenue rose 6.4%, to $9.65 billion from $9.1 billion in 2007. Wireless revenues rose 8.6%, thanks to the growing popularity of smartphones, which let users access the Internet and send and receive email. (Telus charges higher fees for these services than it does for regular voice calls.) Telus also successfully launched Koodo, a new brand aimed at first-time cellphone buyers, in March 2008. Revenue at Telus’s traditional phone division rose 4.4%, mainly on strong demand for high-speed Internet services. Telus’s 2008 earnings fell 10.3%, to $1.1 billion from $1.3 billion in the prior year. Earnings per share fell 6.6%, to $3.51 from $3.76, on fewer shares outstanding. The earnings drop was mainly because of lower taxes in 2007 thanks to one-time income-tax adjustments....

Canada’s telephone companies face growing competition from cable companies and Internet-based phone services. New entrants in the wireless industry will also push the established wireless companies to cut their rates. We feel these four telecom companies will continue to dominate their markets. Steady cash flow from their traditional phone businesses will help them invest in new growth areas, like wireless, and maintain their high dividend yields. BCE INC. $24 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 803.1 million; Market cap: $19.3 billion; Price-to-sales ratio: 1.1; 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....

BANK OF MONTREAL, $27.48, Toronto symbol BMO, earned $225 million in its first fiscal quarter, which ended January 31, 2009, down 11.8% from $255 million a year earlier. During the quarter, the bank issued about $1 billion of new common shares. Consequently, earnings per share fell 17%, to $0.39 from $0.47, on more shares outstanding. However, the latest quarterly earnings included a $359-million (or $0.69 a share) writedown of illiquid securities, including asset-backed commercial paper, held by the bank’s trading division. If you exclude all unusual charges, Bank of Montreal would have earned $1.09 a share. The slowing economy continues to weigh on the bank’s earnings. Loan-loss provisions rose 86.1% in the latest quarter. Most of this increase came from Bank of Montreal’s U.S. operations, particularly loans related to the commercial real estate and manufacturing industries. The U.S. accounts for about 10% of the bank’s revenue. Overall revenue in the quarter rose by 20.5%, to $2.4 billion from $2 billion. Strong gains at the bank’s personal banking operations in Canada and the U.S. offset slow growth at its corporate lending and wealth management businesses. A new high-interest savings account, the launch of the new Tax-Free Savings Account and new credit cards that provide rewards based on use helped the bank lure more customers during the quarter....