transcontinental

CANADIAN PACIFIC RAILWAY LTD., $80.03, Toronto symbol CP, continues to make progress with its plan to improve its efficiency with new trains and streamlined schedules. This week, the company launched its new transcontinental service for intermodal containers (which can be shipped by rail, ship or truck). This new service uses a more direct route with fewer stops. As a result, CP can now ship containers from Vancouver to Toronto in four days instead of five. Shipping to Chicago also takes four days, down from six. CP is our #1 buy for 2012....

SHAWCOR LTD., $41.85, Toronto symbol SCL.A, jumped 18% this week after it announced that it will conduct a strategic review of its operations. This could lead to a sale of some of its businesses or the entire company. ShawCor makes sealants and coatings that keep oil and natural gas pipelines from rusting. It also manufactures industrial products, such as electrical wire and protective sheaths. The family of ShawCor’s founder controls the company through multiple-voting shares, which give them 63% of the total votes. It was their desire to sell their holdings that led to the strategic review....

TRANSCONTINENTAL INC. $9.60 (www.tctranscontinental.com) now owns 100% of Metro Montreal, a free commuter newspaper, after buying out its joint venture partner for an undisclosed amount....

CANADIAN PACIFIC RAILWAY LTD., $75.49, Toronto symbol CP, has formed a partnership with Smart Sand Inc., a private company that sells sand to oil and gas producers. These clients pump this sand, along with water and other chemicals, into shale rock formations. This fractures the rock and releases the oil and gas. Under the deal, CP and Smart Sand will build a new facility in North Dakota that will load the sand onto CP’s trains. From there, CP will deliver the sand to Smart Sand’s customers in the Williston Basin, which covers parts of North and South Dakota, Montana and Saskatchewan. CP did not say how much this new facility would cost, but it should begin operating in early 2013....

RESEARCH IN MOTION LTD. $7.57 (www.rim.com) has delayed the launch of smartphones that use its new BlackBerry 10 software to the first quarter of 2013. That’s because the company is having difficulty adapting this software to its email and messaging servers. RIM had planned to launch these devices in the second half of 2012, in time for the important back-to-school and Christmas shopping seasons. Hold. SNC-LAVALIN GROUP INC. $38 (www.snclavalin.com) has paid an undisclosed sum for Toronto-based engineering firm DBA Engineering. This firm specializes in paving and environmental cleanup, and should help SNC win more infrastructure contracts. SNC’s stock has come under pressure in the past few months over unusual payments related to certain construction contracts. However, these amounts are small next to its earnings. Buy. TRANSCONTINENTAL INC. $9.60 (www.tctranscontinental.com) now owns 100% of Metro Montreal, a free commuter newspaper, after buying out its joint venture partner for an undisclosed amount. Owning all of this paper should make it easier for Transcontinental to attract more advertisers with special packages involving its websites and other media businesses. Buy.

CANADIAN PACIFIC RAILWAY LTD., $73.54, Toronto symbol CP, has resumed normal operations now that Ottawa has ended an eight-day strike by its locomotive engineers, conductors and yard workers. The strike probably cut CP’s earnings per share by around $0.20 in the second quarter of 2012. The company earned $0.82 a share in the first quarter. At CP’s recent annual meeting, U.S.-based activist investment firm Pershing Square Capital Management, which owns 14.2% of the company, succeeded in replacing seven of CP’s 16 directors with its own nominees....

TRANSCONTINENTAL INC. $11 (Toronto symbol TCL.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 81.0 million; Market cap: $891.0 million; Price-to-sales ratio: 0.5; Dividend yield: 5.3%; TSINetwork Rating: Average; www.tctranscontinental.com) is the largest commercial printer in Canada, and the fourthbiggest in North America. It also publishes newspapers and magazines.

Transcontinental continues to invest heavily in its online division. The company now has over 1,000 websites, which supply 10% of its revenue. Their contribution will continue to rise over the next few years as advertisers spend more on the Internet than on printed publications.

The company recently swapped its printing plants in Mexico for six facilities in Canada. This deal should ultimately add $230 million to Transcontinental’s yearly revenue.

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These three media companies continue to cut their costs and streamline their businesses in response to rising competition from free information on the Internet. The resulting savings have kept them profitable and let them maintain—or raise—their dividends. They have also been making acquisitions, often at bargain prices. THOMSON REUTERS CORP. $30 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 829.2 million; Market cap: $24.9 billion; Price-to-sales ratio: 1.7; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.thomsonreuters.com) gets 58% of its revenue and 48% of its earnings by selling news and information products to professionals in the banking industry and the legal (25%, 32%), accounting (10%, 11%) and scientific research (7%, 9%) fields. Over 85% of the company’s revenue comes from products it sells under subscriptions and contracts. That gives it predictable revenue streams and cuts its risk. As well, more of its customers are switching from printed to electronic products; that’s lowering its printing and postage costs....

BCE INC. $39.64, Toronto symbol BCE, is buying Astral Media Inc. (Toronto symbols ACM.A and ACM.B). Montreal-based Astral owns 22 TV stations, 84 radio stations and several pay TV and specialty channels, such as The Movie Network, Family Channel and Teletoon. It also owns billboards and sells other outdoor advertising services in Quebec, Ontario and B.C. The purchase price is $3.4 billion, including $380 million of Astral’s debt. BCE will pay roughly 75% of this cost in cash and 25% in common shares. To put this purchase in context, BCE earned $2.4 billion, or $3.13 a share, in 2011....

TRANSCONTINENTAL INC. $13 (Toronto symbol TCL.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 81.0 million; Market cap: $1.1 billion; Price-to-sales ratio: 0.5; Dividend yield: 4.2%; TSINetwork Rating: Average; www.tctranscontinental.com) is the largest commercial printer in Canada and the fourth-largest in North America. It also publishes newspapers and magazines.

Transcontinental also has over 1,000 websites, which supply 16% of its total revenue. These websites will become more important to its growth in the next few years as advertisers spend more on the Internet than print products.

The company recently swapped its printing plants in Mexico for six facilities in Canada. If you exclude the contribution from the Mexican plants and other unusual items, such as goodwill writedowns, Transcontinental earned $161.7 million, or $2.00 a share, in its 2011 fiscal year (which ended October 31, 2011). That’s up 3.7% from $155.9 million, or $1.93 a share, in fiscal 2010. Sales rose 0.8%, to $2.04 billion from $2.03 billion.

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