Dilution Threat Weighs on Versacold

Article Excerpt

VERSACOLD INCOME FUND $9.10 (Toronto symbol ICE.UN; Aggressive Growth Portfolio, Consumer sector; SI Rating: Extra risk) is one of the world’s leading operators of public refrigerated warehouses. Farmers and food processing companies use these facilities to store perishable foods. In December 2005, Versacold paid $396.7 million for the refrigerated warehouse operations of Peninsular & Oriental Steam Navigation Co. That tripled Versacold’s size; it now has 74 warehouses in Canada, the U.S., Australia, New Zealand and Argentina. Due to the takeover, Versacold’s revenue in the first quarter of 2006 soared to $170.1 million from $44.3 million a year earlier. Income more than doubled, to $5.6 million from $2.7 million. Versacold issued $25.5 million in new units to help pay for this purchase. That limited per-unit earnings growth to 75.0%, to $0.21 from $0.12. Cash flow per share rose to $0.56 from $0.27. Versacold financed most of the purchase with new debt. The fund’s long-term debt is now 3.7 times equity. About half of this consists…

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