April 3, 2001

Agnico Eagle Mines Ltd. (AGE on TSE, AEM on NYSE) Toronto, ON, tel: (416) 947-1212 Price April 3/01: C$10.22, 52-week range:$12.79-7.30. Last commented at C$10.80 on Feb 4,2000. The company has completed its current expansion to 5,000 tons/day. The LaRonde mine also produces silver, zinc and copper as by products and its modern milling and mining facilities can adjust production to take advantage of any near term swings in prices of these metals. Expected gold production of 255,000 ounces at a cost of $128/oz this year compares with 174,000 oz at $174 last year. 2002 production is slated at 304,000 oz at a cash cost of $120/oz. Gold reserves increased 9% to 3.3 million oz while gold resources increased 28% to 7.8 million oz., making for a long life. AGE has above average exploration potential along the large amount of mineral rights held in the mine vicinity. Of note, funds managed by Fidelity management now own close to 15% of AGE stock. The co. has 54.5 million shared outstanding.

ARC Energy Trust (AET.UN on TSE) Calgary, AB tel: (403) 292-0680. Price: April 3/01: $11.31, 52-week range: $12.15-8.65. First mentioned at $9 on Feb 4/00, last on Dec.28/00. The trust is currently paying out 20 cents/unit/month, implying a yield of 21.3%. Even then, this is considered a conservative payout when compared to some other oil royalty trusts with respect to an expected cash flow of $2.80/unit in 2001. Oil appears to have been hedged at $US26/bbl for 2001 while gas at C$5.50, so that this year's projected cash flow is not inflated by higher hedge contracts. AET's acquisition of Startech Energy was done at fair cost price and increases reserves by 55%, production rate by over 60% and is accreditive to the trust by increasing AET's cash flow by 15%. The trust has agreed to acquire Startech Energy Inc. for $485 million through a combination of cash and units. Total units to be outstanding increase from 72.6 million to 102.6 million.

Avid Oil & Gas Ltd (AVO.A on TSE) Calgary, AB tel: (403) 303-8200 Price: April 3/01: $4.45, 52-week range: $4.94-1.96. This is the first mention of Avid in this newsletter. The company has been mainly an oil producer in the Provost area of east central Alberta, but 60% of its 2001 exploration budget will concentrate on gas discovery in this and other areas of Alberta. Avid has built up a land position of 77,000 net acres. Production in 2000 averaged 5,000 boed and added 5.1 million boe at a finding and development cost of $7.47/boe bring reserves to 9.7 million boe. Production in 2001 should, at least, be at a rate of 6,000 boed and should generate $1.80 cfps on a fully diluted basis. There are 24.6 million fully diluted shs. Husky Energy owns 43% of the class A shares. This may be holding back on a fair trading value for the stock and may be one of the reasons the company has filed with the TSE the right to buy back 5% of its stock over the next year. If Husky were to decide to sell its holding, current norms of $30,000 per boed provides a stock price of $7 and a 3.5 multiple to the $1.80 cfps produces a figure of $6.30 a share.

Benson Petroleum Ltd. This company was last mentioned in this newsletter on March 14, 1997 when trading at$1.15. Since the company was bought out at $3.05 on March 19, 2001 coverage is discontinued.

Christopher & Banks Corporation (CHBS on NASDAQ), Plymouth, MN, Tel: (612) 551-5198. Price: April 3/01: $26.44, 52-week range: $34 -7.78. First mentioned on April 8/00 at $10.93 adjusted for two 3 for 2 splits, and again on Dec 28/00 at an adjusted $18.67. The company continues to achieve record results as a specialty retailer of women's clothing and accessories. It has 274 stores in the northern tier of the US and will be opening a further 80 stores this year. Feb same store sales rose 23% on the back of an 18% increase in January. Results have produced returns on equity of over 50% and on assets of 26%. Consensus earnings are for $1.46 this year and $1.82 per share next year. With this growth record a multiple of 20 times next year earnings would not be out of line.

Courage Energy Inc. (CEO on TSE), Calgary, AB, tel: (403) 266-4422. Price: April 3/01: $3.65, 52-week range:$3.90-2.50. This is the first mention of the company in this newsletter. Co. is engaged in oil & gas exploration & development in BC and Alberta and in the UK, Denmark and France. CEO's production in 2000 averaged 4,641 boed up 7% over the year. Current production is at 5,910 boed with a 78% gas weighting and is up 40% from the average in the last Q of 2000. Cash flow this year could attain $1.50 vs $1.14. If prevailing norms are used, i.e. 3.5 times cash flow, this implies a stock price of $5.25 and if measured by $30,000 per boed, it becomes $6.45.

EXFO Electric-Optical Engineering Inc. (EXF on TSE, EXFO on NASDAQ), tel: (418) 683-0211. Price: April 3/01: C$36.99, 52-week range: C$134-26. This is the first mention of EXFO in this newsletter. The company, which derives its name from expertise in fiber optics, is a leading designer of fiber-optic test, measurement and monitoring instruments. Markets include the telecommunication carriers, cable television, public utilities, private network operators, manufacturers of optical components, value-added optical modules and optical networking systems. EXFO's 80 product lines are marketed to 2000 customers in 70 countries, biggest customer represents 5.9% of sales. 2nd Q sales increased 108% to US$36.3 million and up 27% from 1Q of US$28.5 million. 2nd Q earnings before intangibles increased 205% to US$7.5 million, or 14 cents/sh. Company guidelines indicate that sales for this year should be US$150 million to US$165 million and that earnings/share before intangibles should be between US$0.40 and US$0.50. In terms of Cndn. Currency, the stock at C$38.50 currently trades at between 64 and 51 times estimated earnings of C$0.60 and C$0.75 a share.

Gildan Activewear Inc. (GIL.A on TSE, GIL on NYSE) St.Laurent, QC tel: (514) 735-2023. Price: April 3/01: C$27.75, 52-week range: C$35.90-21.90, 52-week range: C$35.90-21.90. First mentioned at $14.12 on Dec 26/99, adjusted for 2 for 1 split and more recently at the adjusted C$29.75 on Dec 28/00. Gildan is a vertically integrated manufacturer and marketer of, primarily, cotton T-shirts for sale in the wholesale segment of the North American market. It is expanding into Europe. First quarter ended Dec 31, 2000 showed sales up 25% to $86.1 million and net earnings up 40% to $7.7 million, or 27 cents/sh. Operations are still on line to produce earnings of $2.50 this year and $3.00 for next year. This type of growth should award Gildan shares with a stock price to earnings ratio of 15.

Inex Pharmaceuticals Corporation (IEX on TSE) Vancouver, BC, tel: (604) 419-3200. Price: April 3/01: $3.71, 52-week range: $10-3.40. This is the first mention of IEX in this newsletter. Inex is a biopharmaceutical company that utilizes proprietary drug delivery systems and therapeutic compounds to increase the effectiveness and reduce the side effects of anti-cancer therapies. The company has announced the commencement of Phase II clinical trials for its Onco TCS as a first-line treatment for aggressive non-Hodgkins lymphoma (NHL). The latest study will be conducted at the famous M.D. Anderson Cancer Center at University of Texas in Houston and will involve seventy patients. Positive results would make this an improvement to the current standard CHOP therapy. Previous Phase II trials have demonstrated Onco TCS's ability to reduce tumors in aggressive NHL patients. The FDA granted fast-track designation to Onco TCS effective last August. Inex has also just announced initial promising data on a new therapeutic vaccine platform, OligoVax, to treat cancer and other diseases. Oligos are short sequences of DNA which can be designed to have immune activation properties. Company has 25.2 million shares outstanding and appears to have about C$30 million in cash, with a burn rate of about $3 million a quarter.

MGI Software Corp. (MGI on TSE) Richmond Hill, ON, tel: (905) 764-7000. Price: April 3/01: $1.90, 52-week range: $29.25-1.88. This is the first mention of MGI in this newsletter. The company is a leading provider of visual media software products that maximize the use of digital visual content and is particularly known for its PhotoSuite program. Revenues for the year ended Jan.31, 2001 increased 52.6% to $47.1 million but produced a loss of $21.8 million or 58 cents/sh compared with a loss of $9.8 million or 33 cents/sh a year ago. Fourth quarter results were particularly disappointing forcing management to introduce some cost initiatives within a restructuring plan. Company has cash & short term investments of $36 million. On the positive side, MGI has recent deals with Sony, licensing agreement to include PhotoSuite and VideoWave with Sony Handycam digital camcorders; with Sharp with the same programs into Sharp notebooks and printers; with Intel to include PhotoSuite in worldwide shipments of its Intel Pocket PC Camera; with Palm Inc.to develop an enhanced version of MGI PhotoSuite Mobile Edition for Palm's new m500 and m505 hand held computers. MGI stock has regressed back to the point when it was not much more than a fledgling start-up and can now be considered as a better than average candidate for survival.

Magin Energy Inc. (MGY on TSE), Calgary, AB, tel: (403) 265-1899. Price: April 3/01: $4.90, 52-week range:$5.45-2.20. This is the first mention of Magin in this newsletter. The company since 1998 has been concentrating on developing the large Copton natural-gas project in northwestern Alberta along with partner & operator Canadian Forest Oil. Now that this is in production, Magin that has budgeted $60 million in exploration for 2001 will most likely earmark $40 million for exploration elsewhere in Alberta. Magin has lately been mentioned as a takeover candidate. Using current norms, projected 2001 production of 9,800 boed valued at times $30,000 provides a figure of $7.44 a share based on 39.5 million fully diluted shs. outstanding and projected cash flow of $1.65/sh provides $5.77 if given a 3.5 times multiple.

North American Palladium Ltd. (PDL on TSE, PAL on AMEX), Toronto,ON, tel: (416) 360-7590. Price: April 3/01:C$11.70, 52-week range:C$17.50-5.50. This is the first mention of the company in this newsletter. Company began production at its Lac des Iles mine near Thunder Bay in Ontario in December 1993. Aided by dramatic increases in the palladium price (from $358 in 1999 to its current $750 level), PAL has been increasing annual production from 64,000 ounces in 1999 to its current rate of 250,000 ounces. A new mill will be in operation in April and production will be further boosted for 2002. Earnings are projected at US$1.90 this year increasing to US$3.60/sh for 2002. The company owns the mineral rights to over 37,000 acres within 25 km of the mine and is expected to explore these in aggressive fashion. Reserves appear to cover more than 15 years, but with the exploration potential plans are being considered to eventually double production to 30,000 tpd. There will be 51 million shs out on a fully diluted basis. With the recent pullback in the stock price, the shares appear to be undervalued trading at 2.2 times next rear earnings of US$3.60 or C$5.40.

Nycan Energy Corp. (NYE on TSE), Calgary, AB, tel: (403) 264-7377. Price: April 3/01: $1.61, 52-week range: $1.85-0.90. This is the first mention of the company in this newsletter. Oil and gas production from Alberta increased 46% in 2000 to 1210 boed. Reserves are now 3.9 million boe, gas 80% Capital expenditures last year were $11 million and were financed mainly from the $7.5 million of cash flow generated. This left NYE with a low debt of $2.5 million at year-end. Capital expenditures are scheduled for $14 million in 2001. Company has a land position of 38,000 net acres. It has 16.2 million shares outstanding, 17.9 fully diluted. The 1210 boed figure, given a multiple of times $30,000, gives a value of $2.03 on a fully diluted basis. The company has hired Yorkton Securities for financial advice in case of a takeover offer.

Search Energy Corp. (SGY on TSE), Calgary, AB, tel: (403) 261-8810. Price: April 3/01: $2.60, 52-week range: $3.40-1.50. This is the first mention of the company in this newsletter. Search produces oil and gas from Alberta and BC. Production in 2000 increased by 50% to 6,317 boed. Cash flow, helped by higher prices, increased by 228% to $44 million, or 92 cents/sh. Cash flow projections of $1.20/sh, if assigned a 3.5 times multiple, indicates a share price level of $4.20 while production of 7,500 boed if assigned a times multiple of $30,000, yields a stock price of $4.50. These are based on 50 million shs. issued.

Storm Energy Inc. (SME on TSE) Calgary, AB Tel: (403) 264-3959 Price: April 3/01: $8.73, 52-week range: $9.25-3.15. First mentioned at $2.30 on Dec 26/99 and more recently at $5.85 on Dec.28/00, the share price has reached near term full value and this newsletter will discontinue coverage of Storm for the moment

Skechers USA, Inc. (SKX on NYSE), Manhattan Beach, CA. Tel: (310) 318-3100. Price: April 3/01:$23.71, 52-week range:$32.20-7.50. This is the first mention of Skechers in this newsletter. The company designs, develops and markets lifestyle footwear for men, women and children. Products are found in the top retailers in more than 110 countries. It also operates 50 concept stores of its own, the more recent flagship stores opened near Dusseldorf in Germany and in London,UK. Sales in 2000 increased 59% to $675 million while net income rose 121% to $43.8 million, or $1.20 per the 36.6 million fully diluted shares. Consensus earnings estimates are $1.67/sh for this year and $2.04 for next. With this type of growth, which trend appears to have been established, a 20 times multiple to at least the current year earnings appears warranted.

Tethys Energy Inc. (TET on TSE) Calgary, AB tel: (403) 294-3550. Price: April 3/01: $3.75, 52-week range: $3.75-1.38. Last mentioned on Dec 28/00 at $1.84. Production of oil & gas averaged 3,850 boed for 2000 generating cash flow of $0.82/sh. Production is scheduled to increase to 5,300 boed in 2001, generating a cash flow of $66 million or $2.20/sh. Capital expenditures for this year are now estimated at $65 million. The company has a 50% interest with Petro-Canada Oil & Gas in a significant gas discovery in the Townsend area of northeastern BC. Tethys has effectively put itself up for sale & has retained Peters & Co.to assist in this process. Using a 3.5 times multiple to project cash flow this year, yields a share price of $7.70. Applying a $35,000 times multiple to projected daily production of 5,300 boe, yields a stock level of $5.38. There are 34.5 million shs outstanding on a fully diluted basis.

Vermilion Resources Ltd. (VRM on TSE) Calgary, AB Tel: (403) 269-4884 Price: April 3/01:$10.80, 52-week range: $11.90-5.65. First mentioned on Dec 26/99 at $4.65, and latest mention was on Dec 28/00 at $8. Production in 2000 increased 27% to an average 15,669. Cash flow increased two and a half times to $138.2 million ($2.63/sh). The company's undeveloped land holdings increased 28 % to 1,149,768 net acres. The capital budget for 2001 is $170 million compared with last year's $165 million. The company feels that its stock price is undervalued and has, therefore, initiated a share buy-back program. Taking into account 59.1 million shs to be issued on a fully diluted basis, projected production of 19,475 boed at a times multiple of $35,000 yields a stock evaluation of $11.52. If projected cash flow of $2.70/sh is used and a 4.2 multiple is employed, the evaluation becomes $11.34. Under these circumstances, the stock appears to be fully valued.

Back to main page