February 4, 2000
ARC Energy Trust (AET.UN on TSE) Calgary, AB Tel: (403) 292-0680 Price: Feb 4/00: $9.00, 52-week range: $9.35-6.15. The Trust continues to make significant acquisitions, mainly oil, adding to reserves, production revenue and to extended reserve life. Recent additions should permit an increase in cash distributions of $0.05/unit to $1.46. These are paid on a monthly basis, producing a current yield of 16%. Some capital appreciation to the $11 level would reflect the expanding quality of oil reserves.
Agnico-Eagle Mines Ltd. (AGE on TSE)(AEM on NYSE) Toronto, ON Tel: (416) 947-1212 Price Feb 4/00: C$10.80, 52-week range:$14.25-7.20. Company is expanding its LaRonde gold mine in NW Quebec from a mining rate of 3,600 tons/day to 5,000 tpd. This means that gold production will increase from an annual rate of 110,000 ounces/year to 220,000 ounces in 2001. Eventually an annual rate of 275,000 oz could be achieved and maintained for 15 years. Meanwhile the size of the gold resource appears to be heading to 8 million ounces from 5 million as a result of more ore being delineated at depth. Full production of 275,000 oz of gold when attained in 2002 should produce a cash flow of US$1.05/sh. Employing a standard 11 times multiple points to a share price of US11 or $C16.
Birim Goldfields Inc. (BGI on TSE) Montreal, QC Tel: (514) 393-8611. Price Feb 4/00: $0.26, 52-week range: $0.40-0.12. Company recently concluded an agreement to sell mineral rights on a 40 sq.km section in Ghana to Ashanti Goldfields. Birim will receive advanced royalty payments of about US$5million over the next 6 months. Beyond that time, it is expected that further payments will be flowing from Ashanti as other zones within this 40 sq.km. section are addressed. This flow of funds will allow Birim to explore and develop many of their other promising gold prospects in their remaining inventory consisting of 7,200 sq.km. in Ghana. Current market cap of $5 million does not reflect potential nor level of activity this junior will be entering into.
Canadian Tire Corp. Ltd. (CTR.A on TSE), Toronto, ON Tel: (416) 480-3000. Price Feb 4/00: $22.90, 52-week range:$46-19.50. Company recently reported earnings for 1999 of $1.89/sh down from $2.09 a year ago. 4th quarter earnings were $0.16/sh down from $0.56/sh. However, these included allocations for unusual expenses of $50 million associated with Y2K expenses as well as costs relating to the set up of an e-commerce business, expected to be in place later this year. Revenues for the year of $4.7 billion were 8.8% ahead of last year’s $4.3 billion and revenues in the fourth quarter were up by 13.1% to $1.3 billion. Another measure was cash flow for the year at $3.95/sh vs. $3.26/sh and for the important 4th quarter $1.24/sh vs.$0.95/sh. The fall in the price of these shares has provided the investor with a good buying opportunity.
Danier Leather Inc. (DL on TSE), Toronto, ON Tel: (416) 762-8175. Price Feb 4/00: $6.70, 52-week range:$8.75-5.00. The company designs, manufactures and retails in their 70 stores leather wear. Revenues in the 2nd quarter, ended Dec 25 increased 36 % to $59.8 million. Comparable store sales for the 13-week period increased 21.3 % Earnings were $1.17/sh vs. $0.76. For the 26-week period, revenues were up 29% to $75.5 million, comparable store sales were up13.2% and earnings were up 53% to $7.3 million, or $1.00/sh on 7.3 million shs.out. Company is encouraged with results of their recent launching of their e-commerce sight. It looks like earnings for the year could come in at $1.15/sh and next year $1.35. The shares appear to be trading under value according to this growth rate.
Freeport-McMoRan Copper & Gold Inc. (FCX on NYSE), New Orleans, LA. Tel: (504) 582-4000 Price Feb 4/00: $18.50, 52-week range: $21.50-9.12. The company is one of the world’s largest copper and gold companies in terms of reserves and production. Its principal operation in Irian Jaya, Indonesia contains reserves consisting of 51.3 billion pounds of copper, 64.2 million ounces of gold and 153.1 million ounces of silver. Revenues for 1999 were $1.9 billion and net income was $101 million or $0.61/sh based on 165 million shares out. With a better copper and gold price outlook for this year, FCX could see earnings of $1/sh and cash flow of $400 million or $2.50/sh. If that were to be the case, an 11 times multiple to cash flow translates itself into a $27 stock.
Global Investment.com Financial Inc. (GIV on CDNX), Vancouver, BC. Tel: (604) 681-7210 Price Feb 4/00: $2.05, 52-week range: $2.12-0.50. The company features a popular financial website known as investment.com. Expansion is taking place in Europe and additional personnel has been hired. There appears to be 22 million shares outstanding so that the market place is currently assigning a market cap of some $45 million to the company.
Novicourt Inc. (NOV on TSE), Toronto, ON Tel: (416) 982-7111. Price Feb 4/00: $2.15, 52-week range: $2.75-1.50. The company (owned 59% by Noranda) in turn owns a 45% interest in the Louvicourt copper-zinc mine in NW Quebec. NOV has been paying a dividend of $0.10/sh twice a year, in May and November. It is their stated intention, however, to pay out most of the cash flow coming in. With a better price in copper, cash flows are estimated at $0.60/sh for 1999, $0.65 for 2000 and $0.85 for 2001. Thus an extra $0.40/sh could be paid out this March, and possibly higher ones at the end of each of the next few years. A total 60 cents/sh represents a current yield of 28%. Current reserves at the mine appear to support the 4000 tons/day production through 2005.
Saputo Group Inc. (SAP on TSE), Montreal, QC Tel: (514) 397-3024. Price Feb 4/00:$35, 52-week range:$41.95-30.50. The company continues to grow, more recently assisted by acquisitions. Culinar added $315 million to revenues and the recent purchase of the specialized cheese manufacturer, Cayer-J.C.B. Group Inc. adds another $55 million to revenues. Analysts see a growth rate of 15% to 20% for this well-managed food company, so that fiscal 2000 earnings could now come in at $1.90/sh and next year at $2.25. That being the case, a 22 multiple to earnings points to a $50 stock.
Topps Company, Inc. (TOPP on NASDAQ), New York, NY. Tel: (212) 376-0300. Price Feb 4/00: $8.35, 52-week range: $13.38-4.12. This well-known manufacturer of Bazooka gum, sports cards is currently benefiting from the craze for Pokemon trading cards. Based on the most recent 3rd quarter result of fully diluted earnings of $0.46/sh, TOPP should clear $1.15/sh this year. It would seem that a 12 times multiple to earnings would not be out of hand, hence a $13 share price target.