May 31, 2002

Beazer Homes USA, Inc. (BZH on NYSE), Atlanta, GA. Tel: (404) 250-3420. Price: May 31/02: $78.22 Nov 23/01:$59.90, 52-week range: $95.05-41.00.  Last and first mention of the company in this newsletter was at $59.90 on Nov 23/01.  At the time we mentioned that Beazer’s stock could reach $80 if the market awarded it a 9 times multiple of projected earnings of $9/sh.  Shares actually rose to as high as $95.  The company is now projecting net of $10/sh for fiscal 2002 ending Sept. 30.  2Q March earnings were $2.56 up 33% from last year’s $1.92 and 6 mos. Profits were $5.02 up 43% from last rear’s $3.52.  During the last quarter Beazer closed new home sales of 2,439 and already in this quarter orders for the month ended April 30 were 1,621, a 49% increase.  With the company’s forecast and again using a multiple of 9, due to the cyclical nature of housing construction, a share price aim of $90 is produced.

Boomerang Tracking Inc.  (BMG on TSE), Montreal QC, tel: (514) 234-8722, Price: May 31/02: $2.15, 52-week range: $3.99-1.75.  This is the first mention of the company in this newsletter.  The Company assembles, markets & distributes the Boomerang Tracking cellular-based system that utilizes wireless systems of major telecommunication companies to locate stolen automobiles, heavy equipment & valuable objects.  In only 3 years, Boomerang has built up 100,000 customers paying $10/mo for the service.  Starting from a base in the province of Quebec, it is now moving into Ontario.  The company is preparing for entry into the US.  To date the Boomerang Tracking System has been instrumental in the recovery of $76 million of stolen vehicles, marine craft & heavy equipment, excluding incidental recoveries.  Insurance companies are recognizing this and are modifying their policies to include this service, even for cars already supplied with manufacture-installed GPS systems.  3Q ended Jan 31/02 revenues increased 44% to $4.4 million, bringing the 9-month total to $12.6 million, a 48% increase.  Net for the nine-month period was $1.4 million, or 6 cents/sh based on the 22.3 million shares outstanding.  Company has no debt.  Boomerang will most likely report full year earnings only in the first week of July.

CPL Long Term Care Real Estate Investment Trust  (CPL.UN on TSE), Toronto, ON, Tel: (416) 929-5450. Price: May 31/02: $15, 52-week range: $15.90-10.65.  Last mention of the investment trust was at $16.50 on Dec 26/99.  On May 1, 2002, Retirement Residences Real Estate Investment Trust (RRR.UN on TSE) has purchased CPL Long Term on a unit exchange basis, 1.2 units of RRR for each unit of CPL. Together, the resulting entity should continue to do well.  It is this newsletter’s intention to comment on RRR at some later date.  RRR pays $0.0875/unit monthly, so that at $12.50, the units trade to yield 8.4%.

Canadian Medical Laboratories Ltd. (CLC on TSE), Mississauga, ON Tel: (905) 565-0043 Price: May 31/02: $31.20, 52-week range: $33.10-17.36.  Last mention of the company in this newsletter was at $25.15 on Feb 22/02 and first mention was at $6.20 on August 19, 1997.  The company reported excellent 2Q earnings for the period ended March 31/02.  Revenues increased 46% to $67 million and net income 65% to $11.4 million, or 56 cents/sh on the 21 million shares outstanding.  The company is on track to earn possibly more than the $2/sh mentioned in the Feb 23/02 edition.  The share price has now exceeded the target mentioned in that issue.

Charter One Financial, Inc. (CF on NYSE), Cleveland, OH, tel: (216) 566-5300.  Price: May 31/02: $36.20, 52-week range: $36.20-23.40.  This is the first mention of the bank in this newsletter.  Charter One, the 25th largest bank in the US, has $38 billion in assets & has 456 branches spread out: 113 in Ohio, 95 in Michigan, 87 in Illinois, 126 in NY, 26 in Vermont and 9 in Massachusetts.  It has a strong retail-banking component with $25.6 billion in deposits.  The bank is currently growing deposit-related revenues at a 20% annual rate.  It has been very successful in attracting deposits through promotions and retaining them.  It opened 141,700 checking accounts during 1Q and now has 1.3 million checking accounts.  1Q net was up 22$ year/year to $140 million, or 62 cents/sh on the 220 million shares outstanding, and was up 5% sequentially over the December quarter.  Results produced a 1.49% return on average assets and a 19.3% return on equity.  Management sees earnings of $2.55/sh for 2002 and analysts predict $2.85 for 2003.  The bank recently upped its quarterly cash dividend by 10% to 22 cents/sh.  It also paid a 5% stock dividend on Sept. 28/01.  A 15 multiple to next year’s earnings implies a share price of $43.

Colonial BancGroup, Inc. (CNB on NYSE), Montgomery, Alabama, tel: (334) 240-5105. Price: May 31/02: $15.40, 52-week range: $16.19-11.52.  This is the first mention of the bank in this newsletter.  After two small acquisitions in the Palm Beach, FL and Dallas, TX areas, the bank has $13.6 billion in assets with 266 offices in Alabama, Florida, Georgia, Nevada, Tennessee and Texas.  1Q earnings increased 17% to 34.2 million, or 29 cents/sh.  Return on assets were 1.09% and on equity 15.8%.  Management indicates that earnings for the year could attain $1.35/sh on the 120.2 million shs outstanding.  Analysts predict a 10% gain for 2003 to $1.35/sh. A 12.5 multiple to this indicates a share price of $17, which, combined with the 3.3% yield on the 52 cents dividend, would allow for a total 13% return over a year.

Flagstar Bancorp, Inc. (FBC on NYSE), Troy, MI, tel: (248) 312-2000. Price: Pre-split May 31/02: $28.35, 52-week range: $34.13-13.62.  This is the first mention of the bank in this newsletter.  With $6.4 billion in assets, Flagstar operates 76 banking centers (27 are in Wal-Mart) in southern Michigan and Indiana.  Flagstar also operates 73 retail loan origination centers located in 17 states and 15 correspondent lending offices located across the US.  The bank is one of the largest originators of residential mortgage loans in the US.  In the first 4 months of this year, Flagstar has closed $11.9 billion in residential mortgage loans, a $3.1 billion increase over the corresponding period a year ago.  1Q earnings increased 114% to $25.5 million, or $1.25/sh, based on 19.5 million shares outstanding.  This represented an annualized return on average assets of 1.55% and an outstanding annualized return on equity of 34%.  Flagstar announced a 3 for 2 split by means of a dividend payout for May 31/02 and a slight increase in dividend to 24 cents on the split basis compared with 32 cents pre-split.  Earnings estimates, on a pre-split basis, were for $4.15/sh this year and $4.30 for next.  An 8 multiple to these cyclically influenced earnings indicates a share price of $33.

Gentry Resources Ltd. (GNY on TSE), Calgary, AB, tel: (403) 264-6161. Price: May 31/02: $1.17, 52-week range: $1.50-0.70.  This is the first mention of the company in this newsletter.  Gentry has been growing production through the drill-bit.  Although oil represents 60% of current production, natural gas production is taking on more importance and will show a boost later this year and into 2003.  1Q/02 production of 1,770 boe/d compares with production of 1,635 boe/d in 4Q/01 and 1,529 boe/d in 3Q/01 from 5 core areas: southern Alberta, east-central Alberta, south-western Saskatchewan, south-eastern Saskatchewan and south-western Manitoba.  Gentry has been increasing its land holdings, particularly in the gas-prone area at Princess, Alberta.  Production from this area alone should attain 12 Mmcf/d in September, so that GNY’s 50% share will boost Gentry’s production significantly over current production of 4.4 Mmcf/d.  With improving commodity prices, the company is on track to generate, over the next 12 months, cash flow of $7 million, or 30 cents/sh based on 22.5 million shares outstanding.  If growth continues at the prevailing rate, a 5 times multiple to cash flow implies a share price of $1.50.  An added attraction is Gentry’s 40% ownership of Stratic Energy Corporation that has oil and gas concessions in West Africa.

Nortel Networks Corporation (NT on TSE and NYSE), Brampton ON, Tel: (905) 863- 0000. Price: May 31/02: $3.25, 52-week range: C$22.92-3.25.  Last mention of the company in this newsletter was at $8.70 on Feb 23/02.  First mention was on June 22/01 at $13.50.  The company expects 2Q revenues to be flat to down 5% from the US$2.9 billion in 1Q.  It will be cutting another 3,500 jobs bringing the work force down to 42,000.  With the continuing slashing of expenses, it now expects to attain a beak-even cost structure of $3.2 billion on a quarterly basis and this by the 4Q of this year.  The company has a cash position of US$3.1 billion and US$3.5 billion of available credit lines.  This should accommodate the expected the losses of $2.5 billion expected over the remainder of the year.  Nortel will be aiming to do some major financing before then, possibly in the form of a convertible debenture.  The stock currently trading at US$2.21 produces a market cap of $7.1 billion, a figure representing 59% of the US$12 billion projected revenues over the next 12 months.  This appears to be cheap.  NT stock is probably trading pretty close to its bottom and may be considered a buy on speculation that it will be a survivor.

Repadre Capital Corporation (RPD on TSE), Toronto, ON, tel: (416) 365-8090, Price: May 31/02: $8.39, 52-week range: $8.95-2.70.  This is the first mention of the company in this newsletter.  Historically, Repadre participated in mineral exploration by means of royalty interests.  While it still maintains this involvement, royalty income accounts for about $2.5 million in annual revenues and this will increase in 2003 when the Diavik diamond mine in the Northwest Territories comes on stream, Repadre, over the last few years has moved into direct mining participations.  This has come about in partnership with Gold Fields Limited, whereby Repadre’s 18.9% interest in Gold Fields Ghana Limited gives it 18.9% participation in two gold mines having a total resource of 16 million ounces of gold and which currently produce 525,000 to 550,000 ounces of gold on an annual basis at a cash cost of about $165/oz.  There is considerable potential for realizing increased production at this Ghanaian complex.  The company wisely took advantage of its higher stock price as a result of strong gold prices by floating an equity issue of 3 million shares at $8.20/sh, with a green shoe of an additional 450,000 shares.  When completed, this will bring Repadre’s cash position to $43 million.  This could allow the company to expand, possibly through acquisition.  There will be close to 41 million shares outstanding on a fully diluted basis, awarding Repadre a market cap of $344 million.  The company’s share of Ghanaian gold production of 104,000 oz/year could throw off $15 million to Repadre in cash flow.  The present market evaluation is at a hefty multiple to this, so Repadre will have to put to good use their cash position to create further returns.

River Gold Mines Ltd. (RIV on TSE), Toronto, ON, tel: (416) 360-3743, Price: May 31/02: $2.80, 52-week range: $2.90-0.81.  This is the first mention of the company in this newsletter.  The company operates the Eagle River gold mine near Wawa, Ontario.  Over the last 6 years it has produced 372,000 ounces and there appears to be remaining 304,000 ounces.  The mine is currently producing at a rate of 75,000 ounces of gold a year.  Production to date has come from zones down to a depth of 280 metres.  A new shaft has been sunk which will allow exploration and development at depth.  The company feels there is excellent potential for an expansion of reserves on this property.  The mill is located 17 km to the north and has a capacity to process 1000 tonnes a day so that there is some 40,000 tonnes a year of excess capacity available to process additional ore.  The company has additional exploration potential at Magnacon and Mishi, both of these properties being adjacent to the mill.  Cash flow for 2002 may attain $12 million, or 30 cent/sh on 40.3 million fully diluted shares.  The shares on an operating basis appear to be fully priced, trading at a 9.3 multiple to cash flow generated, but they nevertheless have speculative appeal on potential for exploration success.

Spire Energy Ltd. (SEY on TSE), Calgary AB, tel: (403) 269-9016, Price: May 31/02: $2.40April 13/02: $2.14, 52-week range: $3.20-1.40.  Last mention of the company in this newsletter was at $2.14 on April 15/02.  Quintana Minerals Corporation has made an offer to purchase all the shares of Spire for a cash consideration of $2.41/sh, conditional on 66.6% of shares being tendered.  Since the 2 controlling shareholders account for 59% of issued shares and that the 3 officers of the company have agreed to exercise their stock options and also tender, the take-over is a fait accompli.  Too bad for the minority shareholders, particularly those that paid higher prices for the stock.  But, hey, the president cashes in for almost $900,000 and 2 other officers each make about $350,000 in options for 2 years work.  So, nothing wrong with that!  Kind of reminds one of  Allied Oil, Avid Oil, Courage Energy, Magin, Player and Tethys, all taken over in favour of the buyer.

Summit Resources  (SUI on TSE), Calgary, AB, tel: (403) 269-4400. Price: May 31/02: $7.36, 52-week range: $7.40-3.70.  Last mentioned in this newsletter on August 30/01 at $5.10.  On May 10, Paramount Resources Ltd. made an offer to purchase all the outstanding shares of Summit for a cash consideration of $7.40/sh.  This is a fair price and Paramount should do well by it also.

Tusk Energy Inc. (TKE on TSE), Calgary, AB, Tel: (403) 264-8875.  Price: May 31/02: $1.40, 52-week range: $1.54-0.75. Last mention of the company in this newsletter was at $1.01 on Feb 23/02 and the previous mention was at $0.75 on Dec 29/98.  Tusk produced excellent earnings in 1Q/02.  Production increased to 1,712 boe/d up 19% from the December quarter.  This produced cash flow of $2.1 million, or 13 cents/sh on the 17.9 million shares outstanding.  2Q production should average 1,850 boe/d, 55% oil, 45% gas.  For the full year cash flow should attain $9 million, or 50 cents/sh. and should cover expected capital expenditures of $9 million.  Net debt is $14 million.  Net asset value has been calculated at $2.06/sh.  The company has a strong inventory of drilling targets that warrants continued growth in production.  That being the case, a 4 times multiple to expected cash flow points the way to a $2 share price.

Ultima Energy Trust  (UET.UN on TSE), Calgary, AB, tel: (403) 264-5709. Price: May 31/02: $5.40, 52-week range: $5.85-3.65.  This is the first mention of the trust in this newsletter.  New management took over last year and changed the name of the oil & gas income trust from Maximum Energy.  Initially, they cleaned up the mess by getting rid of non-core properties in order to pay down debt.  Once completed, management increased production from ongoing properties and also made acquisitions at reasonable price levels.  For example, in December Ultima acquired, for $35 million in cash, light oil producing properties and associated facilities producing 1,400 boe/d, thus paying the equivalent of $25,000 per producing boe/d.  Production has been increasing ever since, with 1Q ended March 31/02 averaging 3,265 boe/d, compared with 2,094 during the corresponding period a year ago.  Ultima, as a consequence, is one of the few trust that have been increasing payouts to unit holders over the last few months, from 6 cents monthly in March to 7 cents in April & May and to 8 cents for June.  In early May, Ultima closed a public financing of $25.5 million through the sale of 5 million units at $5.10/unit.  Proceeds of this will be used to reduce bank debt and to fund development on existing properties.  Net bank debt at March 31/02 was at $28.2 million.  Cash flow for the year should be about $25 million, equivalent to $1.05/unit on the 24 million units to be outstanding.  If payouts remain at the same level, the units will yield 17.8% on the 96 cents disbursements, most of which will not be taxable because of loss carry forwards.

Upton Resources Inc. (URC on TSE), Calgary AB, tel: (403) 263-7373, Price: May 31/02: $3.85, 52-week range: $4.35-2.57.  Last mention of the company in this newsletter was at $2.85 on Sept 28/01.  1Q ended March 31/02 production was at an annual rate of 4,483 boe/d, slightly less than the rates of 4,578 in the December quarter and the 4,802 a year ago.  Again, this is primarily light oil, 4,285 bo/d, while natural gas production continues to increase and averaged 1.2 Mmcf/d.  Upton made a significant acquisition late in the quarter that will produce positive results.  It acquired privately held Empire Energy for $30.9 million, consisting of $14 million in cash, assumption of $4 million of debt and by issuing 3.5 million shares.  This will bring in oil production of 1, 700 bo/d along with a land position of 128,400 net acres.  This works out to a very reasonable purchase price equivalent to $18,176 bo/d.  Average production for 2002 should now average 6,100 boe/d, exiting the year at 7,000 boe/d.  Production for 2003  should average 7,200 boe/d, an 18% increase over 2002.

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