September 6, 2002 

Adherex Technologies Inc, (AHX on TSX), Ottawa, ON, tel: (613) 738-8000. Price: Sept 6/02: C$0.45, 52-week range:C$0.60-0.28.  This is the first mention of the company in this newsletter.  Adherex is an Ottawa-based biotechnology company that develops therapeutic drugs based upon its proprietary cell adhesion platform technology. The lead compound, Exherin, works to destroy the blood vessels that feed a cancerous tumor, essentially destroying the tumorís food supply.  The company has 40 million shares out, a cash position of $8 million and a burn rate of about $5 million a year.  Year end is June 30, so that results should be appearing in the last week of September.  Of note is that one of the companyís directors and shareholders is Francesco Bellini who had founded BioChem Pharma and ended up selling it to Shire Pharmaceuticals for $5.9 billion.


Alimentation Couche-Tard Inc
. (ATD.B on TSX), Laval, QC, tel: (450) 662-3272. Price: Sept 6/02: $16.03, 52-week range: $17.63-7.69.  Last mention of the company in this newsletter was at $16.97 on July 4/02, adjusted for a 2 for 1 split on July 19/02 and first mention was on Sept 28/01 at $8.75.  The companyís growth continued in the 1Q ended July 21/02.  Sales grew 32% to $681 million, mainly due to the inclusion of the Bigfoot network for the full period as opposed to one month last year.  Also the latest period included 3 small acquisitions, including Handy Andy Food Storesí 16-store chain completed in July.  Nevertheless, same store sales in Canada during this 1Q increased by 7%.  Net income increased 43% to $20 million, or 23 cents/sh, compared with $14 million, or 18 cents/sh.  Cash flow generated of $28 million (a 43% increase) allowed the company to reduce debt to $191 million, equivalent to 48% of shareholders equity of $401 million.  With the stock split, there are now 87.6 million shs out on a fully diluted basis.  Subsequent to the end of the 1st Q, Couche-Tard completed the acquisition of 287 Dairy Mart Convenience located in Ohio, Kentucky, Pennsylvania, Michigan and Indiana for US$79.5 million, which includes $13.5 million of inventory.  In addition, the company has a 1-year contract to manage the remaining 150 stores, some of which could be acquired.  The company now owns 545 stores in Midwest USA to go along with the 1710 stores it has in Canada.  The business plan aims for 1000 stores in the Midwest.  The combination of expansion through acquisition combined with internal growth through its 2000 concept appears to define the company shares as a growth stock.

Christopher & Banks Corporation (CBK on NYSE), Plymouth, MN, Tel: (763) 551-5000. Price: Sept 6/02: $31.88, 52-week range: $44.20-14.81.†† Last mention of the company in this newsletter was at $34.20 on July 26/02 and first mention was at $7.29 on April 8/00, adjusted for splits.† The company reported that sales for the 4-week period ended Aug 31/02 rose 25% to$23.4 million and that same-store sales increased 5%.† This came on the heels of Julyís reported same store sales increase of 3% that disappointed some investors.† Comparisons were being made with strong results reported last year.† Furthermore, there were less clearance items in the last 2 months.† The company will be reporting 2Q results on Sept 24, 2002 and expects that these will be 25 to 26 cents/sh compared with last years 20 cents.† CBK operates 408 stores mainly in the northern half of the US and there is speculation that the company may expand geographically into other areas.† The shares continue to be treated as a long-term growth stock.

Fleming Companies, Inc. (FLM on NYSE), Lewisville, TX, Tel: (972) 906-8000. Price: Sept 6/02: $6.90, 52-week range: $30.07-6.87.† This is the first mention of the company in this newsletter.† Fleming is the US biggest supplier of consumer goods to retailers, serving nearly 50,000 retail locat56ions including supermarkets (example 600 IGA stores), convenience stores, super centers, discount stores, etc.† It is also a retailer operating 117 stores under the banners of Food4Less, Rainbow Foods and Yes!Less.† Total sales for 2002 are estimated at $18 billion, of which $16 billion would be wholesale distribution and $2 billion would be retail.† Of the $16 billion wholesale, Kmart would account for about $3.3 billion, taking into account further store closings under Kmartís bankruptcy operation.† Recent negative sentiment has knocked down FLM stock to a 25 year low.† This had to do with disputes the company had with its vendors regarding volume discounts.† Many of the disputed deductions have been settled but the poor market sentiment lingers on.† On the positive side, new management has brought on important new customers such as Target and Albertsonís.† Net debt is $2.16 bi9llion, 75.7% of total capitalization.† Shareholders equity is $695 million spread over 52 million shares on a fully diluted basis.† Fleming may dispose of some of the under-performing retail operations and apply the proceeds to lower debt.† The company guidance is for share earnings of $2.20 to $2.30 in 2002 and $3.55 to $3.65 in 2003.† The shares are currently trading at less than 2 times the lower end of managementís 2003 estimate.† A 6 times multiple to a more conservative estimate of $3.20/sh for 2003 indicates a stock price level of $19.50

Frisco Bay Industries Ltd. (FBAY on NASDAQ), Montreal, QC, Tel: (514) 738-7300. Price: Sept 6/02: $10.00, 52-week range: $12.55-2.20.† This is the first mention of the company in this newsletter. The company is an international provider of security systems and equipment for financial institutions, government agencies and major industrial corporations.† Markets are in Canada, USA and Latin America.† Some of the products are ATMs, digitized video surveillance systems, computer-based access systems controlled by identification cards.† 2Q sales for the period ended July 31/02 increased 18% to C$13.7 million, net earnings 34% to C$1.1 million, or 45 cents/sh.† For the 6 months, sales increased 21% to C$25.4 million and net income by 115% to C$1.8 million, or 75 cents/sh.† For the full year, Frisco appears to be headed for sales of C$35 million, or US$22.5 million (or US$9/sh) and lightly-taxed earnings of C$3.5 million, or US$2.25 million, or US$0.90/sh.† The company has a spotty record of past sales and earnings performance, so that a modest p/e multiple of 15 may be in order, in spite of what appears to be a trend for accelerated growth, implying a stock trading level of $13.50.† Company has no long-term debt, an adequate working capital and a market cap of only US$25 million based on the 2.5 million shares outstanding on a diluted basis.

GTC Transcontintal Group Ltd. (GRT.A on TSX), Montreal, QC, tel: (514) 954-4000. Price: Sept 6/02: $41.69, 52-week range: $43.00- 19.00.† This is the first mention of the company in this newsletter.† Transcontinental is one of the largest commercial printers in North America.† It has, basically, three operations: printing, media and interactive marketing.† Altogether, the corporation has 12,000 employees in Canada, the US and Mexico.† Transcontinental Printing Inc. is the Canadian leader in flier & inserts, book and newspaper markets and a significant printer of catalogues, magazines and directories.† This operation has revenues of $1.2 billion and its 6,500 employees are located in 32 specialized plants.† Transcontinental Media Inc. is a leading publisher of consumer magazines with 54 publications & annual circulation of 100 million copies.† It publishes 68 weekly newspapers with a circulation of 2 million copies a week.† It also produces & distributes Publi-Sac (Ad-Bag), a door-to-door distribution of 50 million advertising items to 2 million Quebec households each week.† This operation with $370 million employs 1700 in Canada and the US.† The interactive marketing sector consists of database management, e-commerce, Internet communications, customer loyalty programs and customer relationship management.† It has revenues of $175 million and 1700 employees.† In August, Transcontinental Group made a major acquisition acquiring 44 publications (including 10 daily newspapers) from CanWest Global Communications Corp. for $255 million.† This consists of 18 presses, employing 870, and will add $100 million in revenue.† This means that Transcontinental has now spent $350 million this year on acquisitions as part of a program to grow revenues to $3 billion in 2005, up from $1.8 billion last year.† Management maintains this will add 20 cents/sh to earnings.† The consensus has it that earnings will be $2.90 a share this year, $3.25 next year and $3.50 in 2004, based on 48.5 million fully diluted shares.† A premium 15 multiple to earnings could be awarded the stock of this well-managed company, indicating a $48 share price.† Transcontinental will be reporting 3Q earnings on Sept 12.

Gentry Resources Ltd. (GNY on TSX), Calgary, AB, tel: (403) 264-6161. Price: Sept 6/02: $1.43, 52-week range: $1.50-0.70.† Last mention of the company in this newsletter was at $1.17 on May 31/02.† Gentry has been increasing oil and gas production, year over year, 1,759 boe/d 1H 2002 vs 1,382 1H 2001, mainly on the success from development drilling in one of the companyís 3 core regions, the Princess area of Southern Alberta.† Oil production from this one area by itself could double during the third and fourth quarters of this year.† The company is attempting to get regulatory permission to increase gas production from the Princess area as well.† During this yearís 4Q, Gentry expects to build up its involvement in its 3rd core area, west-central Alberta on higher risk/higher reward target.† The company could exit the year at a production rate of 2,500 boe/d, thus extending its growth track record.† Cash flow for the year could attain 30 cents/sh.† Capitalizing this at 5.5 times indicates a share price of $1.65.† Out of a $12 million credit facility, the company has drawn down $9.4 million in bank debt, which represents about 1.3 times trending annual cash flow of $7 million.

Gildan Activewear Inc. (GIL.A on TSX, GIL on NYSE) St.Laurent, QC tel: (514) 735-2023. Price: Sept 6/02: $C35, 52-week range: C$37.60-16.51.† First mentioned in this newsletter at $14.12 on Dec 26/99, adjusted for 2 for 1 split. The company reported excellent 3Q earnings, exceeding both street estimates as well as their own guidance.† Earnings increased by 71% to C$27.7 million, or 94 cents/sh on the strength of a 29% increase in sales to $196 million.† This brought 9-month earnings to $47 million, or $1.60/sh, an 18% increase on sales of $390 million, a 13% increase.† Management now expects to achieve earnings for the full year of $2.20 to $2.25 per diluted share, based on sales of $585 million and for next year, fiscal year ending Sept 30, 2003, fully diluted earnings of $2.60 to $2.70/sh on sales of $650 million.† This 20% growth is predicated only on increasing market share in an environment of flat growth in overall industry demand.† It appears that Gildan has maintained its No. 1 position in the U.S. in T-shirts where it achieved a 27.7% market share, up from 23.6% a year ago.† Its share in sports shirts appears to have increased to 13.8% from 8.3%, while Gildanís share of the fleece segment was 11.2% vs. 10%.† Sales in Europe have been growing, unit sales up 38% in 3Q and 33% in the 9-month period. The company continues to integrate vertically and by doing so has improved margins, gross margins in 3Q improving to 29.8% from 27.2%. †As long as this growth remains intact, Gildan's shares can be awarded a 15 multiple to earnings, implying a stock price of C$39 based on next yearís performance.

The J. Jill Group (JILL on NASDAQ), Quincy, MA, tel: (617) 376-4300. Price: Sept 6/02: $24.39, 52-week range: $$27.50-6.80.† This is the first mention of the company in this newsletter.† The company is a specialty retailer of high-quality womenís apparel, accessories and footwear that markets its products through its catalogs, retail stores and e-commerce website.† The company maintains 2 distinct business segments: direct and retail.† Each is separately managed.† The direct segment involves catalogs and e-commerce & is centered in Tilton, NH.† Retail stores began only in November 1999.† Managementís objective is to build the J. Jill brand into a premium national brand, emphasizing natural fibres, relaxed casual career wear to weekend wear and geared to the active, affluent woman, age 35 to 55.†† The company has opened 17 new retail shops this year, all funded from operating cash flow, bringing the total to 68 stores located in 27 states, and expects to open another 19 before year-end, making for a total of 87.† Retail currently accounts for 35% of total sales volume.† Management is programming for sales of $342 to $349 million this year and earnings between $1.04 and $1.07 per share on a fully diluted basis.† This compares with last yearís 70 cents/sh..† Following a 3 for 2 stock split in July, there are now 20.1 million fully diluted shares.† The company has no long=-term debt and had nearly $50 million in cash at June 30.† So far, the company looks like a winner and, if so, its stock could trade at a 25 multiple to estimated earnings of $1.30/sh for 2003, indicating a share price of $30 to $32.

La Senza Corporation (LSZ on TSX), Montreal QC, tel: (514) 684-3651, Price: Sept 6/02: $13.50, 52-week range: $16.26-6.50.† First mention of the company in this newsletter was at $13.00 on April 15/02.† The company certainly did not disappoint investors with 2Q results.† Net earnings increased 52% to $2.4 million, or 19 cents/sh on sales of $98 million, a 9.2% increase.† Comparable store sales increased 8.4% in 2Q and 6.5% in the 1st 6 months.† La Senza is moving into Poland with a lingerie store expected to open before year-end.† Poland has a population of 38 million, 35% of whom are under the age of 25.† The company operates internationally in 12 countries in addition to Canada.† The companyís balance sheet remains strong with cash and marketable securities net of debt of $33.7 million, equivalent to $2.60/sh.† There are only 13 million shares outstanding and the company pays a quarterly dividend of 4 cents/sh.† Early indications are that earnings could attain $2.10/sh this year, up from last yearís $1.72.† A 10 multiple to this implies a stock price of $21.†

Meota Resources Corp. (MRZ on TSX), Calgary AB, tel: (403) 781-2440, Price: Sept 6/02: $4.33, 52-week range: $5.95-2.15.† First mention of the company in this newsletter was on Sept 28/01 at $2.55.† Craig Stewart & the 6 others he brought over from Poco Petroleum when that company was bought out by Burlington Resources are once more flipping their stock and exercising their options by agreeing to be taken over by Provident Energy Trust.† Basis of takeover is 0.415 of a Provident unit for each MRZ share.† So much for creating a strong, growth-oriented independent.† As always, investors must be careful to get into situations such as Meota at an early stage to avoid being left holding the bag with stock paid at a higher price than the takeover, this having been purchased on the basis of holding for the long term benefit.† Often, officers such as the seven referred to above come out well since they may not have invested much, relying on options, and hanging unto the coattails of financiers such as Murray Edwards and Brett Wilson.† Oh well, a la Spire, Allied Oil, Avid Oil, Courage Energy, Magin, Player and Tethys.

Neurochem Inc. (NRM on TSX), Montreal, QC, Tel: (514) 337-6789, Price: Sept 6/02: $4.86, 52-week range: $5.50-2.40.† This is the first mention of the company in this newsletter.† The company was formed in 1993 and is involved in the development of therapeutic drugs and diagnostic tools for central nervous systems and amyloid-related diseases associated with aging.† The companyís main concentration has to do with the clinical trial testing of two products: Fibrillex and Alzhemed.† Fibrillex is a potential treatment for secondary amyloidosis, which is associated with chronic inflammatory diseases (examples: rheumatoid arthritis, inflammatory bowel), chronic infections (example: tuberculosis) and familial Mediterranean fever.† It is manifested in kidney malfunction, gastrointestinal bleeding, enlargement of liver & spleen, etc.† Survival rates are not good.† Fibrillex is in phase II/III clinical trial and has orphan drug status in the US and Europe giving it 7 years of market exclusivity in US and 10 year in Europe.† Alzhemed is the companyís lead candidate for the treatment of mild to moderate stage Alzheimerís disease.† Neurochem is applying to enter into phase II trials.† Of note to investors is that Power Corporation and Francesco Bellini have become important shareholders in the company.† Mr. Bellini founded BioChem Pharma that was subsequently bought out by Shire Pharmaceuticals for $5.9 billion.† Company currently has about $29 million in cash and has 20.7 million diluted shares. Neurochem should be reporting June 30 year-end results in late September.

Paramount Resources Ltd. (POU on TSE), Calgary, AB, Tel: (403) 290-3632, Price: Sept 6/02: $15.45, 52-week range: $17.60-12.00.† First mention of the company in this newsletter was at $13.50 on Nov 23/01.† The company has announced that it will be creating a royalty trust and spinning it off to shareholders.† The contents of the trust to be named Paramount Energy Trust (PET) will end up consisting of much of the assets in the Summit Resources operation acquired (see DDIN May 31/02).† To begin with, Paramount (POU) will roll out the Legend northeast Alberta natural gas assets to PET in exchange for debt and trust units of PET.† It will then dividend out the trust units to Paramount shareholders on the basis of 1 PET unit for each 6 POU shares held.† Based on 59.4 million shs of POU outstanding, this would result in 9.9 million PET units distributed.† PET will then issue 3 rights to its unit-holders for every unit held, allowing for the subscription of additional units of PET at $5.05/unit for each right.† This will raise $150 million and with the additional 29.7 million units issued there will now be 39.6 million PET units outstanding.† With the money raised supplemented with any bank borrowing, if required, PET will the acquire from POU up to a 100% interest in substantially all of Paramountís remaining northeast Alberta natural gas assets.† At the end of the day, PET would have assets producing about 100 Mmcf/d of natural gas.† Paramountís CEO, Clayton Riddell, who owns over 48% of POU shares has declared he will exercise his rights, thus assuring much of the completion of this reorganization.† Paramount will assume management of the royalty trust so that there will not be outside management fees that would, effectively, diminish unit-holder payouts.† Mathematically, it appears that each present POU share has an intrinsic value of about $2.80 reflecting the spin-off and that POU shares would have a post spin-off value of approximately $15.50.† In summary, it looks like a winning situation all around, particularly if one is keen on a high yield natural gas royalty trust.

Storm Energy Ltd. (SEM on TSX) Calgary, AB, Tel: (403) 264-3959, Price: Sept 6/02: $5.72 52-week range: $6.50-5.65.† This is the first mention of the company, which is the spin-off from Storm Energy Inc.(SME).† This newsletter first commented on Storm Energy Inc. at $2.30 on Dec 26/99.† Prior to the split into 2 units, SEM and Focus Energy Trust, SME stock last traded at $15.05.† The new SEM has production averaging 3,500 boe/d, 95%† crude oil and an inventory of undeveloped land of 250,000 net acres.† At this early stage, it appears that cash flow generated may be of the order of approximately $1ť00/sh, based on the 28.6 million shares to be outstanding.† Management has a strong growth record, as exhibited with theyíre past involvements with SME and, previously to that, with Pinnacle Resources.† Based on that premise, the stock could be held as a long-term growth opportunity.

Focus Energy Trust (FET.UN on TSX), Calgary, AB, Tel: (403) 264-3959, Price: Sept 6/02: $9.60, 52-week range: $10.00-9.10.† This is the first mention of the trust in this newsletter.† FET is the spin-off from Storm Energy Inc.(SME), see above.† As is the case with SEM, this oil and gas royalty trust will have the equivalent of 28.6 million units outstanding, some of which will be in the form of exchangeable shares (FET) for tax reasons.† The trust will inherit 75% of SMEís reserves (consisting of nearly all of its natural gas and 40% of its light oil reserves).† It will support production averaging 8,800 boe/d, producing a cash flow estimated at about $45 million, or $1.60/unit.† The trust has declared its first monthly distribution of 11 cents/unit payable Oct 15 and intends to continue such payout at this rate for at least the first 4 months.† This implies that at least 15% of cash flow will be retained for capital expenditures. Derek Evans, formerly Sr.V.P. of operations at Renaissance Energy and, more recently, V.P. of business development at SME will head the trust.† On an interim basis, SEM will provide management services to the trust until June 30, 2003 but eventually it will have its own infrastructure.† At the current payout, the units are yielding 13.75%.† At some point in time over the next year, FET.UN could trade at $12.50, particularly if supported by an increased payout.

Tusk Energy Inc. (TKE on TSE), Calgary, AB, Tel: (403) 264-8875.† Price: Sept 6/02: $1.56, 52-week range: $1.85-0.75. Last mention of the company in this newsletter was at $1.40 on May 31/02 and first mention was on Feb 14/97.† Company has been increasing production with 2@ production at 1,860 boe/d 9 % higher than in 1Q.† This produced cash flow of $2.5 million, or 16 cents/sh.† Product mix favours oil slightly to natural gas, 51% to 49%.† Production is now running at 2,000 boe/d and could exit the year at 2,200.† Tusk recently closed an equity financing of 1.75 million shares at $1.45 raising $2.5 million which when applied to debt will lower this to $12.5 million.† Annualized cash flow is running at over $10 million.† There will now be 17.6 million shares outstanding.† If a 4 times multiple is applied to annualized cash flow of 55 cents/sh, it spells out a $2.20 share price.

WestJet Airlines Ltd. (WJA on TSX), Calgary, AB, Tel: 1-877-493-7853.† Price: Sept 6/02: $16.48, 52-week range: $21.95-8.33.† This is the first mention of the company in this newsletter.† WestJet, founded in 1996, is Canadaís leading low-fare airline.† It is patterned off Southwest Airlines and Morris Air.† The company flies only Boeing 737ís.† In 2001, it took delivery of its first of up to 97 ę next generation Ľ Boeing 737-700 aircraft and this month will be taking delivery of its eighth. This will bring the fleet to 37.† Over the next 8 years, WestJet will phase out the 737-200 model while adding more 737-700ís.† The company has been expanding its routes into eastern Canada from its well-established coverage in western Canada.† While currently conducting a few charter flights into some US destinations such as Las Vegas, it expects to make a move into the US in about 3 years time and this may very well be in partnership with an existing carrier such as LUV.† 2Q revenues, for the period ended June 30/02, grew by 45% to $164 million, as did earnings to $12.3 million, or 16 cents/sh.† Revenue passenger miles have been growing at a rate of 50% as has available seat miles.† The company has been successful in lowering costs per available seat to its current level of about 13.4 cents.† Despite growing competition in Canada (3 new independent discount airlines plus 3 more offshoots from major Air Canada), the company continues to build on its base of loyal customers and on its performance to date.† Management feel that its focus on cost controls, productivity and customer service will widen the gap between WestJet and its competitors.† Based on 74.9 million shares outstanding, 80.7 million fully diluted, earnings are on line to reach 65 cents/sh for this year, 85 cents next year and $1.05/sh for 2004.† A strong case can be made that the stock over the next year could trade at 25 times 2004 earnings of $1.05/sh, or 12.5 times $2 cf/sh, in other words, at $25.

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