Tuesday, July 3, 2012

Canexus Corp 2

First, there will be no blog entry tomorrow, Wednesday June 4, 2012. I will be doing other things tomorrow afternoon. I will do my next blog entry on Thursday, June 5, 2012.

On my comment blog is “Interview by the Loonie Bin Blogger”. See comments blog.

The stock, Canexus Corp. (TSX-CUS) which I will continue to review today is a stock that I do not own. This is a company that converted from an income trust (TSX-CUS.UN) to a corporation (TSX-CUS) in July 2011. They also issued shares for Canexus Limited Partnership. Consequently, there was a big increase in shares in 2011. The problem sometimes with such reorganizations is the lack of continuity in the accounting statements.

When I look at the insider trading report, I find $1.9M of insider selling and $1.5M of insider buying. Most of the insider selling is by CEO, CFO and officers of the company. Selling seems mostly to be that of options. Insiders not only have option, but have Option Bonus Rights. And, there are a lot of both these types of options outstanding.

Most of the insider buying is by directors. Directors seem to have common shares and convertible debentures. They also have Deferred Share units rather than options. However, they have a lot more shares than Deferred Share units.

There are some 31 institutions that own 52% of this company. Over the past 3 months they have had 1 new buyer. However, over the past 3 month institutions have lowered the number of share owned by 4.5%. This is a negative. Of course the problem with selling is that you never know why people are selling.

The 5 year low, median and high Price/Earnings Ratios are 15.14, 18.00 and 20.86. The current P/E at 16.47 is between the low and median ratios and shows a reasonable price.

The 10 year Price/Book Value Ratio is very low at 0.70. This means book value is below the stock price. The current one is very high at 6.46. The problem is that with the reorganization book value fell by some 83%. At the present, I would ignore this except to note it is very high.

I get a Graham price of $3.17. There are problems with this measure also because the Graham price has jumped around quite a bit. (What happens with good stocks is that it tends to rise over time.) The 10 year low, median, and high Price/Graham price ratios are 0.69, 1.00 and 1.12. The current P/Gp Ratio is, at 2.18 quite high and shows the stock price is high.

The 5 year median dividend yield is 12.61% and the current yield is 6.77%. The current yield is some 46% lower than the 5 year median and would suggest a rather high stock price.

The above is all a mixed bag as far as results go. It does not help looking at other ratios. For example, the 5 year median Price/Sales Ratio is 0.41 and the current one is 1.66 a 300% increase in the wrong direction. The Sales part of this ratio is sales per share, which because the shares have been massively increased, but the sales have not, we get a rather high P/S ratios and a very high relative P/S Ratio. If we look at Price/Cash Flow Ratio, we have a 5 year median of 9.16 and a current one of 9.16. This shows us a reasonable current stock price. This is because the Cash Flow per share has increases relative to the increase in the number of shares.

When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold. The consensus recommendation would be a Buy. Analysts have been upgrading this stock over the May and June in both Target Price and recommendations.

A number of analysts like the good dividend yield of 6.7%. Although this is lower than in the past, most ex-income trust corporation have lower than in the past dividend yields. Analysts feel that the company has good growth prospects. Only one mentioned that he thought the current price might be a bit high.

The 12 months consensus stock price is $8.81. Using a current stock price of $8.08, it suggests a 12 months total return of 15.8%. That is a 9.03% increase in stock price and dividend yield of 6.77%. However, note that the stock price is up some 25% so far this year.

I really have not changed my opinion about this stock. It might have good growth going forward, but I do not like the lack of continuity in the accounting statements before and after the reorganization. I will continue to track this stock, but personally, it would be nothing I could get excited about at this point in time.

Canexus Corporation is engaged in the production of sodium chlorate and chlor-alkali products, and operates a hydrocarbon terminal. They have four plants in Canada and two at one site in Brazil. Its web site is here Canexus. See my spreadsheet at cus.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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