Blogdaleup is the blog I use to discus technical matters that only bear on the price of a stock indirectly.The stock’s finances(revenues and earnings) are not examined but the result is often an improvement in the share price.At present Aimia is bogged down with board difficulties involving one of their biggest shareholders with 23%- the Mittleman brothers.Apparently this is a New York city hedge fund.According to recent press releases the Mittleman brothers want to grab all the Aimia cash and use it for other investments.The present board has entrenched itself and refused any more than one board member to the Mittlemans.This has stopped the Mittleman Brothers from advancing further but this blog sees this as a clever distraction from what should be Aimia’s main direction.
Too much Cash on hand?
It is not clear how much cash is on hand but it is clear that the present chairman of the board wants to buy back 150 million shares with an estimated cost of more than $500 million. There must be a considerable amount of cash around to do this.William McEwen is the present chairman of the board and was present when the Aeroplan loyalty program was sold for $450 million.It is true that this sale removed $1.9 billion of liability from Aimia. But it is this blog’s position that Aimia gave Aeroplan away for almost nothing.Especially as TD bank will pay $622 million for the right to use Aeroplan and later a further $308 million while CIBC will pay $200 million to use it and a further $92 million.American Express will also pay an unspecified amount.Aimia gave up almost $1.5 billion in order to receive $450 million from Air Canada.Where was the Aimia board when this was happening?This appears to be one of the worst deals in Canadian corporate history.
Anyone got a good Mediator?
The Statute of Limitations has probably not run out on this deal.The ususal time period allowed is 2 years and the deal was inked in January,2018.The normal course of events would have Aimia suing Air Canada for a unilateral cancellation of a long running agreement (started in 2002)with no performance cause for cancelling it.But Aimia probably has a good case for being forced to settle under duress.Aimia shareholders probably believed that no agreement with Air Canada would bankrupt the company.Revenues fell dramatically in 2018.On the other hand, this blog recommended a deal where Aimia got a share of equity in Aeroplan.A decent mediator would recommend Aimia get a 25-33% share and return $100 to $150 million to Air Canada.
Sue or Hire a Mediator
As was mentioned above Aimia has about 2 years to commence a legal action against Air Canada under The Statute of Limitations.Aimia would have a strong claim for damages as Air Canada unilaterally withdrew from a long running agreement (17 years) when there were no performance issues.Air Canada merely wanted to withdraw and by so doing caused substantial damage to the other party in the agreement.Air Canada had no reason to complain about the way Aeroplan was being run.This was discussed in an earlier blog on Blogger-Workathon.But the cause of a legal action here could be that the deal was made under duress.Air Canada wanted the whole of Aeroplan or nothing.The price as already discussed was less than what the banks paid to Air Canada.So arguably Air Canada gave nothing to Aimia.Why would Aimia sell under these conditions?They probably thought that Aeroplan would fall apart.So either take our deal or there will be no Aeroplan.If Aimia has any evidence of that position then this blog finds Air Canada to be a predator.Mediation should give Aimia a much better deal than they now have.
Aimia ran Aeroplan for 17 years and built it up to it’s present level of success.It sold Aeroplan to Air Canada for less than what the banks were willing to pay for the right to keep it operating.If Aimia does not commence a lawsuit or get Air Canada into mediation by year end then there should be a shareholder movement to remove present board members Jeremy Rabe,William McEwen and at least 2 other board members.
This is another technical matter which is best discussed on Blogdaleup.Chorus Aviation is not 50 years old but it’s new leasing division has now leased 50 aircraft to 13 international carriers based in 13 countries.An earlier blog on our companion website called Econothon(dated April 2,2019) forecasted 8 new leases for Q1 but in fact Chorus has signed up 10 new leases.Chorus just gave a press release announcing 5 new leases with Flybe,Europe’s largest independent airline.These new leases mean that the Econothon forecast of adjusted EBITDA for 2019 of $350-$375 million is probably right on target.
Mostly Turboprop Leases
Chorus Aviation started off as Jazz Airlines which was mostly using turboprop aircraft.Later it acquired Voyageur Airways which was all turboprop aircraft.However it has fairly recently purchased some newer regional jets,like the one in the picture above (a CRJ-900).Chorus has a very strong relationship with Bombardier and acquires all it’s regional jets from it and uses some of their expertise also.However it does not escape the notice of this blog that 38 of the 50 international leases are for turboprops.It is likely that the entire world of airlines is aware of the Chorus Aviation expertise in dealing with and maintaining turboprops.So it is likely that more international leases for turboprops will be made in Q2.This blog expects another 3-5 new leases in Q2.At the same time a better reputation in handling regional jets would probably increase new international regional jet leases.
International Leases Prop up Earnings
This is intended as a technical post not a financial post but it is true that obtaining more international leases has a quite positive impact on Chorus’ earnings.And it is also true that Chorus seems now to have a solid reputation for leasing and maintaining turboprop aircraft.But this blog believes that it could further enhance it’s reputation and abilities for regional (narrow-body) jets.This could boost international leases substantially.With this in mind this blog advocates making an acquisition in the area of maintaining and repairing regional jets.Perhaps an arrangement could be made with Bombardier to take on excess engineers and keep them on standby to return when sales pick up. https://www.bombardier.com/en/home.htmlhttps://www.chorusaviation.ca/
Intrinsyc Technology is a company that I have covered for a long time.I have made several blogs on another site called Workathon stating that ITC has relied too much on one product line called it’s Open-Q computing modules.This is a computer type product that Quallcom has used for telephony.It appears to have both 3-G and 4-G equipment.And ITC modifies it to suit the client’s application.But things changed for Intrinsyc when it obtained a licence to modify and adapt the Open Q modules.And now it has increased it’s apps to include telematics as well as all the telephony applications.My blogs on Workathon have warned about relying too much on one product and slowing it’s revenue growth.But they seem to have averted this problem.And now they have solved another of their problems by looking for mergers or acquisitions with a company called Roth Capital Partners, doubltless a hot-shot American company based in California.
First Increase the Revenues,then EBITDA
ITC has increased it’s revenues continuously over the last 5 years;now it’s annual revenues are expected to be $33 million for 2018.My b log on Workathon has warned ITC management not to rely on one product or revenues will suffer eventually.So Intrinsyc has licensed it’s Quallcom computers so that the number of applications has increased.And this blog has advised them to look more seriously at a couple of junior telcos and it appears that they may be doing just this with Roth Capital Partners.There is little doubt that this will increase the trajectory of revenues but EBITDA now suffers.It is likely that Intrinsyc Technology may even look at another small but effective acquisition.This blog will surely recommend it.
Revenues were growing at a steady pace until 2016 but they were relying to a large extent on their main product – Open-Q computing modules supplied by Quallcom.My blog on Workathon warned of an impending downturn if they did not diversify.In 2017 they obtained a licensing agreement with Quallcom which allowed them to modify and adapt the computing modules.Since then revenues have accelerated so much so that in 2018 they achieved record revenues of $34 million.ITC says that in 2018 they have had “a strong and steady compound annual growth of 26.4% from 2014 to 2018.”However EBITDA has grown inconsistently over this period.As it was only $.57 million in 2017.This blog sees EBITDA in 2018 in the range of $1.5 to $1.8 million in 2018This is exemplary for a junior technology stock.
This means that their P/E ratio will be quite low for a growth stock.For example, Shopify,another technology stock has an EBITDA loss of $37 million and a negative P/E ratio.Stocks like Shopify,Intrinsyc Technoogy and Kinaxis focus on revenue growth in the early stages and very few like Tucows have a robust EBITDA.
Continuing Growth in 2019
My blog on Workathon (Blogger.com) dated (05/09/2018) warned that ITC must change it’s relationship with it’s equipment supplier,Quallcom.ITC got a new licensing agreement and has increased it’s revenue growth. This blog also says that”ITC needs complimentary product lines”.This blog anticipates that it will soon have added another subsidiary perhaps in digital payments solutions. As a consequence 2019 should show a continuation and perhaps acceleration of their trend between 2014-2018.It will probably adopt the business model of Kinaxis and Shopify with the emphasis on growing revenues.EBITDA for ITC is small but not inconsequential and will likely show growth in 2018. On the other hand new product lines often have lower margins.However it must be remembered that many other software companies have negative EBITDA and are quite financially healthy.So investors should look for another small acquisition and ITC heading towards the $2.35-$2.55 level. https://www.zacks.com/
Manufacturer’s Life Ins. is not your dad’s Manufacturer’s Life Ins.Yes it has made quite a few changes.It’s third quarter report came out on Novemeber 14 and it showed a number of significant changes.The press release says that “solid growth in Asia and global asset and asset management business contributed to the rise in earnings.”Additionally MFC reported a 42% increase in net income to C$1.57 billion.In addition, MFC recently announced 3 transactions that are expected to release over $1 billion of capital from their legacy business.
Manufacturer’s has increased their revenues but earnings have been a little volatile over the last 3 years.And the price over 2018 has gradually fallen from $26 in January to $23 in June and now to around $20 a share.Now it’s P/E ratio is down to about 14.This is partly a reflection of the market in general that has fallen off and partly a measure of the lack of positive sentiment for financial stocks.But it does also show American distaste for a Canadian insurance company that has about 40- 50% of it’s assets in U.S.A.It is certain that the value of trades on the NYSE now exceed that on the TSX but that may change in the not too distant future..And this blog feels that it is this diversification that Americans find distasteful.Not only is 50 to 60% of their business outside the U.S.A. but recently MFC has said that it is open to derisking or selling it’s long term care business in order to reduce the volatility of it’s stock.Furtermore Manufacturer’s says in it’s recent press release that “Asia’s new business value rose 30% in the third quarter”Americans could easily feel that if it is outside U.S.A.that it is more risky and require a lower P/E ratio.
Long Term Prospects
Soon MFC will be a very healthy insurance company with substantial and growing earnings.This blog sees in 2019 that 60 to 70 % of their earnings may come from outside U.S.A. But still a significant amount of trading is done on the NYSE.This blog predicts that gradually the P/E ratio will start to rise as the e.p.s. rises.For example, Qtrade shows their e.p.s. only as $1.22 for 2017.But MFC has had 3 good quarters in 2018 and likely to have a good 4th quarter.If the fourth quarter is only slightly better than the third then 2018 e.p.s. should be above $2.50 per share.And this blog sees Manufacturer’s getting ready to divest some non-core American assets such as their long-term care business.This will free up capital to invest in Asia.MFC may fall further in Q4 until word comes out about healthy earnings in Q4.There is little doubt that earnings and even some divestitures will bring MFC back to the $22-$24 price level.But not until 2019.
Blogdaleup is the blog that I use for irregular events or activities.The previous blog on Blogdaleup discussed my business activities and the form of my payment for them but not the amount.It stated that I deal mostly with A2 Acquisition and Robert Half and there was no direct payment for my referrals.In fact, the whole process is done indirectly or if you wish , by a gentlemen’s agreement.The only thing proving that the work is being done is the change in the price of the stocks involved.That and the fact that my girls are being trained.As that is the way I am being paid now-through the training of my girls.Examples of the success of this gentlemen’s agreement abound.Intrinsyc Technology went from $.25 to $1.50 and at one time it traded at$2.50 before settling back.Tecsys went from $4 a share to it’s present $16.And of course there is Tucows. which is now a billion dollar company.
Did I Find any New Partners?
A2 has done well in the last 2 years.In 2 years it has gone from a small M and A company to a company with a market capitalization of $30 to $40 million.Of course, many of it’s customers recognize the managers and this is definitely good for business.But A2 has changed somewhat also;it has gone from a simple M and A operator to a total acquisition consulting company.This has widened it’s customer base and increased revenues.
Robert Half has changed some also.It used to be a staffing company that handled staffing of junior and senior managers..It did not search much for customers as they came to them.Now they get a considerable number of referrals from me.And they now do a sizeable business in consulting and consulting studies.This has widened it’s business also.
Neither A2 nor Robert Half reacted to my last blog on Blogdaleup.They do not seem to be interested in a new deal with me.There is no handshake across the table.It is an invisible handshake and based on me seeing my daughters to know how they have fared.I did get a little implied interest from Caldwell Partners but nothing direct. And I am familiar with Mike;he will not likely give more than A2 but less.And he will not sign any papers either.
No big Deal it’s only a Referral
In one sense there is no big payment nor direct payment required because I am only giving a referral to an established M and A operator and staffing company.But the difference is that I have sent a number of companies that have lead to successful transactions.In addition, the customer companies have gotten new staff that has added to their value or market capitalization.So both A2 and Robert Half have seen that “my suggestions” have lead to increased business and revenues.In other words I have a good track record.In addition, both A2 and Robert Half have increased considerably in value while I have not.That is why I am looking for a new deal with more regular compensation.For a start maybe some of my girls could be given a few shares of A2(MDNA) that I could see. https://www.medicenna.com/
I have worked with a man I call R.H. from Robert Half Personnel for some time now.And more recently with A2 Acquisition that has put together a number of deals that have been very successful.Their payment is more direct than mine.A2 gets paid when a stock transaction has been completed;they get paid commissions on stock deals.R.H. gets paid when one of his consultants completes a project;the assumption is that the completed project helps the final customer or sometimes even A2 do their job better.In both cases there is value added from both of my partners doing their job.But my payment is more vague.Neither A2 nor R.H. pays me money in any direct way.My payment comes when the value of the transaction that I asked to be done goes higher and the resulting stock price goes higher.There are many examples of this happening.But unfortunately for me I do not have a contract setting out my payment.
My Girls are in Training
My payment is in an indirect manner;I get rewarded if a number of my selected transactions bear fruit. However I am still waiting for an insurance award from Sun Life for which I have a signed contract.But I can get rewarded in another way.I have 3 daughters that are in training so that they can run their own business.And I expect my partners to help them and house them temporarily at the Oakville Inn and help train them.This has happened only on an intermittent basis.And my partners do not seem to want to give them jobs even temporarily.Unfortunately if the training is taken away from my daughters then my pay amounts to a pittance.
The Usual Fee
When I worked in real estate there was a fee called a “finder’s fee”.A real estate agent would sometimes pay up to 20% of their commission to get a customer that finalized a deal and paid him.This could easily amount to $ 1000 to $2500 on a normal purchase.This is an analogous situation as I refer customers to both R.H. and A2.However because of my extremely good track record my referrals are as they say golden.I have given referrals to both of my partners that have been very successful.For example, I have given several suggestions to Tecsys and seen it grow from $4 to now at $17.This is a gain of about $100 million.Certainly not all can be attributed to my suggestions but I have taken Tecsys on a path they had no intention of following on their own.A 20% payment on the total gain would be unusual and atronomical but 20% of the commission stock brokers received would certainly be well received.And I did have my stockbroker’s license;I can make trades.
R.H. on the other hand does mostly staffing and I give him leads on staffing jobs.Small technology companies need engineers (mostly electronic engineers).But there is pretty good demand for industrial engineers that study how to improve efficiency of his customers.The new staff need payroll work and that goes to R.H along with the consulting.Most of the consulting work that I give him is efficiency studies but sometimes he gets assignments that look at the organization of staff.
My business, as I call it, is a specialized one in that it deals almost exclusively in junior technology stocks (listed on the TSX).Some are so small that they are not listed on the TSX.But none of these stocks have much of a following.Which does make me a good fit with A2 and R.H;they are both technology oriented.So any new partners should have a technology basis.
Any new Partners?
Should I get new partners now it is clearer what I am looking for.They should be in the area of staffing and mergers and acquisitions.Just as my present partners are.However I need a better contract;one that sets out what I am expected to do and what I am expected to get paid.Getting fringe benefits is interesting but not nearly as much as perhaps getting some equity in both of my partners’ companies.However there really are a number of ways of equalizing the scales for both partners.And a situation whereby my girls are being trained and housed well is a part-way step especially when they can see me every week. https://www.caldwellpartners.com/
This blog is where I cover technical matters that are not of major importance or monetary value.And I read in a recent press release where Kirkland Lake Gold spent C$20 million (plus diligence) to acquire a stake in a company called Novo Resources.The gain here is not yet readily apparent.In the background are two mesa in the Australian outback.They (in theory) could be close to an Australian mine called Maud Creek.This is a copper and gold mine in the Northern Territory of Australia.And Maud Creek is not too far from another gold mine called the Esmeraldo mine.The Maud Creek mine has had a positive Preliminary Economic Assessment using $C1200 for the final price of gold.This studt and other studies show that Maud Creek has 871,000 ounces of inferred ore and 344,000 ounces of indicated gold.In addition, it is about 100 kilometers from the Union Reefs processing facility.Union Reefs is also the processing centre for another Kirkland Lake mine called Cosmo.
The Cosmo mine also in Northen Territory was developped by the former owner called Crocodile Gold.Kirkland Lake has estimated that there is about 700,000 ounces of gold in the main Cosmo mine.But Crocodile Gold was better at exploring than developing properties.They found that the main fault had extensions filled with gold and they also found that the vein of gold was in a basin.On the other side of the basin was another fault and it had only a slightly less rich grade of gold ore.This vein does not seem to have been drilled yet.It is possible that the total amount of gold is closer to 1.25 million ounces with maybe 80,000 to 125,000 ounces already mined.Both Crocodile Gold and Kirkland Lake Gold were mining 15,000 to 25,000 ounces a year from Cosmo.
A Better Use for $20 Million
The gain on the investment in Novo Resources is unknown perhaps $5 to $8 million.But an investment in a new mine entrance to the Cosmo mine or the extension of the existing mine shaft would undoubtedly bring a larger return.There are sizeable extensions on the existing mine and a second vein that could possibly contain the same size of ore deposit as the existing Cosmo mine.Also the Maud Creek mine has had a positive PEA using $C1200 and it would likely only cost $1 to $2 million to complete a feasibility study.The mine could start as an open pit operation before a shaft need be built.This should be profitable as Maud Creek has at least 1.25 million ounces.