RE:PORSerge001 wrote: BlueCollar: Thanks for taking the time to explain the terminology. The first part that I had missed was what the POR short form stood for. From the context of your explaination I figure it is PayOut Ratio.
That said, the POR would go down automatically once they are not spending CapEx on NATO even without income from NATO. But I do understand the extra load on Divs re: 150mil share issue.
In an Oil and Gas comany, they worry more about CF verus earnings per share and often payout over 100%. I see that CUS is different in that they cannot just turn up production and quickly sell it.
BTW the term is GAAP not GAPP. I figure it was a typo.
CUS seems like a commodity company in terms of few barriers to entry other than they may be a low cost producer. Their Financial Reports come across as very stodgy and not nearly as exciting or creative certainly as Oil & Gas companies. I take it that the NATO is an attempt to break out of an otherwise uneventful business model with little real growth.
The question remains for me, as to whether this company has the management to effectively control and grow itself into an area sounds like it is a new frontier (NATO) for them. Can they compete with others that may be more experienced in this area?
CUS seems to be in a bit of a crisis mode to stem the bleeding. Do they have the talent to pull this out of the fire? Being honest about the problem does not imply competence to fix it. It rather reflects badly that they did not see their incompetence before it got full blown.
That said, I would be very happy to get the 11.5% div but would not like to risk the loss of principal if they cut the div. Perhaps the cut in the div would restore some shareholder confidence but it only be window dressing because cutting the div merely shows that they really don't have surety that they can handle NATO well and move the cash flow out of crisis.
Serge; Your welcome. As I mentioned I am not a big fan of DRIP programs. They tend to be dilutive and if they get out of control can be destructive. A good example of “Destruction by DRIP” would be Argent (AET.UN). A 71% DRIP participation combined with a SP under extreme pressure created EXTREEM dilution and drastic measures were required.
I haven’t been able to find the participation % for the Canexus DRIP program. I don’t know if this is a valid way to estimate it but using the Q4 POR % numbers I get;
179 – 139 = 40
40 / 179 x 100 = 22.3 %
If that is correct (I am not sure that it is) the Canexus DRIP program is under control.
In the process in the financial statements I came across Canexus’s explanation of how they calculate “distributable cash” and the POR rates;
“Distributable Cash is not a recognized measure under IFRS and therefore the Corporation’s method of calculating distributable cash is unlikely to be comparable to methods used by other entities. A reconciliation of Distributable Cash to the net cash generated from operating activities (an IFRS measure) of the Corporation for the three months and years ended December 31, 2013 and 2012 is provided on page 6 under “Reconciliation of Net Cash Generated from Operating Activities to Distributable Cash”. Distributable Cash per Share is calculated as Distributable Cash divided by the number of common shares outstanding at the end of the period. Cash Payout Ratio is calculated as cash dividends paid (net of DRIP participation) by the Corporation divided by Distributable Cash.”
”
Operating non-cash items represent items such as the timing of recognition of: (i) pension funding and pension expense, and (ii) the cost of foreign exchange option contracts. Pension expense is added back to and pension funding deducted from net cash generated from operating activities. Distributable Cash is reduced by cumulative pension funding in excess of cumulative pension expense. The cost of foreign exchange option contracts is recognized as a decrease in net cash generated from operating activities in the period purchased. For purposes of calculating Distributable Cash the cost is being recognized as a decrease in Distributable Cash over the term of the foreign exchange option contracts.” The NATO project has clearly been a bit of a fiasco. That said the BOD has taken steps to get the “Train Back On The Tracks” so to speak. The construction costs (such as they are) are a “one time expense” and when completed NATO will provide “Perpetual Revenue”.
NATO is designed to be expandable. Assuming the revised budget and schedule will be met the lessons learned will be applied to any future expansions.
In my opinion the SP is being held down by “Uncertainty”;
- Potential Dividend reduction
- Will Canexus execute the revised budget and schedule?
The Dividend issue should be resolved on May 08 and we will get a progress update.
As I have previously posted in my opinion a dividend reduction is not the worst thing that could happen, the fundamentals will improve. Based on yesterday’s closing price ($4.78) the yield is abt. 11.35%. A 50% cut would give a yield of abt. 5.67% which is not too shabby.
More often than not a dividend cut results in a “Temporary Knee Jerk” sell off which barring any other bad news I would view as a buying opportunity.
I am quite optimistic re Canexus but I agree with Nawar “patience will be required”. If all goes reasonable well “The Patient Will be Rewarded”.
As Always; Do Your Own Due Diligence; It’s Your Money !!