RE:RE:divvy reductionamugsgame wrote: Yes the return looks good on paper but at over 350% payout ratio the piper has to be paid at the end of the day so for the next "?" quarters CUS either keeps digging into debt , issues more shares or cuts the dividend. All options will have a negative effect on the SP while waiting for the turn around appear. Not bashing here - just being a realist and wanting to protect my capital
amugsgame; The “Headline” Q1 POR numbers were certainly shocking. As always to get a good understanding of what actually went on it’s useful to look past the Headline and dig a bit deeper.
I am not an accountant not to mention a forensic corporate accountant but when my money is at stake I do my best to figure things out.
You can’t re-write history, the Q1 numbers are what they are. That said I think that it’s useful to assess what did and didn’t happen in Q1 to attempt to project the future. In Q1;
- The Chemical business revenues were weak.
- The “DBCO” manifest facility operated at abt. 57% of its capacity.
- The “Unit Train” facility contributed “nil” to the distributable cash. They loaded a grand total of 7 unit trains in Q1.
- The “distributable cash” was $7m.
- The “distributable cash” was reduced by abt. $12.8m due to;
- $3.4m “severance”
- $9.4m FX loss which was the result of making a $124m payment on the USD credit facility.
- The “Cash Dividends” paid were $16.2m.
As I said we can’t re-write history but if it wasn’t for the “unusual” $12.8m reduction in “distributable cash” the result would have been a “Cash POR” of abt. 81%.
** There is one item in the “distributable cash” calculation that I don’t have a handle on;
“Cumulative Pension Funding (in Excess) Lower than Cumulative Pension Expense”
Some quarters it is positive some negative (Q1). It looks to me like it is a “non cash” amount re Canexus’s Pension Liability’s.
** It’s also not clear to me how dividends declared in the current quarter that will be paid in the next quarter are accounted for in the current quarter. It looks like they are treated as a current liability which could affect the “distributable cash” calculation.
Perhaps somebody with more knowledge that me (it won’t take much) can shed some light.
Q1 “Was What It Was” but as I said attempting to understand what happened in Q1 is helpful in attempting to estimate what Q2, 3 and 4 will look like.
Looking forward to Q2;
- The Chemical business revenues won’t be worse and could be better.
- Although it’s unlikely that the “DBCO” manifest facility will operate at maximum capacity it should operate substantially better than in Q1.
- The “Unit Train” facility loaded more trains in April than all of Q1 and will load more in June and July which will have a positive impact on the Revenue/Distributable Cash.
- It’s highly unlikely that the Distributable Cash will be negatively affected by “Severance” or a large FX loss. The odds of a large FX loss due to a LARGE cash payment on the USD credit facility in Q2 are somewhere between Slim and None.
- The “Cash Dividends” payable in Q2 will be abt. $18.8m.
The net result should be a substantially improved Q2 “Cash POR” than in Q1.
Looking forward to Q3 and 4;
- The Chemical business revenues should improve.
- The “DBCO” manifest facility should perform well and WON’T be affected by the planned shutdown.
- The Unit Train facility will be shut down for 60 to 90 days but WILL generate revenue. Compared to Q1 anything is more than nothing.
- Assuming that the dividend is not re-adjusted I estimate that the “Cash Dividends” paid in Q3 and 4 will be abt. $13.8m per quarter.
Looking forward to 2015 Canexus should be performing substantially better on all fronts.
In the end after doing our DD to the best of our abilities it becomes a Subjective Decision based on our Personal Investing Strategy, our Risk/Potential Reward Assessment and Risk Tolerance.
Based on the above “AMATURE” and possibly flawed financial analysis I added to my position yesterday at $4.56. It’s My Money !
As Always; Do Your Own Due Diligence; It’s Your Money !!