Why I don't want to be an SPB shareholder
In a previous post I stated that I voted no and in this one I explain why I don't want to own SPB even if it is rated by TD as an Action List buy.
Some time ago I was looking for propane producers to invest in because of the growing use of propane in the in situ extraction of oilsands oil. Cenovus uses propane in SAP and their website presentation shows a 15% improvement in recovery and 30% increase in reserves. There are also competing proprietary processes like
N-Solv that use propane as the solvent and no water. The use of propane reduces GHG emissions by up to 80% and also upgrades the oil in situ to a better API rating. With the current push on climate change, processes using propane will become more common and create more demand for propane. The increased demand should result in higher prices for companies that produce or extract propane from gas streams. The processes can also be used for heavy oil extraction and any other thermal extraction. I think we have seen the last of the large scale oil sands mining operations ala COS and Suncor. BTW Suncor has a pilot project using N-Solv..
SPB does not produce propane and as a distributor will suffer a loss in demand or reduced margins due to the higher propane prices. As it is the TD report only shows a 1% annual growth in propane demand. The TD report does not even list the increased demand for propane by industrial users as a possible future risk to SPB.
I really don't want to be a shareholder of a company with three different unrelated business segments. I believe the drywall and propane businesses will be low margin going forward. Any benefits from the chemical business will be diluted by the two underperformers.
Just my opinion so do your own assessment. I rather stay with CUS as a pure chemical play.