RE:Matter of time
Avalon,
I'm bullish on these guys. Their ability to generate positive cash flow given the dramatic drop in revenues is a testament to their business model. We can expect their depreciation to continue to contribute to FCF for the foreseeable future. Naturally, the CEWS is a big boon to them and should continue to be for quite some time.<br><br>
In a previous post, you mentioned that they should use some of their cash to buy depressed assets - I disagree. Look at what happened to their US purchase for 8MM+ a short while back; they kiboshed the thing - now they're stuck with these assets until they can sell or shift them back to Canada to make them productive once again. I appreciate the company's conservative approach when it comes to M&A.<br><br>
I opine that the best use of their cash is to continue with the NCIB for the present. Frankly, I think that they should pay back the $10mm they owe and enjoy an extra $500K+ annually in interest savings. Mind you, if they're able to borrow money at less than 4%, then fine, they can be a little more agressive in their borrowing. However, it's akin to a mortgage in the US - do you borrow $1 to get $0.30 in a tax write-off? Or, do you just pay off your mortgage (assuming that you have the money to pay off the mortgage in the first place)? It's an interesting optimization problem whereby the two sides to leverage can come to light. :) <br><br>
Insofar as the OPEC deal, I don't much faith in it - or them. As you know, they're a cartel and will do whatever they feel like. The high probability that we'll see Covid vaccines roll out in late spring / early summer of 2021 is more telling. Demand will skyrocket once again when the sky is inundated with aircraft (due to everyone's desperation for travel) and we'll see $60-$70 WTI oil, if not more, in short order. Peak oil is stll some years away. Hence, notwithstanding the oil industry's current move towards a zero carbon emissions footprint and alternative energies, fossil fues will continue to enjoy extensive demand for the foreseeable future. <br><br>
Yes, I'm bullish on High Arctic and yes, I think their stock's currently undervalued, substantively. In the long run, once the dividend is reestablished, this can once again be a $5-$6 stock. <br><br>
Cheers,<br><br>
JJ