RE:RE:RE:RE:On the surface the Q2 results look goodemba33 wrote: Hey BlueCollar51: As you are aware, the stock price was seriously driven downwards ... but has recently seen a huge surge. What do you think initially drove the price over $7 a share ... what do you think drove the price down and now a steep upward trend with higher volume? What do all of these investors see in the fundamentals which haven't really changed that much (or, in your view, declined)? I am interested in your interpretation. Emba33
Retail Yield Chasers drove the share price up above $7 CAD.
Don’t forget that in Feb 2015 when the latest bought deal was announced the Yield in CAD was over 7% (7.7% at the bought deal SP of $7.20). Student Transportations yield has historically been quite a bit higher. The CAD/US exchange yate was substantially better in Feb 2015 than now.
The share price started its decline when the bought deal was announced.
The Dividend “Adjustment” in May wasn’t well received and SP decline accelerated. In USD terms it was a reduction. The only reason that it doesn’t look like a reduction in CAD is due to the current exchange rate.
The SNCF sale of 4m shares in Aug at $5.40 added to the negativity.
There were several potential cost saving initiatives discussed on the conference call which is good. Don’t forget that if they can reduce the number of busses required by optimising routes that the savings will be shared with the customers. It was also mentioned that once the “low hanging fruit” has been picked it will be difficult to improve on those initial replacement buss savings.
The CHASE FOR YIELD is back on! The traditional former Income Trust High Yield Oil and NG Industry has been decimated. There isn’t much for the Yield Junkies to Chase on the TSX these days.
Student Transportation is as usual growing (and maintaining) the company with Balance Sheet and Off Balance Sheet Debt. At some point in the future the Balance Sheet Debt will be paid down with Dilutive Equity and the cycle begins again. That is the STB business model.
The Sustainability of the Dividend is a function of the Net Cash From Operations and the Payout Ratio. The PE has very little to do with it. In my “opinion” the current POR is not sustainable. It remains to be seen if they can achieve their stated goal to improve it. Since 2009 the Cash Dividend has been subsidised by the DRIP. It appears that the DRIP participation has been substantially reduced.
(there is a benefit in less DRIP dilution which is good) The Q2 results looked good on the surface but in my opinion the substantial y/y reduction in Net Cash From Operations both in nominal and more importantly per share terms is a big warning sign.
The Yield is determined by the market (share price) and for Canadians the exchange rate. It doesn’t currently look good for the Loonie but if and when the exchange rate improves the Canadian Yield will erode accordingly. For Canadians the STB Dividend is essentially unhedged USD income.
I have learned from experience and observation that “Chasing Yield” is very dangerous.
As Always; Do Your Own Due Diligence; It’s Your Money !!