Teck: value is called sound
Stewart Bailey, Bloomberg
Published: Friday, November 21, 2008
Teck Cominco Ltd., Canada's largest diversified miner, dropped to the lowest price in 20 years after announcing it would halt dividends and cut spending to repay debt from last month's purchase of Fording Canadian Coal Trust.
Teck's Class B shares sank 21.5 per cent to $4.10 in Toronto Stock Exchange trading, the lowest since Sept. 12, 1988. The shares have plunged 90 per cent since July 29, the day Teck agreed to buy Fording.
"Teck's developed into the classic value trap -- you're buying value, but the shares keep falling," said Bill Belovay, who helps manage $33 billion at Jones Heward Investment Counsel Inc. "I believe they'll survive, because of the measures they're taking and because the banks will support them."
Don Lindsay bought Fording to boost production of coal used in steelmaking as the global credit freeze reduced metal demand. He's now slashing spending to repay loans totalling $9.8 billion, more than five times Teck's $2.3-billion market value.
Chairman Norman Keevil's family trust and Japan's Sumitomo Metal Mining Co. are the largest holders of the company's Class A shares, which each carry 100 votes compared with a single vote for each Class B share, Teck spokesman Greg Waller said.
Halting the dividends on both classes of Teck's stock next year will save about $486 million, and capital-spending cuts will save an additional $730 million, Vancouver- based Teck said yesterday. The company already has repaid $210 million of its $5.8-billion, one-year bridge loan.
"We've taken action on the things we can control," Waller said. To pay for Fording, Teck used stock as well as the bridge loan and a $4 billion-three-year loan provided by JPMorgan Chase & Co., Citigroup Inc., Merrill Lynch & Co., Canadian Imperial Bank of Commerce, Royal Bank of Canada and Bank of Montreal, according to a regulatory filing in July.
Teck's shares are trading at 1.2 times earnings, which is "insane," said Belovay, who owns Teck stock.
https://www.canada.com/theprovince/news/money/story.html?id=858b5846-fadd-449b-b348-ac4470f624dd
I bought in yesterday, sooo I'm a bull on Teck...