RE:RE:here's my take (bluelight special)Nawar - good analysis. Seems to coincide with mine on all points.
To follow up - if the market is pricing a dividend cut this week - the big question to me is - why now? Are they cash strained? (Not likely with a $150M liquidity infusion). What would would be the compelling driver to cut NOW when everything at this point are just forecasts?
This is where analysis has to drive investment decisions - not emotion or fear. The selloff has been completely speculative since the only known is the CEO resignation and 40% cost overrun on NATO - everything else as to "why" he was let go is conjecture. This is why (apart from Nawar and a few others) many of the comments on this site seem to be fear driven opinions without analysis.
This is from thier website....
The annual dividend is $0.5472 per share, payable quarterly. It builds on 70 months of successfully maintaining a monthly distribution as an income trust.We believe in generating solid returns for investors in the form of both dividends and growth. We are committed to this dividend, yet don't expect to increase it while we have solid growth opportunities to invest in and we de-lever our balance sheet. The dividend level will be revisited as excess cash flows allow.
Even if they are behind schedule with NATO - they will likely do what they can to make the dates than cede an early dividend cut - only to revisit it upwards when cashflows materialize with NATO. To Nawar's point - a good chunk of the capacity is already locked - and its only March 2014.
So even if forecasts are gloomy for signing more capacity - it would be prudent by the BOD to take a "wait and see" approach than throwing in the towel this early with a very good start already in place....which in my opinion - pushes the probability of REVISITING (not cutting) the dividend towards the end of 2014. There are too many unknowns to make that call at this point. For example - if Obama rejects Keystone or delays it further - crude by rail will explode - and there won't be any concerns with future cashflow or locking up capacity since every producer will be looking to ship thier oil to the best markets by rail to get the best price. If he approves Keystone - then it's best to hedge your Canexus position with an oil and gas producer who stands to benefit from approval...but note - hydrochloric acid is used in fracking - so even if Obama approves Keystone - Canexus can still see some upside.
This sounds alot like another stock I owned - Chorus aviation (you can see my post history there). Long and short - stock tanked from $4.50 a share to $2.00 a share in the summer - and everyone was running for the exits. Based on my analysis (and I research/write articles on the positions I take)...It was a steal at that price with a high probability of a favourable outcome with Air Canada. There was a lot of noise about the stock from those that had bought in at the $4.00+ level. Even Canaccord put a $1.50 target on this stock - but thier analysis was fundamentally flawed. So I did my own research and took a 300,000 share position at $2.20 (purchasing 0.25% of the outstanding shares). I ended up unwinding my position at $3.90.
That is the essence of contrarian/value investing - a typical Buffet type investment - boring business with stable cashflows, hold long term, competitive cost advantage in thier chemicals business with dominant market share, potential revenue growth with crude to rail and a strategic location (Bruderheim) that intersects with two rail lines creating a strong competitive advantage (or valuable asset by a potential buyer)....
...I wait (sometimes months at at time) for opportunities like this....I think i've gotten a steal with Canexus by taking an initial long position of 60,000 shares at $5.02 - and will pick up another 100,000 shares or so IF they cut the dividend and SP falls below $4.00. Again - this is a long term hold (at least 1-2 years) and not for the faint of heart. But this is an easy $6 - $7 per share by 2015 if not higher if you can wait that long while collecting some variant of the dividend payment.