CANEXUS CORP 6.5 PCT DEBS T.CUS.DB.D

disproportional reaction

[Nawaralsaadi]

Canexus was trading at $7.5+ prior to the $90m overspending disclosure, since that time the company raised $150m in cash and the CEO has been fired, thus both the cash shortfall has been funded and the person responsible gone, yet the company market cap has shrunk by $300m (adjusting for the increased share count). The company underlying chemical business continue to perform and with improved margins due to weaker Canadian dollar and a firming of caustic soda prices. The company oil terminal is still on track as of January, while MEG Energy and Cenovus continue to affirm their commitment to increased use of rail. The massive destruction in the share price as a result of the oil terminal overspend is clearly disproportional, once fully functional this oil terminal business will be a cash cow for years to come, and there is a strong chance that an industry player may take a stake in the project and help accelerate its development overtime. A number of private equity players such as KKR have made or expressed an interest in making investments in Canadian oil infrastructure; CUS terminal is potentially a perfect fit for many industry and institutional partners especially when we consider the future potential expansion of the site in areas such as condensate handling and oil storage in salt caverns.

The whole economic proposition underlying Canexus asset base did not go away because of an extra $90m or a change of leadership. I believe the stock will move back to the $6 range once we have clarity on the corporate transition, followed by a gradual move to the high single digits as NATO starts yielding cash flow and the final capacity contract is signed.

I am sure glad that I was able to finalize building my position today under $5, I believe the risk/reward ratio at current levels is very favourable.

Regards,
Nawar

[borne2run]

Nawar, you raise some excellent points in this post and your previous. Although I think you may well be right in the the long term (I have been watching this stock for about a year), I suspect there is still some more short term pain. Why? 1. Funds and institutions are selling; no evidence the selling is over.  Most of today's trading occurred after the price broke below the $5

[pm1231]

I would concur with your comments and add - this was an event driven selloff.   I think there is a lot of speculation that is moving the price downward.  The facts are straightforward.  Announcement on 40% cost overrun was made January 14th - price reacted - bottomed out at $5.48 - then recovered to high of $6.15.   CEO resigned - triggered a 17% drop in price to date

[borne2run]

pm1231, 1. $4 price target - based on chart price and volume patterns, nothing to do with fundamental analysis. 2.  Why fire the CEO before results are announced?  Any investor who knows anything at all about the stock market will tell you the firing would only encourage negative speculation and a stock sell-off. If the results are inline with the latest guidance or a slight miss

[pm1231]

Thanks for your response.  I'm still curious how you got to $4 based on chart/volume patterns...what is your time frame (ie. next few days, months, year end?) a) Set aside that any news this week will render technical analysis moot (either guidance will be positive or negative which will move the SP) - but setting fundamentals aside for arguments sake and focusing on technicals.... b

[pm1231]

one more quick point on the dividend - CIBC is suggesting a "dividend cut is inevitable"...but for those that read the research report - it has to do with thier assumptions on future cashflow related to NATO...specifically - thier thesis is that the abundance of pipelines that will come on board by 2017 will reduce the WTI to WCS spread - diminishing the business case for crude to rail

[Nawaralsaadi]

I am not sure I buy CIBC’s thesis on pipelines undermining unit trains for bitumen transport. According to TORQ Transloading unit trains advantage over pipelines for undiluted bitumen is more than $3 a barrel: https://ww.crude-rail-markets-canada-2013.com/media/downloads/103-day1-1155-jarrett-zielinski-torq-transloading-new-pdf.pdf The above thesis is underpinned by the

[GUY2012]

"Crude-by-rail  surges in the US" .......... Will be the topic of conversation on BNN tomorrow at 7:45 am.  

[borne2run]

pm1231, $4 target, when? I don't do time projections and I am not predicting $4. Just saying that it's a target / magnet. I look for horizontal support and resistance levels. Take a look at a 7 year weekly chart. The low closes in late 2007 and mid 2008 were 4.11 and 4.16. Off the 2008 bottom, the spike closing highs in late October / early November were 4.20 and 3.99 After the double

[ocean112]

it looks like you were right again about a double bottom at $4.80 after todays rally after borne2run predicted $4.00...dont know about the others but you were bang on the technicals and fundamentals over the last 2 weeks with your predictions...haven't seen anymore posts from you - what is your next call?

[ocean112]

that last post was meant for PM123.....he called it last week in one of his previous posts - double bottom at $4.80

[pm1231]

Prediction 1) Short term - steady price climb until next Q1 2014 call in May 2014 - most if not all the bad news was priced into the SP over the last 2 weeks and most of what lies ahead prior to next call are positive news catalysts that will likely drive the current SP higher. a) Ex - Dividend is approaching next week - should be some run up associated with that b) Likely announcement of