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

Pressure tomorrow, recovery delayed

[Nawaralsaadi]

Canexus Q1 report contained a couple of negative developments:
 
- 2 trains/week customer walked away.
- NATO 10.5/week ramp up is delayed to “sometime in 2015”.
 
Those two developments mean that NATO contributions to EBITDA this year will be minimal, while the contribution next year will be lower than expected. Thus, the announced dividend cut is prudent in light of the continued disappointments at NATO. Canexus chemical business continues to be sold, and the reduced dividend can be maintained even if NATO was to produce zero EBITDA contribution.
 
Going forward, I expect the company to divest NATO once a new CEO is hired. It is clear that Canexus is unable to extract the embedded value in the terminal operation; the only question is when and for how much will Canexus divest or partner NATO?.
  
As the stock dive tomorrow, the naysayers and your fear centre will tell you, Canexus is done, and only pain and despair awaits. The reality couldn’t be any more different. Despite the setbacks at NATO, this asset continues to have physical, strategic and operational value to bitumen producers in Western Canada, and likewise for experienced logistics operator such as Gibson or Keyra for whom this facility has immense potential. NATO’s current book value is $450m; I expect NATO to be ultimately divested for $350m to $450m and could go for $500m+ if the facility was to achieve its operational capacity at the time of divesture.
 
Once this facility is liquidated, Canexus will be in great shape, debt will be substantially reduced the company can invest back in its core chemical business, possibly buyback some shares and eventually raising the dividend back.  Thus, for those holding this stock for the long term, nothing really has changed; while it is true that the stock price will probably remain weak in 2014, an eventual path to a full recovery is visible and clear for 2015.
 
Always remember, we don’t invest in stocks, we invest in companies, and if this was truly your private company, you won’t consider selling a single share tomorrow. You would pull your sleeves, get NATO to the finish line, ramp it, contract it, unload it and move forward. This approach is the only viable and logical approach at this stage, anything else would be the action of a speculator and not the action of an investor.
 
Good luck to all,
 
Regards,
Nawar

[jd43xl]

Nawar, it is good to put on a brave face, but there is no way to spin anything positive out of this news release. You should have kept your SGY, sorry to say. CUS shareholders only hope is that they don't cut the dividend further, as that is the only thing CUS has going for it for the next year.

[Kherson]

Looks like the Canexus Pump Gang have finally realized that something is very wrong here. What we now need is for the CFO to be shown the door and the entire BOD replaced. Time for an activist investor to step in and clean house... Nawar, you really blew your call on Canexus. You might want to add another chapter in your soon to be released book... Kherson

[Nawaralsaadi]

 JD, I don’t believe I am spinning anything I am explaining the situation as is. I highlighted the two new negatives, and explained their impact short term and long-term.   As I have said in my post, I am an investor, I don’t invest for the short term, I have gone through similar ups and downs with many of my positions over years. I evaluate my investments from a fundamental standpoint

[jd43xl]

I realise you can afford to wait, but the vast majority of investors are not millionaires, and having their income reduced while at the same time watching their capital evaporated, is not a comfortable position to be in. That is all.

[pm1231]

Let me start by saying, there is no way to put a positive spin on the Q1 announcement.  Bad news all around and it will likely be a selloff tomorrow.  That said - I will illustrate the point Nawar is making for those who get discouraged from temporary price moves. To Nawar's point - you are buying a company.  To go back to my Chorus trade, when it plummeted 50% - I bought a

[whitey4$]

I think the divi cut was priced into the SP before the release and they did make 1.3 million more over last quarter before the one time charge.So  it's going to take some time to get this thing firing on all cylinders but this company is making money. Whitey

[Serge001]

Nawar: Honestly, your upbeat reaction to this is surprising. As someone who writes expert comments on stocks I find that your ownership of this stock has perhaps biased you. I wonder if you would really invest in this stock over some other unencombered stock. The chemical side is down in one important area. The BOD seems irresponsible in supervision. The knee jerk reaction was to fire the CEO