Pat McKeough responds to many personal questions on specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions.
Last week, one member asked about one of Canada’s more intriguing commodity investments—a high-yielding stock that supplies chemicals to the pulp and paper industry and shipping services to the oil and gas industry.
Q: Pat: What do you think about Canexus Corp.? Thanks.
A: Canexus Corp. (symbol CUS on Toronto; www.canexus.ca), produces sodium-chlorate and chlor-alkali products, largely for the pulp and paper and water-treatment industries.
The company’s five plants—four in Canada and one in Brazil—aim to use nearby low-cost electricity and transportation facilities to cut their production and delivery costs. Canexus also provides “transloading” services (transfers of oil and gas by-products, such as butane, from railcars to trucks) to the oil and gas industry from its terminal at Bruderheim, Alberta.
Canexus was formerly a division of Nexen Inc. (symbol NXY on Toronto). It began trading as a separate entity, and as an income trust, on August 18, 2005, at $10 per unit. Canexus converted to a conventional corporation in July 2011.
As a member of my Inner Circle, you will get individual answers to your personal investment questions. And you will see my answers to questions other investors like you are asking. In fact, you will get virtually all the investment advice I have to give. You will have access to all of our advisories – The Successful Investor, Wall Street Stock Forecaster, Stock Pickers Digest and Canadian Wealth Advisor – and full access to the members-only, password-protected Inner Circle section of The Successful Investor Network website.
Although my team carefully researches all the stocks that members ask about, I personally review each and every recommendation. To ensure this close personal attention, only a limited number of members can be admitted to our Inner Circle. Under the pressure of world events, even more investors are asking for my personal investment advice. We are nearing our membership limit already. Click here to secure your membership in the Inner Circle right away.
Commodity investments: Canexus completes ambitious series of plant expansions
In the three months ended September 30, 2011, Canexus’ revenue rose 17.0%, to $139.3 million from $119.0 million a year earlier. Cash flow per share was $0.20 in the latest quarter.
A comparative year-earlier figure is not available because the company converted from an income trust. Canexus’ long-term debt of $414.6 million is a manageable 45.0% of its $922.2-million market cap.
COMMENTS PLEASE
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The company has completed a number of plant expansions over the last 18 months. These should add to its cash flow in the near term. It now expects to produce cash flow per share of about $0.73 this year.
The shares trade at 10.6 times that estimate. Canexus pays an annual dividend of $0.55 with a high 6.8% yield.
In the latest Inner Circle Q&A, Pat looks at whether Canexus can continue to increase its revenue and cash flow with the help of a sustained economic recovery and whether it can sustain its high dividend yield. He concludes with his clear buy-hold-sell advice.
Inner Circle members see Pat’s analysis and recommendations on the stocks that other members have asked about in each week’s Inner Circle Q&A. You can view it immediately when you become a member of this unique investment group. You will get Pat McKeough’s answers to your personal investment questions, full access to our members-only Inner Circle website, and many other membership privileges. Click here to get started right away.
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