Investment Q&A

Q: Peter & Team, I think we do have a problem at CRH and it has to do with the minority interests (MI's) in that they are getting way too much of the business, possibly because of mix or maybe the joint ventures are the better operations.

$000
Earnings

                    Q1 '17               Q1 '16
Net Income        $3302                $ 3031
Att. to CRH          1542                  2956
Att. to MI's         1760                 75

CRH net income down almost 50%. How is it possible that the MI's can be getting more of the profit than CRH shareholders?

and

Cash flow

Cash flow provided 7991                 5524
Paid to MI's             4011                  627

Share to MI's             50%                  11%

Cash paid to the MI's is more than their share of the profits.

Year ago this was not an issue. Now it is!

What should we do here? The business as a whole looks fabulous, it is in a good space with strong and meaningful secular tailwinds, it has a huge 35% conversion of sales to cash flow, but something looks very wrong with the business model and the sharing of the cash and profits.

Kindly advise. Thank you. Keith

Q: Hi Peter and Team,
Is it CRH overvalued now? It seems that investors do not like the financial result and outlook. Your opinion please.
Thanks

Q: In your last answer on crh do you take into account the correction issued by the company regarding its first press release ?

Q: CRH down another ten percent today. Can you please comment on this after the CC. Do you still recommend holding this.

Q: Sorry, another CRH question. The stock is down after what looked like a solid earning quarter. is there something in the earnings report that investors do not like? Your thought on the continued selling pressure.

Q: Sorry another comment that Members owning CRH may find comforting and certainly shows the clear difference between it and Valeant/Concordia:

"At March 31, 2017 , the Company had $9,232,240 in cash and cash equivalents compared to $9,507,004 at the end of 2016. The decrease in cash and equivalents is primarily a reflection of cash generated from operations, less cash used to finance acquisitions during the first quarter of 2017"


Looking at the Cash Flow Statement: they generated CF-Op of $8M and acquisition cost was $7.5M. Net Debt did go up ~$3M to fund some distribution to non-controlling interest (need to dig more into note 4 for details).


The main point through is CRH earns real cash and finances its acquisitions mainly from its cash flow and not from out of control debt - as the Motley Fool article was suggesting.

Q: Your analysis and thoughts on CRH's quarterly results?

Thanks!

Q: You mentioned CRH Management will hopefully address the short report in their Management call tomorrow. They already took a first jab in the quarterly release:

"While acquiring less than 100% of an anesthesia business will obviously create more rapid increases to non-controlling interests versus purchasing the entire business, our joint venture strategy does significantly increase our opportunities for accretive acquisitions. As a result, our acquisition pipeline remains strong and we are confident in our ability to deliver on our growth strategy."

Q: it looks like crh beat earnings and revenue big time, your take. dave

Q: Should be interesting, can you comment on the earnings when they come out. Thx

Q: Does CRH report earnings before the open of markets, during the day, or at the end of the day after markets close.

Q: So last night Motley Fool Canada took down their article from yesterday that was bashing CRH and comparing it to Valeant. Then the author releases a new version of the article that is actually promoting CRH for the most part. I did notice in the original article that they listed Motley Fool (US) as owning the stock which struck me as odd. I wondered why Motley Fool would bash a company, contributing to its decline while its parent company is long the stock. Feels like maybe the author got a big slap on the wrist and was forced to instantly retract the article? Very weird.Would there be any legal implications there, seems like manipulation. They are bashing a stock one day, and pumping it the next.Not that I had any respect for Motley Fool but I've defintitely lost the little I did have for their stock reports.

Q: The company is releasing earnings 2 months after the last release and not the usual 3 months. Is this a concern? Thank you.

Q: Being only a few days from earnings release. Wouldn't CRH management be in the blackout period? Releasing a short report when management potentially cannot respond (not sure about this), would that not technically be a violation of the CFA ethics code of conduct under market manipulation? Would this not trigger some kind of review by the CSC or another regulator for taking advantage of the inopportune timing?

Q: With CRH down drastically two days in a row on two short reports, management has not made a response which leads me to believe these reports are probably true which will result in a poor earnings report. Shouldn't they have responded. Your opinion please. Thanks

Q: Hi Peter and Team,

Could you please comment below The Motley Fool's analysis about CRH.
"CRH made three acquisitions in 2016 for controlling interests of anesthesia companies with two of the acquisitions for 51% of the targets, and the third acquisition for approximately two-thirds of the business.
Because CRH now owns more than 50% of these companies, it is able to include 100% of the revenues and earnings from these firms on its balance sheet, boosting total earnings substantially while distributing only approximately half of the acquired value to shareholders.
On the bottom of the financial statements, we can see that net income “attributable to shareholders” was $10.6 million in 2016 and net income “attributable to non-controlling interests” was $5.5 million, meaning more than a third of the net income produced by CRH in 2016 is not attributable to shareholders of the company.
It is important to differentiate the two; looking at the financial statements from a high-level perspective, the numbers may seem impressive, and the growth rates often stated on press releases or in the media may make investors wonder why they didn’t pick this “growth gem;” however, the numbers used are clearly artificially inflated by more than one-third, and the overall indebtedness attributable to shareholders is more than one-third higher.
Shareholders who are not careful to take note of the adjustments may be disappointed when they understand that their overall equity as a percentage of the total company is actually shrinking.
The percentage of net income attributable to shareholders has been decreasing at an alarming rate due to the manner in which CRH is completing its acquisitions. As of Q4 2016, over 45% of the company’s quarterly net income was not attributable to shareholders, meaning in 2017 investors can expect to cut most of the numbers shown on the financial statements in half for the sake of accuracy."

Thanks

Q: How to catch a falling knife and when do you know it's hit the floor?

In your opinion, considering all the media, short attack pirates, and the massive volatility that have come to life so quickly. How would you play picking up CRH medical? I see technical levels at 7.99 for different measures as a resistance level. Or perhaps it would be prudent to spend time on the sidelines and watch this one. Or would it be best to watch the moves of institution buying as a sign of confidence for those who have done their homework vs. stop losses begetting further selling? I see this company as having a lot cleaner financials, so I don't feel too worried taking a small position at $8.00.

Q: I realize you guys have to be diplomatic, but the rationale that the shorts (different people in each case, by the way) were right on other stocks so they are probably right again is laughable. And it should be pointed out that just a month ago Motley Fool (not exactly the cream of the investment crop anyway) issued a very positive report on CRH.
http://www.fool.ca/2017/03/22/investors-forget-valeant-pharmaceuticals-intl-inc-check-out-crh-medical-corp-instead/

Thanks,

Alex

Q: I'm dowm 18%. Should I fold my hand on this?

Q: April 24/17 ? Asked by david:

Shorts right on cxr, vrx, any big loser:
All the above would have closed below their 200 day moving average at some point. Selling at that point would have eliminated any big loser.