Investment Q&A

Q: Hi Peter, As for Paul's holding of ALC.DB, I see a few more considerations for the analysis of this investment. Yield to maturity in 4 years at 2.5% assumes the debenture will be redeemed at par then, which is unlikely if the normal growth assumptions for the shares are applied and the debenture, now at a 12% premium to conversion, will be in the money, and the current $113 price will be a bargain then if the shares were to lift to, say, $24. If that is to be the route the shares will take, then conversion at a later date will be more advantageous or sale at a higher price for the converts, and a current yield of 5.3% is a fairer comparison to the share dividend of 1.8% than YTM of 2.5%. Only a flatlining or downtrend of the common would cause redemption at par in 2018.

A current 12% premium to conversion isn't large compared to lots of others including converts of FCR and MRT that I hold in RRSP where I tax shelter the interest, which is more advantageous than a taxable account. In fact I might switch for the lower conversion premium. If I'm making any false assumptions here, please correct me. Thanks, J.

Q: ALC.DB question of Apr 26/14 asked by Paul:

"Converting ...you would need to sell the debentures at the quoted price, buy the stock at the current price, pay taxes if you sold the debentures, and pay two commissions"

I don't follow the above answer. There are no commissions to convert as the broker informs the transfer agent and the shares are credited to the account. I have never seen a conversion fee at full service brokers such as McLeod.
The current yield is 5.30% (6/113) versus 1.77% for the common.
The yield to maturity losses will be gradual since the bond has 4 years to redemption. The bonds will hold up better than the common on the downside because because of embedded 4 year warrant in the bond. Conversion destroys the embedded warrant. Publish at your discretion.

Q: Does DHX own the rights to Johnny Test? This show is all my grandkids favourite. For example if they decided to start making figurines of Johnny Test and other characters would that not be a call to Disney to buy DHX for their huge potential? Or ignore if this is a ridiculous question.

Q: Hello Peter,
Can I have your view on the recent thumping ( down 10+% in a day) of PRE on the heels of its Q1 report? I feel the fundamental metrics seem positive, despite the company`s involvement in a geopolitically risky environment. I was initially planning to hold my position in PRE for a 2-3 years.
Thank you Peter!

Q: Hello Peter :
I have had very little experience with Convertible Debentures and need some advice.
I own $50,000 of Algoma Central Convertible debentures ALC.DB which I bought at $108.00 a while ago. My Book Value is $54,000.00 and the current Market Value is $56,550.00 for an unrealized gain of $$2,550.00, and an annual dividend income of $3,000.00 for the next 4 years.

The National Post give this information about ALC.DB :
Coupon 6.00%
Maturity 31Mar18
Last Price $113.10
Parity $100.71
Yield to Maturity 2.50%
Premium 11.91%
Conversion Ratio 6.49
Conversion Price $15.40
Current share price [ALC] $15.79

I would be quite pleased to own the common shares for a very long term hold unless there is an advantage to holding the debentures.
At a Conversion Ratio of 6.49 am I correct that I would receive 3245 common shares?
Does this mean I could now advantageously convert my debentures into shares. If I am in effect just earning 2.50% yield now and the yield on the shares is 1.77% there isn't much difference and the share dividend has the dividend tax credit advantage.

The debentures are held with Scotia McLeod so I suppose there is a fee for doing the conversion, and would I be subject to tax on the unrealized gain if I do the conversion?

Would you go ahead with the conversion or just wait and hold the debentures? Any other information or advice you could provide on this issue would be appreciated.
Thank you............ Paul

Q: TOS This company is trading like it is going out of business at 52 week low. Would you recommend sell or hold. Thank-you
Best Regards
Harold

Q: I took a flyer on PRY and have lost most of my capital at this point. Though I am modestly cheered by some insider purchases in the last few weeks, I think I am ready to seek greener pastures. Do you have any reasons I might want to reconsider sale at this point? Thanks for a great service!

Q: I have an opportunity to purchase shares in the pending IPO spinoff of PrairieSky from Encana. Should I take advantage of this opportunity? The rumour is that there will be will an overwhelming demand for this IPO.Thanks for your opinion.

Q: Espial Group (T.ESP) Q1 results on Wednesday indicate a company now hitting the sweet spot. At what market cap would you consider doing a detailed report on it?

Q: Hi team:
DND is slowly making a recovery, would you rate this as hold, buy or sell ?

thanks!
Michael

Q: Do you have a comment or any insight into the repercussions of the court finding against MDA's subsidiary today in California (patent infringement). Is this likely to be a continuing drag on the stock until finally resolved?

Q: I noticed today that MDA lost a case against Via Stat for breach of contract and patent infringement. The stock is getting hit hard today. Will this effect the stock long term?

Q: Hi! I hope yesterday was fun :-) Re Qualcomm (QCOM, I wondered if you had any thoughts about the class action suit, announced yesterday by Harwood Feffer? There's no further info on either company's website, and I can't gauge how much of a threat it is... Do you have any information? Thanks, as always! kate

Q: Please provide your expert opinion of the effect on the stock price basing on the following actions.Will use XSR as an example. Today it closed @ $8.01(up.04) on unusually very high volume of 1.33m shares.Daily chart shows 19.3k up volume vs 1.3m down vol.(including sale of 1.248m shares @ $7.97) Thanks a lot

Q: Hello;
What is your opinion on the following;
RE (Rock Energy)
TVE (Tamarack Valley)
RNE (Redknee)

Thank you,
Steve Mason

Q: I just read the following release: (COS): Canadian Oil Sands Limited ("COS") (TSX:COS) today announced that Syncrude has begun unplanned maintenance work on Coker 8-1.
Is this likely to affect COS price / dividend? Thank you.

Q: Hello 5i,

I was wondering what percentage of Sylogist's (SYZ) revenue is relatively fixed or recurring in nature? I noticed they haven't announced any new contracts recently. Would the contracts they announced last year still largely be in effect this year?

Their 2013 Q4 numbers were a step change above that for 2012 with benefits being realized from the Epic Data aquisition. Do you expect this to continue and what would you expect in the way of EPS for Q1?

Thanks

Q: re FCU Fission reports 152M Shares outstanding Sept 2013, and 392M including 60M options and Warrants as of Apr 4, 2014. Would this cause the current drop in value to $1.32 over the past few weeks. Is this a good point to add to current holdings.

Q: Hi,

Can you provide me your opinion on Chesswood (CHW). I bought it at 15.25 and it is down since then. It also pretty volatile. Is it a good company to hold in a portfolio. What kind of risks do you see in this company going forward. Also with its small market cap could it be a potential takeover candidate for someone interested in leasing business. Thanks

Q: Hi Peter and 5i Research team,
Can you please provide an update on Melcor, MRD. I am up approx. 25% and wondering if we can expect continued growth in midterm. In your opinion is this company still a great long term investment? Any concerns? Thank you. Linda