I have acquired more units of Harvest and Crescent Point Energy Trust last week. I am hoping for a pull back so I can acquire more units.
I also picked up 40,000 shares of Plexmar just for the fun of it.
Sunday, April 29, 2007
Monday, April 16, 2007
Harvest Energy Trust Upgraded by Canaccord
Harvest Energy Trust (HTE.UN : TSX : $29.62) - Buy - Target: $31.00
Bruce McDonald
Comment: Raising target price due to rising refinery margins
Refinery crack spreads have been rising significantly due to recent refinery outages. Harvest generates approximately 35% of its EBITDA from the North Atlantic Refinery. We have increased our EBITDA estimate for North Atlantic from $319 million to $377 million. Under the NYMEX forward strip, we now forecast 2007E cash flow of $7.37 per unit, representing a payout ratio of 62%, and a debt to cash flow ratio of 2.2 times.
Based on a conservative multiple of 5.0 times EV/EBITDA, we estimate the value of North Atlantic at $1.9 billion. The upstream business is trading at 5.8 times 2007E EV/EBITDA under the forward strip, compared with an average of 6.6 times for average large cap royalty trusts.
We maintain our BUY recommendation and have raised our 12-month target price from 29.00 to $31.00 due to higher refinery cash flow estimates. Our target price is based on a 2007E EV/EBITDA multiple of 5.0 times for the refinery business and a 6.0 times 2007E EV/EBITDA for the upstream business under the forward strip. Our upstream target multiple is a discount to the 6.9 times average target multiple for large cap royalty trusts, given Harvest's shorter upstream asset RLI.
Bruce McDonald
Comment: Raising target price due to rising refinery margins
Refinery crack spreads have been rising significantly due to recent refinery outages. Harvest generates approximately 35% of its EBITDA from the North Atlantic Refinery. We have increased our EBITDA estimate for North Atlantic from $319 million to $377 million. Under the NYMEX forward strip, we now forecast 2007E cash flow of $7.37 per unit, representing a payout ratio of 62%, and a debt to cash flow ratio of 2.2 times.
Based on a conservative multiple of 5.0 times EV/EBITDA, we estimate the value of North Atlantic at $1.9 billion. The upstream business is trading at 5.8 times 2007E EV/EBITDA under the forward strip, compared with an average of 6.6 times for average large cap royalty trusts.
We maintain our BUY recommendation and have raised our 12-month target price from 29.00 to $31.00 due to higher refinery cash flow estimates. Our target price is based on a 2007E EV/EBITDA multiple of 5.0 times for the refinery business and a 6.0 times 2007E EV/EBITDA for the upstream business under the forward strip. Our upstream target multiple is a discount to the 6.9 times average target multiple for large cap royalty trusts, given Harvest's shorter upstream asset RLI.
Thursday, April 12, 2007
Bought More Harvest & Crescent Point Today
Today I bought 2,000 units of Crescent Point (CPG.UN-T) and Harvest Energy Trust (HTE.UN).
I also bought 1,000 units of Vermillion Energy Trust (VET.UN-T) too.
Disclaimer;
We are not investment professionals. We often post our own opinions and identify them as such, we reserve the right to change our opinions. The fact that we sometimes disclose when we establish or sell a position in a company is no warrantee that we will publish every trade. We do not warrant that any information that we post is true beyond the fact that it came from whatever source we acknowledge. We may at anytime have or not have an interest in a stock that we discuss. Finally we advise every investor to perform their own due diligence on both the investment products they purchase as well as the people whose opinions or decisions they accept about investing.
I also bought 1,000 units of Vermillion Energy Trust (VET.UN-T) too.
Disclaimer;
We are not investment professionals. We often post our own opinions and identify them as such, we reserve the right to change our opinions. The fact that we sometimes disclose when we establish or sell a position in a company is no warrantee that we will publish every trade. We do not warrant that any information that we post is true beyond the fact that it came from whatever source we acknowledge. We may at anytime have or not have an interest in a stock that we discuss. Finally we advise every investor to perform their own due diligence on both the investment products they purchase as well as the people whose opinions or decisions they accept about investing.
Wednesday, April 11, 2007
Bought 1,000 Units of Harvest Energy Trust today
Today I added to my position of Harvest Energy Trust.
After the market close they annouced that they are maintaining their $0.38 per month distribution. This is one well managed trust.
After the market close they annouced that they are maintaining their $0.38 per month distribution. This is one well managed trust.
Tuesday, April 10, 2007
Plexmar Resources PLE-X
I was very disappointed in Plexmar's press release today. It seemed more like a puff piece. There was no mention of drilling schedules or any other advancement on the property.
I sold all my shares today. I may get back in later. We will see.
Disclaimer;
We are not investment professionals. We often post our own opinions and identify them as such, we reserve the right to change our opinions. The fact that we sometimes disclose when we establish or sell a position in a company is no warrantee that we will publish every trade. We do not warrant that any information that we post is true beyond the fact that it came from whatever source we acknowledge. We may at anytime have or not have an interest in a stock that we discuss. Finally we advise every investor to perform their own due diligence on both the investment products they purchase as well as the people whose opinions or decisions they accept about investing.
I sold all my shares today. I may get back in later. We will see.
Disclaimer;
We are not investment professionals. We often post our own opinions and identify them as such, we reserve the right to change our opinions. The fact that we sometimes disclose when we establish or sell a position in a company is no warrantee that we will publish every trade. We do not warrant that any information that we post is true beyond the fact that it came from whatever source we acknowledge. We may at anytime have or not have an interest in a stock that we discuss. Finally we advise every investor to perform their own due diligence on both the investment products they purchase as well as the people whose opinions or decisions they accept about investing.
Sunday, April 8, 2007
Sound Energy Trust-Very Tempting
I presently hold 5,000 units of Sound Energy Trust (SND.UN). I plan on acquiring additional units as funds become available.
However, the "street" does not like management so I would not expect much capital gains in this investment until commodity prices firm up and the company has some reasonable quarterly reports. However, the 18% yield pays you to wait for the capital gains which will eventually come.
Below is an opinion posted on Investor Village message board which reflects my views.
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SND's most recent guidance was EXTREMELY impressive for a company yielding around 18%.
"It remains our objective to be known as a low-payout trust, and with the distribution cut effected beginning in March 2007, we estimate our payout ratio to average approximately 50 percent for the year. Based on price assumptions of US$55.00/bbl WTI and $7.00/Mcf AECO, our cash flow projections for 2007 are $78.1 million. These funds will enable us to cover distributions of approximately $43.0 million and capital expenditures of $31.3 million without issuing additional equity or increasing our debt levels. "
So SND's all-in POR (capex plus distributions) is projected to be around 95% using a very conservative price deck.
I don't know of a trust yielding anywhere near as much with similar sustainability.
Assuming that same conservative price deck, SND is trading for about 3.1 times cash flow (which is about as cheap as any trust in the sector, and tremendously cheaper than most. The only trusts comparably cheap on this basis are THY and TUI, both of which are total basket cases and understandably sector pariahs).
SND's NAV (as calculated by the company using a seemingly reasonable price deck and 10% discount rate) is 5.05, meaning that SND is currently trading at roughly a 23% discount to NAV. I believe that this is one of the very largest discounts to NAV in the sector.
SND will also be one of the best takeover candidates around when/if the Trust Tax is passed, thanks to their extreme undervaluation and very large tax pools. That's another reason to like the trust imho.
It was encouraging to see Chairman Boyce buy 50,000 units last week.
http://www.canadianinsider.com/coReport/allTransactions.php
That buy reinforces my opinion that SND is very undervalued at its current price of $3.92 and pays $0.055 per month distribution.
However, the "street" does not like management so I would not expect much capital gains in this investment until commodity prices firm up and the company has some reasonable quarterly reports. However, the 18% yield pays you to wait for the capital gains which will eventually come.
Below is an opinion posted on Investor Village message board which reflects my views.
---------------------------------------------------
SND's most recent guidance was EXTREMELY impressive for a company yielding around 18%.
"It remains our objective to be known as a low-payout trust, and with the distribution cut effected beginning in March 2007, we estimate our payout ratio to average approximately 50 percent for the year. Based on price assumptions of US$55.00/bbl WTI and $7.00/Mcf AECO, our cash flow projections for 2007 are $78.1 million. These funds will enable us to cover distributions of approximately $43.0 million and capital expenditures of $31.3 million without issuing additional equity or increasing our debt levels. "
So SND's all-in POR (capex plus distributions) is projected to be around 95% using a very conservative price deck.
I don't know of a trust yielding anywhere near as much with similar sustainability.
Assuming that same conservative price deck, SND is trading for about 3.1 times cash flow (which is about as cheap as any trust in the sector, and tremendously cheaper than most. The only trusts comparably cheap on this basis are THY and TUI, both of which are total basket cases and understandably sector pariahs).
SND's NAV (as calculated by the company using a seemingly reasonable price deck and 10% discount rate) is 5.05, meaning that SND is currently trading at roughly a 23% discount to NAV. I believe that this is one of the very largest discounts to NAV in the sector.
SND will also be one of the best takeover candidates around when/if the Trust Tax is passed, thanks to their extreme undervaluation and very large tax pools. That's another reason to like the trust imho.
It was encouraging to see Chairman Boyce buy 50,000 units last week.
http://www.canadianinsider.com/coReport/allTransactions.php
That buy reinforces my opinion that SND is very undervalued at its current price of $3.92 and pays $0.055 per month distribution.
Saturday, April 7, 2007
Picked up 1,000 EIT.UN on Thursday April 5, 2007
I picked up another 1,000 units of EIT.UN last Thursday before the market closed. I could not resist the 13.5% yield and a 14.5% discount to net asset value plus I get a diversified portfolio of over 60 income producing assets.
I am surprised how weak these trusts are but I am still hanging in there.
I am surprised how weak these trusts are but I am still hanging in there.
Thursday, April 5, 2007
The Right Market at The Right time
Below is an article published by Roger Conrad an American newsletter writer. I think he is being overly optimistic about Canadian Income Trusts but I figure my readers may find his article interesting.
Some of his comments with respect to the Trust tax legislation are out of date so I edited those portions out.
-------------------------------------------------------------------------------
THE RIGHT MARKET AT THE RIGHT TIME
by Roger Conrad Editor, Utility & Income
April 4, 2007
Remember when investors could retire and live well on a modest nest egg? Remember when taxes were only 15% a year, and when you didn't have to worry about losing your shirt before the closing bell?
That way of life has gradually been taken from you. But this letter is going to bring it all back, courtesy of the Canadian government.
They've invented a whole new kind of investment, one that's pulling hundreds of billions of US dollars across the border into Canada today.In a nutshell, Canadian Income Trusts are a brilliant structure that allows a business to avoid taxes--all taxes.
That's one pretty obvious reason they're so popular.The other big reason is that by Canadian law, nearly all the earnings from a trust business must flow right through to its investors, which in this case means you.
You no longer have to settle for the bread crumbs we call "dividends" here in the South 50!Here's how trusts work up North: A trust uses what it receives from its product sales to pay general expenses and service any debt, and it also sets aside a little bit for exploration or development. Trusts are very careful to set aside no more than 15% of their gross profits, so at least 85% normally goes directly to your mailboxevery month. In other words, you usually get a check for about 85% of the true earnings. Sometimes it's near 100%!Life doesn't get any smoother than that.
Canadian income trusts aren't structured for the benefit of their CEOs, but their shareholders.
What a concept!
Canadian Income Trusts: A Screaming "BUY" Opportunity
On Halloween day last year, Canadian Finance Minister Jim Flaherty decided that no more companies should be allowed to convert into trusts and that virtually all existing trusts should lose their tax-exemption starting in 2011.
Four years is an eternity in politics. It gives Canadian authorities plenty of time to allow certain businesses back into the income trust fold. (I'm convinced that what they really want is to restrict the format to the natural resource companies it was intended for--not to kill the trust format altogether.)
A year from now, I bet we'll barely remember this Halloween scare. And look on the bright side: It's hard to lose if you buy in now.
Trust prices have fallen in the face of uncertainty, giving you a great entry point and super-sized yields. Trusts that were yielding 10% the day before Halloween are now paying 12%. The actual businesses underlying these trusts haven't changed a bit. Conservatively run, high-quality income trusts are as solid as ever, and I have no doubt they'll prevail for years to come.
Remember, the current yields still hold until 2011. So the owners of Precision Drilling, just to pick one of my favorites, will still receive 13.2% on their capital for the next four years. And even if they're taxed four years from now, these companies will still be paying yields that dwarf your options in the Dow and S&P. Dozens of trusts now yield more than 10%, some as high as 21%.
Bottom line: I'm pounding the table because there are still plenty of trusts worth buying and holding for the long haul as their businesses grow.
Some of his comments with respect to the Trust tax legislation are out of date so I edited those portions out.
-------------------------------------------------------------------------------
THE RIGHT MARKET AT THE RIGHT TIME
by Roger Conrad Editor, Utility & Income
April 4, 2007
Remember when investors could retire and live well on a modest nest egg? Remember when taxes were only 15% a year, and when you didn't have to worry about losing your shirt before the closing bell?
That way of life has gradually been taken from you. But this letter is going to bring it all back, courtesy of the Canadian government.
They've invented a whole new kind of investment, one that's pulling hundreds of billions of US dollars across the border into Canada today.In a nutshell, Canadian Income Trusts are a brilliant structure that allows a business to avoid taxes--all taxes.
That's one pretty obvious reason they're so popular.The other big reason is that by Canadian law, nearly all the earnings from a trust business must flow right through to its investors, which in this case means you.
You no longer have to settle for the bread crumbs we call "dividends" here in the South 50!Here's how trusts work up North: A trust uses what it receives from its product sales to pay general expenses and service any debt, and it also sets aside a little bit for exploration or development. Trusts are very careful to set aside no more than 15% of their gross profits, so at least 85% normally goes directly to your mailboxevery month. In other words, you usually get a check for about 85% of the true earnings. Sometimes it's near 100%!Life doesn't get any smoother than that.
Canadian income trusts aren't structured for the benefit of their CEOs, but their shareholders.
What a concept!
Canadian Income Trusts: A Screaming "BUY" Opportunity
On Halloween day last year, Canadian Finance Minister Jim Flaherty decided that no more companies should be allowed to convert into trusts and that virtually all existing trusts should lose their tax-exemption starting in 2011.
Four years is an eternity in politics. It gives Canadian authorities plenty of time to allow certain businesses back into the income trust fold. (I'm convinced that what they really want is to restrict the format to the natural resource companies it was intended for--not to kill the trust format altogether.)
A year from now, I bet we'll barely remember this Halloween scare. And look on the bright side: It's hard to lose if you buy in now.
Trust prices have fallen in the face of uncertainty, giving you a great entry point and super-sized yields. Trusts that were yielding 10% the day before Halloween are now paying 12%. The actual businesses underlying these trusts haven't changed a bit. Conservatively run, high-quality income trusts are as solid as ever, and I have no doubt they'll prevail for years to come.
Remember, the current yields still hold until 2011. So the owners of Precision Drilling, just to pick one of my favorites, will still receive 13.2% on their capital for the next four years. And even if they're taxed four years from now, these companies will still be paying yields that dwarf your options in the Dow and S&P. Dozens of trusts now yield more than 10%, some as high as 21%.
Bottom line: I'm pounding the table because there are still plenty of trusts worth buying and holding for the long haul as their businesses grow.
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