uncommonprofits

Suncor was up almost 25% today. This one day rally seems to have outperformed most (if not all) majors whether integrated, midstream, upstream or downstream (natural gas pure-plays included). Perhaps the market is catching on as to how undervalued Suncor is; or is it a more optimistic take on SU’s greener initiatives (maybe even Hydrogen) considering the new presidency? Suncor (and other oilsands players) are sitting on massive potential if/when Hydrogen moves forward. The new presidency could be the catalyst. If something on this file passes through Congress - I would expect the Canadian government to follow suit (regardless who is in power here). With all the infrastructure required, this would be a very positive dose of stimulation on both sides of the border. Even the present right leaning Alberta government is starting to catch on to this Hydrogen potential - and calling on Ottawa to supercharge a national strategy. Obviously not in play yet - but the odds of an accelerated hydrogen strategy perhaps increased over the weekend somewhat? Bottom line is Suncor pretty much has all sides of the energy puzzle covered. Even electricity. Once complete in a couple years, their 800 MW co-gen project is forecast to produce about 8% of Alberta’s power (further displacing coal). Combined with SU’s renewables, this should leap-frog them into the #1 electricity producer in Alberta. The recent market pricing hasn’t been reflecting this either. Nice to see a double or triple dose of reality today - but it’s still very cheap in my opinion.

Suncor is a new addition to my portfolio this year and seems very underpriced to me. The dividend cut is the first that I can find in their history dating back to 1992. The company’s growth up until now has been more than impressive. Full period 1992 - 2019. SU increased the dividend by 12.8% annually. (Early years less, later years more) 1992 - 2002. Dividend increased at a more moderate pace of 2.7% annually. SU IPO’d in March 1992 at a split adjusted price of $2.38. The average price for 2002 was $13ish. So roughly 17-18%-ish annual increase - during a mostly depressed oil market (at least until 2000 or so). This is not the integrated Suncor of today and leads me to think they were investing more toward growth than dividends, etc (but I didn’t delve further). 2002 - 2019. Dividend increases every year amounting to an average of 19.2% annually. First part of this period is during a great bull oil run. 2009 - 2019. Start entering a more difficult oil market. They acquire Petro-Canada in 2009, perhaps creating some tailwinds? 2014 - 2019. Very difficult period for Canadian oil during this stretch. But SU perseveres with annual ave dividend increases of 10.5% up to 2019. (In fact another 10.7% increase in early 2020 that was very short lived). I know the above is a rear view look, but I am hard pressed to find another high quality fully integrated energy company with similar historic execution - and especially priced this cheap. Historically, they have been opportunistic in difficult times (Petro-Canada is just one example). But even without such an acquisition for a tail wind they have some growth initiatives in the works with little ‘tie-in’ to the price of oil. While they have pulled back on these growth expenditures some by extending out completions -- they are still projecting an additional $2 billion in free funds flow by 2024/25 ($1 billion of this projected for 2023). These are some very good returns - I don’t expect all free funds to make their way into the (current $1.3 billion) dividend/buyback pool but a decent portion will if they can execute. From this low dividend base I can see a return of the historic dividend growth for the next several years even if the current depressed oil market persists. Below is a compilation of SU’s full dividend history (split adjusted). It’s been quite consistent and stable (up to this cut) - no special payouts as I recall going through the history. If one were to include 2020 on the list it would be $1.095 assuming the current payout for Q4 (but of course the current annual payout is $0.84). 2019 > $1.68 2018 > 1.44 2017 > $1.28 2016 > $1.16 2015 > $1.14 2014 > $1.02 2013 > $0.73 2012 > $0.50 2011 > $0.43 2010 > $0.40 2009 > $0.30 2008 > $0.20 2007 > $0.19 2006 > $0.15 2005 > $0.12 2004 > $0.115 2003 > $0.09625 2002 > $0.085 2001 > $0.085 2000 > $0.085 1999 > $0.085 1998 > $0.085 1997 > $0.085 1996 > $0.080 1995 > $0.07125 1994 > $0.06625 1993 > $0.065 1992 > $0.065

It seems most of that big volume was being bought long. Very little of the short position was covered - just slightly more than 100k. There remains a 3.3 million short position outstanding. Short Positions for GVC Symbol Report Date Volume Change Shares Issued % Float T : GVC 2015-10-31 3,323,600 -103,400 89,236,030 3.72 T : GVC 2015-10-15 3,427,000 -20,700 89,236,030 3.84 T : GVC 2015-09-30 3,447,700 -9,300 89,236,030 3.86 T : GVC 2015-09-15 3,457,000 -85,000 89,236,030 3.87 T : GVC 2015-08-31 3,542,000 -1,900 89,236,030 3.97 T : GVC 2015-08-15 3,543,900 1,400 89,236,030 3.97 T : GVC 2015-07-31 3,542,500 348,200 89,236,030 3.97 T : GVC 2015-07-15 3,194,300 360,100 89,236,030 3.58 T : GVC 2015-06-30 2,834,200 106,200 89,236,030 3.18 T : GVC 2015-06-15 2,728,000 22,900 89,236,030 3.06

I found where there is indication of the multiples paid for the two GVC divestitures I mentioned totalling $24 million. For the first one refer to the 2014 annual report where $1.4 million is reported as discontinued EBITDA. This would seem to relate entirely to the trade media assets sold for $19.65 million and associated real estate of $8.35 million for a total of $28 million. If one were to assign zero EBITDA toward the real estate operations and rather all of it to the trade media assets it works out to a multiple of 14.0x EBITDA ($19.65/$1.4). If part of the EBITDA applies to the real estate value then the multiple would actually increase. For all intents and purposes though, assume they sold these trade media operations for at least 14x EBITDA. The second one involves the sale of Iron Solutions for $4.3 million. This is the one where I recalled the commentary I referred to (keep in mind that Iron Solutions fit their renewed focus as it is a seller of integrated software services for agricultural equipment dealerships): While Glacier intends to continue its growth in the agricultural sector and expand its position as a leading provider of agricultural information, it was deemed prudent to sell the interest in Iron Solutions at an attractive valuation, and focus efforts and capital on organic growth and acquisitions over which it has greater operational control. The transaction reaffirms the value creation potential of Glacier's overall focus on the business information and rich data space. While the above two divestitures might be opportunistic by nature and perhaps exceeds the average multiple of their core base - it gives a bit of an idea as to the high end multiple that GVC indicates.

TRI actually trades at about 15x EBITDA. But we are in a somewhat over-valued market that over time will come down as interests ease upward. 10x is a more cautious multiple - but for more leeway I am figuring 8-12. This is more or less in line with GVC's guidance (albeit at the lower end). We do not have much in the way of figures - but the two related divestitures GVC did back in Dec & Jan totaled $24 million of proceeds. I seem to recall them commenting they were sold for very good multiples -- pure speculation, but my guess is around 12-15x. Wish I could track down something more accurate though.

I am mainly reading between the lines in the company's recent commentary: Efforts will be made to restructure community media assets to create greater direct value and simplicity for Glacier, or monetize where appropriate value can be realized. Even the un-bolded part seems they are being restructured for an eventual sale. Glacier's core focus is to operate as an information and marketing solutions company pursuing growth in sectors where the provision of essential information and related services provides high customer utility and value. If this is to be the 'core focus' - I think the ultimate goal will be to make the distractions go away. Management is seeking to reduce senior debt levels to less than $50-million, such that continuing debt can be supported by the business information operations, and the community media operations can provide free cash flow for investment purposes, further debt reduction and financial flexibility. Again emphasis is placed on the business information operation. Selling of the community papers may not happen overnight but I think monetizing them is the preferred choice provided they can get the appropriate value. They wish to increase the size of the business info segment as compared to community newspapers. Selling the newspapers in one fell swoop would do this rather dramatically. Monetizing a little at a time would obviously be more gradual. How quickly the newspapers are sold off remains to be seen - but I think it will happen. The quote from Lester Asset Management that sculpin posted above is interesting confirmation. They may know more direct info than my simply reading between the lines - but I am not sure.

A few scenarios with regards to the CRA claim: - They negotiate a settlement. The 50% deposit might be sufficient - it might not. If CRA stood firm in such a settlement and required substantially more than is presently deposited one would think they would litigate to the fullest extent. - Litigate & Lose >> full payment would not be due for several years down the road as this would be a drawn out process. - Litigate & Win >> Gain back their deposit but not until several years down the road. Assign a 33.3% chance to each of the above scenarios: - 66.6% chance little if any more contribution will need to be made to CRA. - 33.3% chance they need to double up on their present deposited amount (but will be several years from now) - 33.3% chance they could actually have their deposit returned (but several years from now) The above odds are of course an arbitrary 1/3 chance of each - which I think could be conservative. The cost of litigation and it's related distraction have not been figured in. In all likelihood - the above underestimates the chance of a negotiated settlement. Regarding secular decline - this becomes more of a non issue as they divest and monetize community newspapers. Such divestiture(s) also raises capital to fund acquisitions and keep the debt level in check. Outside newspapers - I also don't think they are finished yet with certain business info, etc divestitures (seems to be a select few operations remaining that do not meet the stated transformational growth focus strategy) - helping them further to attain the goal of $50 million net debt while still being able to make more focused acquisitions. I sold off my GVC position early in the spring - moving most of it to GCT.C. But I was buying back significantly into GVC at 60-64 cents (less than half the price I was selling it for back in the spring). If they were to ever divest the community newspapers completely - this could have the effect of paying off debt entirely, meaning one was buying the growing business information segment for slightly more than 2x EBITDA (today's pricing perhaps brings that multiple up to almost 3x). It's probably worth 8-12x, maybe more.

Linked below is a very thorough analysis of RNK on Seeking Alpha. Note the very cautious valuation particularly with regard to the feature film (Ratchet and Clank) which is still expected in theaters this year. While the value of future feature film cash generation is acknowledged - the estimated worth takes a very cautious approach in valuing Only the cash proceeds of the R&C movie based on certain scenarios (less the cost to produce). It's a very good write-up. http://seekingalpha.com/article/3081746-rainmaker-entertainment-undiscovered-animation-studio-with-large-value-dislocation

While this analysis might make a few valid points - it is also quite misleading on a few accounts. Firstly, by stating in the summary that Oil related/western hotels accounted for 52% of HLC's 2013 NOI (ie. seemingly referring to Alberta + BC). Yes, he acknowledges the Royal Host acquisition - but not the magnitude that it has changed the geographic distribution that he refers to. Almost 2400 hotel rooms were added midway through 2014 (2000+/- of these are in Ontario, the remainder Nova Scotia, New Brunswick and Yellowknife). In 2013 the company's total room count was only 1798 (about 1835 including their JV's). This is a 130% boost in hotel room count vs 2013 - and this boost is mostly eastern with pretty much zero exposure to O&G. He seems to suggest that from historical profitability the Western Hotels are more profitable than those in the east. But consider that while 52% of 2013 NOI came from Alberta + BC - the actual room count represented about 67%. Perhaps the margins have actually been lower out west due to a higher cost of labour due to shortages, etc? He does mention that cheaper gas could actually boost tourism. I would add that this potential boost is magnified even more considering the significant drop in the Cndn dollar. While he does say that the company is making good progress on improving profitability of the newly acquired mostly eastern properties - he seems to discount continued progress going forward. He is missing the huge fix up potential here and the divestiture potential of practically $1/share of assets acquired that generate very little income. He is also missing out on the point that the Travelodge franchise rights they own in Canada (that came along with the Royal Host acquisition) are carried on the books at an amount equating to about $0.75/share equivalent and requires very little capital to expand. The company's debt load and the make up of the company are not what he makes it to be. The bottom line is the far two western provinces now account for <29% of the total hotel count. That's a significant drop from the 67% they were at in 2013 when these western hotels accounted for 51% of NOI. And one should keep in mind the 2 BC hotels (which account for 6 of the 29 percent) are located directly on the official Alaska Highway. And again as mentioned before, 70% of the Alberta room count is located on the main route leading to the official Alaska Highway. Yes he is right there could be a boost to tourism for the company - but the catalysts are more than just cheap gasoline. He is also right that progress seems to have been made in the newly acquired mostly Ontario hotel expansion - but I think there is a lot further potential ahead. I own some CKI but am mostly concentrated in HLC. At this point I don't understand TVK so don't own it directly.

Yes, that is correct. They are not travelling to Alaska to visit these places, they are merely passing through for one nights sleep and back on their journey in the morning. Mile Zero of the official Alaska Highway begins at Dawson Creek, BC. The two hotels owned by HLC in BC are located north of Dawson Creek on the official Alaska Highway. The fastest route to Dawson Creek for a great majority is through Alberta via Calgary >> Edmonton >> Grande Prairie >> Dawson Creek,BC. This route is all dual lane up to Grande Prairie (akin to an Interstate). Grande Prairie is the largest city between Fairbanks and Edmonton. Whitecourt is the largest town/city between Grande Prairie and Edmonton. An option for those in the extreme western states might be the very scenic Cassiar Highway in BC. This route does not take in all of the official Alaska Highway - so some will opt to go up one way and come back the other. While HLC doesn't have a lot to offer those doing the trek via RV - this little snippet from an RV park (located in Whitecourt) might give you an idea as to the welcoming of American tourists along this route each summer: "Each year we warmly welcome many American travelers making their way to untamed and breathtaking Alaska. Our large pull-through sites allow these often weary travelers to come in for the night and drive away the next morning quickly and efficiently. Many stay longer to recharge their batteries, do some laundry, and visit Walmart, before making the next leg of their trip to Dawson Creek, which is an easy days drive away. We are located midway between the Calgary area and Dawson Creek." http://sagitawahrv.com/ratesservices.html

EliG is correct. The part of the presentation you are referring to relates to the company in 2013 (pre-Royal Host) per the footnote in that presentation. If you go to their website - about 23% of the current room count is in Alberta. As for the amalgamated NOI it could be more, it could be less. One can draw some conclusions from Q3 2014 where Royal Host was consolidated for all but a day or two in the quarter: 2013 Q3 Income (before interest, G&A, Income tax) was $4.32 mil IF 41% of this was Alberta - then that would represent $1.78 mil coming from Alberta hotels in 2013 but up this by 8.75% as they bought a Days Inn in Whitecourt and sold a Holiday Inn in Kamloops (for a better return prior to the quarter - upping their Alberta Room count to 982 from 903) So had they owned these extra hotel rooms in 2013 - adjust this to about $1.94 mil. 2014 Q3 Income (before interest, G&A, income tax) was $9.20 million $1.94/ $9.20 = 21% Alberta The above percentage needs to be adjusted for: - any increase or decrease in Alberta profitability or inflation from 2013 to 2014 - any franchise related fees to travelodges in Alberta which they now own the franchise rights for in Canada. - JVs - future fix up and margin improvements to the Royal Host -- exclusively eastern weighted portfolio. There seems as much (if not more) reason that this number could decrease than increase if adjusted. Bottom line is that the 41% Alberta weighting mentioned in that presentation has been decreased by roughly half (plus or minus). Very little if anything is Oil Sands related. All of the hotels are located well outside the Fort McMurray region. Most are located in the Montney and Duvernay (said to be world class O&G regions - maybe more weighted to gas though). Slave Lake is the exception and they own two hotels here - this town is weighted a bit more toward forestry than O&G (tourism is also becoming an increasing part of this town). While there is plenty of scare in Alberta right now that can and probably will spin off into the forestry and tourism industries - my own feeling is the Oil Sands is the most vulnerable (they are reasonably sheltered from direct fall out of the Oil Sands itself). Here is something to consider though as far as a bit of an offset to what is going on. 4 hotels are located in Grande Praire - 2 in Whitecourt. These 6 hotels account for 70% of the Alberta room count. These two regions also have significant forestry industry and just importantly are both located along or just off the Alaska Highway which gets a lot of American tourist traffic in a normal year which should increase quite a bit this summer if gas prices stay low and American dollar high. The two hotels they own in BC are also on this Alaska Highway route. Perhaps only a 2 or 3 month part of the summer - but something else to mitigate possible weakness ahead.

Not sure why the significant delay - but Escape is finally being released to theaters in the UK this weekend. France on May 7. http://www.imdb.com/title/tt0765446/releaseinfo Box office revenue could be limited If already released on DVD to these countries - perhaps some figures will be out in a week or two to see how the UK opening went. There was a little bit of fanfare coinciding with UK opening weekend: http://www.dailystar.co.uk/news/latest-news/367497/Stephen-Fry-and-Olivia-Coleman-turn-out-for-Escape-From-Planet-Earth-screening

Another PlayStation title taking to the Big Screen with RNK again taking a lead role both in producing and investing in the animated film. Sly Cooper is scheduled for early 2016 theater release. http://www.rainmaker.com/?/site/news/86 As I write this, the movie trailer is not posted on RNK’s website yet — but has been included with several press releases today such as this one: http://www.digitaltrends.com/gaming/sly-cooper-movie-stealing-theater-screens-early-2016/

I don't see this as a slam dunk for Canada Revenue Agency. In fact to this point the only thing disclosed so far is that CRA has 'proposed' to issue a notice of reassessment. Obviously, there is some correspondence going back and forth before they actually do. Should CRA go forth and issue a notice, then perhaps the odds of a negative outcome increase. However, it will be a long drawn out process that will take years. I don't believe they set up this tax loss structure just because they could get away with it and CRA would never catch on. They likely have a strong defense. It could take a very long time before we know if they have actually been bitten by this and to what magnitude if any. As for converting the GVIC ownership structure over to GVC - I kind of wonder if the opposite might be true. I wonder if this could possibly be detrimental to their defense they now have ongoing with CRA. Perhaps any decision on such a conversion would be best put off until this issue is resolved with CRA. Then again whether they were to do such a conversion or not - might make no difference at all to their defense - but it's something to think about.

Tim sold the exact same number of common shares to Cavan (whereby Craig Graham is a shareholder, director and officer). http://www.marketwire.com/press-release/cavan-consulting-limited-announces-acquisition-common-shares-rainmaker-entertainment-1796679.htm So with the two combined sales, Tim has sold about 3.55 million common shares in RNK -- but retains at this point about 1.963 million common plus $2.25 million debentures convertible into 11.25 million shares. http://sedar.com/GetFile.do?lang=EN&docClass=13&issuerNo=00027273&fileName=/csfsprod/data143/filings/02071790/00000001/i%3A%5C1SEDAR%5C549371%5CAEWR%5C052013AEWRRainmaker.pdf So while RNK structured this in their best interest - Tim ends up creating some great value within his partnership in tax losses. Just guessing - but I assume the $635 K increase in debentures mentioned in the above relates to the debentures that McElvaine back stopped -- if so this amounts to almost 3.2 million if converted. This is almost as much as the 3.55 million in common shares sold. So very little is lost, and so much is gained through the tax loss created (perhaps around $8 million assuming an average cost base of just under $2.50ish ??). So while making a nice couple transactions to benefit the McElvaine partnership - RNK is being provided some great benefit here as well. Having Beutel on board along with the others is very good to see. And having our CEO now own a significant ownership position is a good vote of confidence and commitment. I really like the ownership balance taken place here, and the fair and equitable means in which it happened.