KeyStone Financial Independent Equity Advisors

Transcription

1 KeyStone Financial Independent Equity Advisors

2 Overview When Last We Met... What is Fundamental Stock Specific Analysis? Profile of a Great Small-Cap Stock. Strategy Focussed Diversification. Current Investor Environment. 3-4 Stock Recommendations.

3 Update Fall 2011 Small-Cap Conference Selections Company Fall Price Current Price Return Enghouse Systems Limited (ESL:TSX) $9.50 $ % Exco Technologies Limited (XTC:TSX) $3.20 $ % WiLAN Inc. (WIN:TSX) $6.11 $ % Average Return: 28.89% Versus S&P TSX: -0.20%

4 What is Fundamental Stock Specific Analysis? The most effective tool for valuing a business. The value of the underlying business drives the value of the stock. Show me the money!

5 Profile of a Great Small-Cap Stock 1. Strong Balance Sheet 2. Positive Cash Flow 3. Sustainable Growth 4. Attractive Valuations 5. Potential for a Dividend (or dividend increase)

6 Profile of a Great Small-Cap Stock 5. Management Team with a Significant Share Ownership. 6. Business we can Understand. 7. Operations in Relatively Safe Jurisdictions. 8. Positive Industry Outlook or Niche Outlook. 9. Hidden Assets.

7 Wide diversification is only required when investors do not understand what they are doing. - Warren Buffett Focussed Diversification But if you want to beat the market, you cannot be the market. Optimal diversity with 20 stock portfolio.

8 Focussed Diversification Your Small-Cap Growth Stock Portfolio 8-12 Stocks (ex. $100,000 split equally between 10 companies: $10,000 each) Select stocks from a variety of sectors: manufacturing, gold & precious metals, oil & gas, healthcare, financials, technology, retail, etc. and with exposure to a variety of geographic regions: Canada, USA, China, India, other BRIC nations, Europe, etc.) Actionable advice on 3-4 Small-Cap Stocks make sure you complete the process of focussed diversification.

9 Current Investor Environment A hint of rationality creeping back in. For a time, global macro issues took precedence over rational stock specific analysis. Company specific news is again part of the equation, and helping drive equity prices. Stock pickers market.

10 Exco Technologies Limited (XTC:TSX) Price: $4.85 Sector: Automotive Industry Manufacturer - Automotive and industrial die, mould and component maker. Investment Highlights: Good Balance Sheet ($0.44 per share in cash and no debt), Good Growth from Auto Refresh Cycle, Solid Dividend, and Attractive Valuations. Q Financial Results Revenues rose 29% to $58.5 million from $45.19 million in Q Earnings jumped 157% to $5.3 million or $0.13 per share compared to $2.1 million and $0.05 per share in Q Cash on hand of $18 million, or $0.44 per share, and zero bank debt.

11 Exco Technologies Limited (XTC:TSX) Valuations/Fundamentals 2012 EPS Estimate: $ PE is Strip out the $0.44 in cash per share, 8.16 times forward EPS for the operating business. Book value also continues to increase and currently stands in the range of $3.20 per share. Quarterly dividend of $0.03 per share, current yield is in the range of 2.5%. Management ownership: CEO: 23%, Total 35%. Growth Major Auto-Refresh Cycle - Exco s customers now committed and investing heavily in the launch of more fuel efficient powertrain architecture. Mexican operations will turn to profitability in Q2 and for the remainder of the year.

12 XTC:TSX Chart

13 Geodrill Limited (GEO:TSX) Price: $3.15 Sector: Mining Services Contract Drilling (Gold) - leading West African based drilling company currently operating in Ghana and Burkina Faso. Investment Highlights: Good Balance, Global Exploration at All Time Highs (& Growing), Strong Earnings Growth, Growing Drill Fleet (50% in 2012), and Reasonable Valuations Financial Results Revenues rose 56% to US$70.15 million from US$45.06 million in Earnings jumped to US$12.41 million or $0.29 per share from US$5.08 million and $0.17 per share in Revenues were positively impacted by the continuing strong price of gold and the enhanced profitability of mining companies.

14 Geodrill Limited (GEO:TSX) Valuations/Fundamentals 2012 EPS Estimate: $ PE is Management ownership: Total 45%. Growth The number of drill rigs in operation has increased to 26 in Q4 2011, representing a 44% increase from 18 drill rigs in Q All of the company s drill rigs as at December 31, 2011, are currently committed to contracts. Geodrill plans to have 40 rigs operational by December 31, 2012, a 54% increase over Metals Economics Group (TD Securities) estimates global exploration spending increased 50% in 2011 to a new record of $18.2 billion, up from $12.1 billion in 2010.

15 GEO:TSX Chart

16 Athabasca Minerals Inc. (ABM:TSX-V) Price: $0.56 Sector: Industrial Minerals Aggregate - a management and exploration company developing and exploring industrial minerals in Alberta, providing aggregate management for the construction, oil sands, and infrastructure industries of the province. Investment Highlights: Strong Earnings Growth, Attractive Valuations, Business & Margin Expansion, and an Improving Balance Sheet Financial Results Revenues rose 9.5% to $12.1 million from $11.14 million in the Earnings jumped 72.62% to $2.90 million or $0.11 per share compared to $1.68 million or $0.06 per share for the year ended November 30,

17 Athabasca Minerals Inc. (ABM:TSX-V) Valuations/Fundamentals 2011 EPS: $ PE is Improved balance sheet cut debt from $7.8 million to $3.8 million. Based on current cash flow run rate, company could be debt free in approximately two years. Management ownership: Total 45%. Growth Over the next 25 years the Oil Sands Development Group estimates oil sands investment will generate $1.7 trillion in economic activity in Canada Higher Margin Production from its Own Projects.

18 ABM:TSX-V Chart

19 Endeavour Mining Corporation (EDV:TSX) Price: $2.15 Sector: Mining Gold Producer West African gold production and exploration company currently producing gold at a rate of 180,000 ounces per year from two operating mines (Nzema in Ghana and Youga in Burkina Faso). Goal to produce 250,000 ounces of gold annually by end of 2013 from existing properties. Investment Highlights: Strong Balance Sheet ($115 million in cash), Relatively Low Cost Production, Strong Cash Flow Growth, Strong Production Growth and Attractive Valuations. Q Financial Results Revenues rose 34% to $37.96 million from $28.35 million in Q Earnings jumped to $9.62 million or $0.09 per share from $2.07 million and $0.02 per share in Q Cash on hand of $115 million and had drawn $100 million of its $200 million revolving corporate credit facility.

20 Endeavour Mining Corporation (EDV:TSX) Valuations/Fundamentals 2012 Cash Flow Estimate: $0.58 Price to cash flow: Current junior producer trades at an average of approximately 9.0 times 2012 estimated cash flow. Apply 25% risk discount and arrive at a multiple of 6.5 times cash flow. Upside range for Endeavour of $3.75-$4.00. Growth 2012 production: 170,000 to 190,000 ounces, cash cost per ounce $645 to $685. (vs. 87,264 ounces from single mine in 2011). Strong balance sheet: $215 million of cash and credit facilities + $150 in cash flow for 2012 positioned for accretive acquisitions exploration program at Youga mine resulted in the Life of Mine being extended from 4 years to 7.2 years. Agbaou Gold Project - construction decision expected in late Q Capex estimated at $120 million, 100,000 ounces, potentially 250,000 ounces of gold per year by the end of 2013 from existing properties.

21 Thank-you ladies and gentlemen.