Winpak Ltd

Competitive Pricing Pressure, High Valuation: Winpak Ltd (TSX: WPK) is a leading manufacturer and distributor of high-quality packaging materials and related packaging machines. Winpak’s offerings are used to protect beverages and perishable foods. Also, it used in health care applications. The company operates 12 production facilities in the North America and supports customers around the world.

Recent updates:

• Winpak is set to announce its first quarter financial result on May 5.

• On April 2, Winpak announced that it has postponed its annual general meeting (AGM) from April 22 to June 26, 2020 at 11:00 a.m. (CDT).

• On April 1, Winpak announced that its operations are classified within ‘essential services’ and all its production facilities are operational. Also, the company is witnessing sustained demand for its production from customers.

Financial Highlights: Winpak reported revenues of US$ 873.8 million, down 1.8% y-o-y owing to the decline in volumes primarily in the rigid packaging and flexible lidding segment. Volumes declined 1.3% y-o-y, reflecting about 7% decrease in the rigid packaging and flexible lidding segment. Meanwhile, lower selling price and adverse mix had a negative impact of 0.7% on the top line. A decrease in the specialty beverage and retort tray shipments is to be blamed for the decline. The flexible packaging segment saw 4% growth led by heightened activity at key accounts. The packaging machinery operating segment saw volume growth of 9%. Despite dip in sales, gross profit margins expanded 90 basis points to 31.3%. The margin improvement came on the back of lower raw material costs. Operating expenses, adjusted for currency movements, increased by 0.9% y-o-y, in line with the decline in sales. Winpak reported EBITDA of US$ 198.5 million, up from US$ 190.2 million in 2018. Meanwhile, the company reported net income of US$ 118.1 million, up from 111.6 million in the prior year. The y-o-y increase in net income reflects lower commodity costs, higher net finance income, and decline in tax rate.

The company ended 2019 with cash and cash equivalents of US$ 397.2 million and cash flow from operating activities of 160.0 million. Further, Winpak has virtually no debt on its balance sheet.

Financial Highlights (Source: Company Reports)

Stock recommendation: Winpak stock has recovered sharply in the recent past and is trading in the positive territory so far this year. The company’s business is classified as essential services, which ensures continued revenues. Further, the company is witnessing stable demand from its customers amid COVID-19 outbreak and all its production facilities are operating at normal capacity. The company has diverse set of customers including food and pharmacy companies. Moreover, the acquisition of Control group last year brings in another growth avenue. Also, the company has enough liquidity and no debt on its balance sheet. While the company’s business is relatively stable when compared to other industries, competitive pricing pressure and weakness in the specialty beverage is likely to restrict the upside in stock. Further, the company’s high valuation keeps us on the sidelines. WPK stock trades at a forward P/E multiple of 20.5x, which is higher than peer group average of 13.0x. We recommend a ‘Watch’ stance on Winpak stock at current price of CAD 48.63, down 2.2% on April 24.

WPK Daily Price Chart (Source: Thomson Reuters)

Osisko Mining Inc.

Temporary Halt to Hinder Near-term Drilling Activities: Osisko Mining Inc. (TSX: OSK) is a precious metal mining company. The company is engaged in acquiring, exploring and developing of precious metal resources in Canada. Recently, the company reported new infill drilling results from the definition drill program from Windfall gold project located in the Abitibi greenstone belt, Québec. The company’s operations will remain on temporary halt on account COVID 19 crisis till further notice. While the company will continue its drilling activities on the Lynx deposit.

Osisko will conduct its annual share holders’ meetings on May 29, 2020.

FY19 Financial Highlights: OSK declared its full-year results, wherein the company reported an operating loss of CAD 31.11 million, as compared to CAD 25.50 million in FY18. The increase in the operating loss was driven by higher exploration and evaluation assets impairment loss and a marginally higher general and administration expense, partially offset by lower compensation expenses and a gain in marketable securities. Net loss widened to CAD 78.84 million from CAD 33.99 million in FY18. Cash and cash equivalent stood higher at CAD 102.30 million, up from CAD88.28 million in FY18. The company exited the year with a total asset of CAD 719.17 million. Total investment activity stood higher at CAD 118.46 million, as compared to CAD 115.376 million in FY18.

Income Statement Highlights (Source: Company Reports)

Stock Recommendation: The stock of OSK is quoting at CAD 3.17 with a market capitalization of CAD 922.69 million. The stock is trading at the upper band of its 52-weeks trading range of CAD 4.19 and CAD 1.67. On technical terms, the stock is trading above its 20 days and 50 days simple moving average of CAD 2.88 and CAD 2.94, respectively, which indicates a positive investors’ sentiment developing for a short-term basis. OSK stock is benefiting from high gold prices and favorable outlook. However, the company’s drilling activities remain temporarily suspended at Windfall due to the COVID-19 outbreak. Though the company is financially stable and owns high value asset, OSK is in the exploration stage company with high degree of risks associated to it. Hence, we recommend a ‘Watch’ stance on the stock at the closing market price of CAD 3.17 as on April 24, 2020.

OSK Daily Price Chart (Source: Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.