Westshore Terminals Investment Corporation

Westshore Terminals Investment Corporation (TSX: WTE) operates a coal storage and loading terminal at Roberts Bank, British Columbia. The company derives its revenue from rates charged for loading coal onto seagoing vessels.

Q2FY20 Financial Highlights: WTE declared its quarterly results, wherein the company posted revenue of CAD 96.816 million, as compared to CAD 98.714 million in the previous corresponding period (pcp). Tonnage shipped for Q2FY20 was 7.7 million tonnes against 7.6 million tonnes in the previous corresponding quarter. The marginal decline in revenue was due to lower income from coal loading segment, partially offset by higher income from other segment. Coal loading revenue dipped by 5.2% to CAD 92 million as compared to CAD 97 million, a year ago. Total expenses stood marginally higher at CAD 48.007 million, as compared to CAD 47.566 million in pcp, due to a significantly higher administrative expense, partially offset by slightly lower operating expense. Profit for the period stood at CAD 34.653 million as compared to CAD 34.96 million in pcp, supported by lower income tax expense, lower net finance costs and a higher foreign exchange gain.

Q2FY20 Income Statement Highlights (Source: Company Reports)

Risks: The business is exposed to several factors, including global demand and competition in the supply of seaborne coal. A decline in the average loading rate would dampen the top-line of the company.

Valuation Methodology: P/CF Based Relative Valuation (Illustrative)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of WTE corrected 4% so far this year amid the volatility in the equoty market owing to COVID-19 pandemic.  Westshore has been able to continue its normal operations at the Terminal, and the business is likely to remain stable in the coming years, which is a key positive. The Company expects that its upcoming performance would be supported by its customers' throughput, rail service etc., which are categorized under the essential services. The Company expects its FY20 throughput volumes at 29.5 million tonnes, which looks decent amidst the current pandemic. Going forward, we believe, the Company is well-positioned to handle a range of bulk commodities in addition to coal. The Company is focusing on attracting the interest of producers of other products and will evaluate the feasibility of the opportunities. The stock gained ~28% in the last three months and closed above its 200-days simple moving average of CAD 16.82, indicating a bullish pattern. We have valued the stock using the P/CF multiple based illustrative relative valuation method and have arrived at a target upside of double-digit (In percentage terms). We have taken peers like Canadian National Railway Co, Canadian Pacific Railway Ltd, and TFI International Inc etc. for the comparison purpose. Considering the current trading levels, stable demand for coal, we recommend a 'Buy' rating on the stock at the closing market price of CAD 18.13 on 17 August 2020.

WTE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

goeasy Ltd

goeasy Ltd (TSX: GSY) is a Mississauga, Ontario based Company providing lending services and non-prime leasing services through easyfinancial and easyhome businesses. The Group offers a wide range of financial services and products such as secured instalment loans and unsecured instalment loans. The Company has an employee base of over 2,000 employees and offer services through 400 locations.

Financial Highlights – Q2 and H1 Financial Year 2020 (30 June 2020, CAD, thousand)

(Source: Quarterly Report, Company Website) 

In the first half of the financial year 2020, driven by an increase in interest income for the period, the revenue increased to CAD 317,879 thousand (H1 FY2019: CAD 287,714 thousand). The revenue in Q2 FY2020 stood at CAD 150,677 thousand (Q2 FY2019: CAD 147,854 thousand). The operating income in H1 FY2020 stood at CAD 98,213 thousand (H1 FY2019: CAD 79,741 thousand). In Q2 FY2020, the Group managed to reduce operating expenses and reported an operating income of CAD 53,994 thousand (Q2 FY2019: CAD 40,931 thousand). Reflecting higher revenue and operating income, the reported net income in H1 FY2020 stood at CAD 54,521 thousand (H1 FY2019: CAD 37,841 thousand), and net income stood at CAD 32,542 thousand in Q2 FY2020 (Q2 FY2019: CAD 19,568 thousand). The basic earnings per share stood at $3.74 in H1 FY2020 (H1 FY2019: $2.58), and the basic earnings per share stood at $2.25 in Q2 FY2020 (Q2 FY2019: $1.34). The cash balance as on 30 June 2020 stood at CAD 54,765 thousand (31 December 2019: CAD 46,341 thousand). The total assets as on 30 June 2020 stood at CAD 1,352,219 thousand (31 December 2019: CAD 1,318,622 thousand).

Share Price Performance

GSY 1 Year Technical Chart. Source: Refinitiv (Thomson Reuters)

goeasy Ltd shares closed at CAD 69.87 at the time of writing after the market close on 17 August 2020. Stock's 52 weeks High is CAD 80.61 and Low is CAD 21.08.

Key Risks

The Covid-19 has resulted in disruption to business as it can affect financial conditions, inflation, credit ratings and interest rates. The Group is exposed to regulatory, financial, operational and commercial risks.

Conclusion

The Company reported an improvement in financial performance in the first half of the financial year 2020 and the second quarter of the financial year 2020. Both the top-line and the bottom-line performance have improved with decent profitability margins for the period. The revenue from core operations has improved, with an increase in the cash balance. GSY controlled its operating expenses in the Q2 FY2020, which improved financial performance. The Company’s business model is strong and is able to withstand increased credit losses. The Group has a well-positioned balance sheet with lower net debt. The Company was also supported by the banks and lenders to tackle the impact of covid-19.

Based on the above rationale, we have given a “Hold” recommendation for goeasy Ltd at the closing price of CAD 69.87 (as on 17 August 2020).

Disclaimer

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