Monday, December 12, 2011

Good News Gone Un-Noticed - Canam Group



I have owned a small position (< 1.0% weighting) in Canam Group (CAM.TO) for the past 2 years, and it hasn't been an enjoyable (AKA sitting on a paper loss) experience. Canam has suffered from weak business conditions in the heavy steel construction and fabrication industry in North America. Think bridges and stadiums. Combined with a few "mis-priced" contracts and presto: the income statement, balance sheet and stock price have taken a beating. I clearly came too early to this party. However, the tide could be changing. Q3 earnings have perked up - albeit still weak. Sales are up 21.6% YTD as compared to last year. However, more importantly, their backlog is firm and rising which now stands at $526 million as compared to $513 Million in Q3FY10 and $490 Million in Q4FY09. Provided the new orders are priced right, earnings should improve going forward. The company also recently announced a normal course issuer bid (NCIB - stock buyback) for 5% of the company's stock. Provided they execute the NCIB (which they didn't in 2010) then that will bode well for the current shareholders going forward. On another positive note, a holding company that is controlled by the Chairman and CEO (Marcel Dutil) recently purchased on the open market, an additional 935,000 shares at $2.87/share. This brings the Dutil's ownership of stock in CAM to 15.3% of the company. Dutil sees value in the shares, especially when/if the dividend is restored.  At 0.5X tangible book value, the downside in CAM is limited. In better business conditions, CAM could be worth $8-10/share. I have doubled my position in CAM recently at $3.20. My new cost base is in the upper $4 range.
Chart forCanam Group Inc. (CAM.TO)

1 comment:

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