SEDAR Filing
May 03, 2011
June,19, 2012, updated
Check list:
1.Major Business.
Founded at 1977. Mail envelop manufacture. 10 factories across Canada. Over 50% share of Canada envelop market. IPO at 2006 as income fund. Converted to Corp at Jan 2011.
Transactional mail: 50%. Direct mail: 20%. (this might not be accurate since it never changed in its report over years.).
Over 90% from Canada, 7% from U.S.
March to July sales lower.
2.Balance sheet.
Recent Price: $2.36, Tangible book value: -28.6m, Share outstanding: 29.3m, Market Cap:$69m.
Current assets: $38m, Current liability:$36.5m, Debt:$69m, Inventory:$12m, Cash:$0.
June, 19, 2012:
Recent Price: $1.62. Book value: -35m*. Shares: 29.3m. Market Cap: $47.5m,
Current assets: $33m, Current liabilty: $25m. Debt: $53m. Inventory: $13m. Cash: $1.6m
*:there is a increase of $12m in pension obligation due to accounting policy change.
3.Credit facility.
(1) $35m revolving, $4.3m outstanding. Interest around 5%
(2) $65.6m term, all outstanding. Interest around 5%.
Both mature at 2012.
4.Financial data by years.
Revenue/Price ratio:2.2:1
Dividend policy: current dividend is $0.12/share.
| 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 144 | 153 | 166 | 182 | 187 | 196 | 191 | 194 | 198 |
| Volume(1) | 4.6 | 4.8 | 4.83 | 5.05 | 5.12 | 5.16 | 5.12 | ||
| Volume(2) | 5.2 | 5.5 | 5.45 | 6.14 | 6.07 | 5.79 | 5.40 | ||
| SXP Volume | 5.3? | 5.3 | 5.8 | 6.6 | 7.2 | 7.6 | 7.5 | ||
| SXP% | 55%? | 55.8% | 56.4% | 59% | 64% | 69% | 71% | ||
| FCF | 15 | 29.8 | 32.4 | 40.7 | 37.2 | 37.8 | |||
| Acquisition | -4 | -1.9 | 0.3 | -13.4 | -25.4 | n/a | n/a | ||
| Devidend | -2.9 | -4.7 | -18.9 | -33.8 | -36 | -24 | |||
| Debt | 54 | 69 | 92 | 111 | 101 | 75 | 0 | ||
| Employees | 600 | 650 | 650 | 750 | 780 | 750 | 750 |
(2)Canada Post Admail Volume, in billions
(3)Based on Transaction Mail decreased by -4.2% and Admail decreased by -10.9% as reported by Canada post.
5.Cost structure
Leasing obligations:$9.2m.
6.Insider holding, options, Insider trading info, share buy back.
Gilles Cyr(CEO): 415k.
George Armoyan: (Director): 7.7m, Sime Armoyan: 3.3m. Total the family owns 38% of common shares.
7.Management compensation.
Top4: 2011: 1.9m. 2010: 1.3m. 2009: 1.0m.
8.Employee numbers. Revenue/Employee. Compensation/Employee.
650 employees. 230k revenue/employee. 27 unionized. plus LaSalle facility worker similar to unionized.
9.Industry comparison.
(1) National Envelope: US Private company. $600m in sales. At June 10, 2010, it filed for bankruptcy. At Sept. 2011, Gores Group acquired it by $150m.
(2) Cenveo(CVO:NYSE): $2b annual sales. At 1995 Cenveo acquired SXP. Sold it at 2006 by IPO. SXP has non-solicitation agreement with Cenveo which expired at Apr. 2008. This seems had significant affect of SXP's revenue.
10.Auditor
Ernst & Young
11.Major events.
Aug. 2007: acquire NPG Envelope for $25.6m. It has annual sales of $26m with 150 employees.
Sept. 2008: acquired Montreal Envelop for $13.2m. It has annual sales of $13.0m with 85 employees.
Jan. 2011: Converted to corporation from income fund.
Jan. 2011, To adopt IFRS from Canada GAAP, there might be decrease of $8m to $11m in equity.
12.Comments.
(1) From 2006 to 2010, despite two acquisitions, its envelop volume decreased by 30%. Its market share dropped around 15% from peak time. If considering the acquisition, the market share might dropped over 30%. Cenveo might have a big effect on its sales since 2008.
(2)Balance sheet looked not good. No tangible book value. Debt too high. Current ratio too low.
(3) Its free cash flow remained strong and very attractive.
(4) Over the past 6 years, it has paid $117m in dividend ($4/share).
(5) At Q4 2010, its sales in U.S. jumped by over 50%. Although is small in numbers,.
(6) Although it is the No. 1 player in Canada. It has no brand value, small price change could cause lost on market share.
