Last week, I purchased a new company in my RRSP -- Canam Group Inc. (Toronto: CAM), headquartered in St. Georges in the Beauce region of Quebec. So I am investing in my back yard! :o)
Canam Group Inc. is an industrial company specialized in the design and fabrication of construction products and solutions (i.e. concrete, steel and wood structures for large projects). The company employs close to 2,600 people in Canada, the United States, Romania and India, and has partnerships with companies in Saudi Arabia, the United Arab Emirates and China.
The financial situation of the company is strong, with only $70M in debt and net earning of $48M ($0.99 per share, diluted). A dividend of $0.04 per share is paid quarterly, for a dividend yield of 2.5% (a decent yield) on a dividend payout ratio of 20% (which leaves plenty of room to grow the company).
The stock currently trades in a $6-7 rande, while the book value is above $9. That's a discount to book value of 25 to 35%. Using the Graham formula to calculate the fair value of the stock, I get close to $13, for a margin of safety of 50%. A classical value pick.
Why is the company trading so low? I believe it is the uncertainty of the economy. Although economic stimulus packages -- with an emphasis on infrastructures -- have been announced in many countries (including both Canada and the U.S.), the markets seem unsure whether this will be enough to maintain the earnings of the company. I believe that, even if those fears prove to be true in the short term, the company will flourish over the long term (5 years or more).
I can afford to wait.
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2 comments:
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