September 25, 2017

On Monday, the S&P 500 was down 0.2% while Toronto was up 0.4%.

CRH Medical had another weak day, down 7.1% on Toronto and 9.4% in U.S. trading. This was after announced several things in a press release on Friday.

The press release updated expected revenue and adjusted EBITDA attributable to shareholders (i.e. after deducting the share going to the minority owners of each Anesthesia provider which CRH does not own 100% of)  for Q3. Annoyingly, they did not say how the updated numbers compared to Q3 2016. When I looked it up, they are projecting a 20% reduction. They blame this on a reduction in commercial patients versus expectations and canceled procedures related to the Florida hurricane. And this in spite of the positive impact of recent acquisitions. The hurricane impact is truly outside of their control but the market will not like the fact that the number of commercial patients was over-forecast.

In positive news, they announced the acquisition of 51% of an anesthesia practice. This is the fifth acquisition in 2017 and suggests that their growth-by-acquisition plan remains intact.

Overall, it still appears to me that the underlying business is viable and that this should be a good investment over time going forward. However, it appears as if any material improvement to earnings could be at least a year away. The reductions in their pricing which drove down the share price do not come into effect until 2018.

I was somewhat tempted to continue to increase my position due to this price drop and given this latest acquisition. But I have enough exposure already and I was not impressed that I had to calculate what kind of reduction they were communicating for Q3. I would have thought the press release should have made that clear.

Bombardier was down 4.0% to $2.14 after news that Siemens will in some way combine its rail operations with Alstom rather than Bombardier. Certainly, Bombardier has been a terrible investment and I last rated it Sell at $2.05 in August of last year.

I retained some faith in their preferred shares which yielded 9.1% at my last update also in August of 2016. Since then there has been some good news in terms of deliveries and performance of the C Series plane. But Bombardier has also been in the news regarding corruption allegations in some of its marketing in areas of the world that do tend to be corrupt. And we have the spat with Boeing. Overall, the company and its preferred shares seem to be even more speculative. At the same time the Canadian government has its back and so I have not sold my preferred shares.

In other news, Statistics Canada released July figures for food services and drinking places. There was an increase in sales. This should be positive for Boston Pizza unless they have lost market share.