Rogers, 125 years old, converted to an income trust in 1997, early in the trust boom. Yet it didn’t prove to be a stable investment. Its unit price fell from $10 to below $4 in 2003, after Gerry Schwartz’s Onex Corp. sold its stake and Rogers slashed its monthly distribution.
But the last five years have shown steady growth in revenue and stable earnings. The sugar market in Canada is basically a duopoly of Redpath Sugar and Rogers. Rogers is a familiar brand name in Western Canada; in the East, it’s known as Lantic Sugar, which it bought in 2002.
Revenue is up by a third since 2008, and the company maintained its dividend during the financial crisis. Even though Rogers’s share price has doubled to about $6 since the meltdown days of 2009 (it converted back to a corporation in 2011), its dividend yield is still a fat 5.7%. And that calculation doesn’t include a special 36-cent dividend paid earlier this year.
Makin says that maintaining profit margins via cost control is a priority. Rogers operates three major refineries—two processors of imported cane sugar in Vancouver and Montreal, and a refiner of domestically grown beet sugar in Taber, Alberta. Keeping costs down also helps prospects for exports on the rare occasions when the U.S. opens its doors, as it did last winter. “We trucked 10,000 tonnes of cane sugar across the border in three weeks and 17,600 tonnes of beet sugar in eight weeks,” Makin says. “We have trucks rolling the day that door is opened.”
Pulse Seismic Inc. (PSD-T)
Top 1000 rank: 291
Revenue: $86 million
Profit: $27.4 million
Three-year share price gain: 181%
Oil and gas can be very daunting to risk-averse investors. Finding the stuff, then producing it and transporting it takes years, and can be hugely expensive. But the price of your product and the value of your inventory are set by the microsecond on often-volatile commodities and futures markets. Suppose you could invest in the sector, yet remove or smooth out most of those elements?
Calgary-based Pulse Seismic is an entirely digital oil and gas company. It owns and licenses the second-largest library of 2-D and 3-D exploration data in Canada, behind Olympic Seismic, a subsidiary of Texas-based Seitel Inc. “We don’t have crews, we don’t have equipment,” says Pulse’s chief financial officer, Pamela Wicks. There are just 29 employees at head office.
The business has its roots in the 1980s, when almost all the seismic data in the oil patch was owned by the industry’s giants. But they would often license that data to one another through brokers. The now-retired founders of Pulse had gathered data in the field, and saw an opportunity to warehouse it. Mergers and acquisitions among oil giants helped, because many of them were eager to monetize those data assets. Pulse Seismic went public in 1999.
The data has a long shelf life, since producers keep re-exploring as new recovery methods allow them to squeeze more oil out.
Wicks says that over the past five years, Pulse Seismic has sold more than $50-million worth of two-dimensional data mostly gathered in the 1970s and 1980s.
Nevertheless, Wicks says that the 3-D accounted for more than 80% of revenue last year. To keep the business growing, the company spent $58 million last winter to gather more data. In 2010, Pulse paid $75 million to acquire all the data of rival Divestco Inc.
Pulse Seismic’s share price has also been on a tear, having more than doubled since 2010, which can make value investors nervous. But at about eight times trailing earnings, it still looks like a poster child for growth at a reasonable price.
TransForce Inc. (TFI-T)
Top 1000 rank: 108
Revenue: $3 billion
Profit: $154.2 million
Three-year share price gain: 129%
“I am not a trucker by trade,” says TransForce CEO Alain Bédard. An accountant who arrived from the cheese business in 1996, Bédard was able to see a segmented business with a fresh eye.
One way truckers differentiate is by load size—package and courier, less than a truckload or a full truckload, etc. Another is by timing—in the package business, you can be what Bédard calls “the same-day guy or the next-day guy.” TransForce is now in almost every segment, but it tries to pick its spots. In Canada, its next-day courier brands Canpar, Loomis and ATS compete with UPS and FedEx. Bédard says he wouldn’t go up against those two giants in the United States. But TransForce is one of the biggest “same-day guys” south of the border: It delivers all packages to customers for the likes of Staples. UPS and FedEx are not big same-day players.
Bédard has also diversified into waste haulage, landfill and recycling in Ontario and Quebec, under the Lafleche, Matrec and Malex names. Waste is now about 6% of TransForce’s business.