Jon Helgason
A little more than one quarter into 2013, Canada's top performing stock isn't a miner or a major energy name. It's a label maker.
Shares of Toronto's CCL Industries Inc. are up 42 per cent since January and have skyrocketed 68 per cent in the past year. The company generates roughly 80 per cent of its revenues from making product labels as well as office labels, such as name tags.
CCL's stock first started to take off in early December and then truly popped in late January when management announced the acquisition of two divisions from Avery Dennison for $500-million. (Surely you've seen Avery office supplies before. Just think of the name tags that say"Hello my name is ...")
The day that deal was announced, which amounted to a quarter of CCL's $2-billion market value, the acquirer's shares jumped 16 per cent. Then just a few weeks later CCL boosted its dividend by 10 per cent to 86 cents per share annually, adding even more heft to the valuation. Now worth about $61 each, the shares are worth significantly more than their pre-crisis peak of $46.55 each.
Meanwhile, investors are piling in. From January to December last year, CCL saw about 31,000 of its shares traded on average each day. Since December that daily volume has more than tripled to 97,000 shares.
As for growth prospects, CCL is currently building plants in Brazil and Thailand and there's lots of room to grow in the 'tube' segment, which makes small bottles and tubes for the personal care and cosmetics industries. Again, the margins are lucrative, with the division bringing home 26 per cent of its revenue.
CCL is also looking at potential acquisitions in emerging markets, health-care and the consumer durables segments. Just last week the company scooped up INT Autotechnik GmbH which caters to German car manufacturers, for $14-million.
And best of all, the balance sheet is in good shape. Analyst Stephen Macleod at BMO Nesbitt Burns noted that CCL's net debt amounts to just $140-million, and last year it came in at just 0.7 times earnings before interest, taxes, depreciation and amortization.
A label maker as a national champion? Why not?
(Tim Kiladze is a Globe and Mail Reporter.)
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Tim Kiladze