Wednesday, October 30, 2013

Air Canada (AC.B) Profitable ? Revenue Up At Chinese Banks, Earnings Dividends At Citigroup, HSBC

Air Canada (AC.B) is making more revenue per passenger and that's one of the reasons investors continue to reward this airline stock with record growth (+52% last month, +150% last 3-months).  In fact just yesterday, the stock touched a five year high of $5.80 up from $1.80 exactly one year ago (Oct. 30).  The company has had success charging passengers additional fees for meals, pillows, earphones and other conveniences previously taken for granted.  Also giving the company lift is its own new discount carrier Air Canada Rouge launched in July 2013.
For the first time in a long time, earnings are showing signs of breaking into positive territory !  Quarterly net loss now at $(23) million, down considerably from $(160) million last year.  Passenger revenue is up (+$86m for 2q13, +$89m 1h13),  First half operating profit was $174m up 176% from last year's $63m.
Lower fuel costs (-$57m quarter, -$76m half) not the main reason quarterly operating expenses are down (1.4)% (total increase in salaries + currency effects were +$60m)  : this proves that the company is getting its act together ! 
Despite currency effects weighing on results [1h13 $(114m) vs +$26m] and wages/salaries up bigtime (+9% quarter, +7% half), overall operating expenses declined (-1.4% quarter, -0.6% half).  Also a positive sign: cash equivalents up 4.8% to $790m after declining (6.6)% in the second half of last year.  Long term debt was lowered by $315m (half) vs $238m last year. 
Airline Stock October 30 2013 1-year 3-months 1-month
Air Canada (AC.B) 209% 150% 52%
Westjet (WGA) 54% 34% 8%

Air Canada benefits from more international travel particularly to and from China;  The last two census results show Canada's Chinese population is up 141,070 or +10.5% in five years; in 2010 Canada acquired Approved Destination Status which is key since it was one of the last major countries not to have it.  At the time, it was estimated that by 2014 Chinese travel to Canada would increase 50%.  Direct competitor Westjet (WGA) has also been reaping the benefits of increased air travel within Canada and to and from the country.  First half revenue up +6.5% ($1,810.93 million), earnings up +22.6% ($135.8m).

Among The World's Largest Banks China's Phenomenal Revenue Growth;  Earnings Dividends At Citigroup, HSBC Remain Healthy

  • TD Bank reported 18% growth in average loans (3q2013). 
  • JPMorgan Chase - 3rd quarter earnings take a hit :  down -$380m due to - $9.15 billion pretax expense; $7.20 billion after-tax (eps down 185c) for legal expense in Corporate, including reserves for litigation and regulatory proceeding. - $1.60 billion pretax benefit; $992 million after-tax (eps up 26c) from lower reserves in Consumer & Community. 
  • China Construction Bank - lending fee incomes climbed contributing to increased revenue.  earnings increases lagged analyst expectations of CNY57.69 billion.


Canadian Retailer Hudson's Bay Becomes Major Player In North America's Fashion Retail Industry

Just yesterday HBC's $2.9 billion takeover deal for Saks Inc received Saks shareholder approval.  The Toronto-based company will operate 320 stores in prime retail locations throughout North America.  After the merger, Hudson's Bay Company will have annual sales in excess of $7 billion.  Investors take note:  HBC growth plans for the company are synonymous with increasing shareholder value. 
It was only in 2008 that the company was on the verge of bankruptcy.  Investment firm NRDC Equity Partners was then able to acquire HBC for little more than $1 billion.  Three years later, it unlocked nearly $2 billion in value by selling the leases to over 200 Zellers locations to Target Canada (Zellers was struggling at the time;  Zellers still exists in Canada's three largest cities).


Refining Crack Spread Narrows 55% Last 3 Months

Last quarter, refining became a lot less profitable but to many companies including Husky Energy that was the only negative factor affecting the bottom line.  In the third quarter of 2013 the Chicago crack spread decreased 55% from $35.18 last year to only $15.86 this year.  Crack spread is the price difference between the price of crude oil and petroleum products extracted from it.  it is the gross margin difference in turning 3 barrels of crude oil into 2 barrels of gasoline and 1 barrel of distillate (petroleum products ie diesel, propane).

China and India Buying 3/4 of World Gold Output

China gold imports continue to climb - averaged 100 tonnes per month earlier this year for four consecutive months, many days it's more than 4 tonnes a day.  That despite the fact that total production in China is expected to climb 19% in 2013 to 440 tonnes. 

Canadian Named Wealthiest Man In Asia

Last month, Forbes ranked longtime Canadian citizen Li Ka-shing Asia's richest man.  He is a key investor in Canada's oil industry and Toronto's China Town.  Also, Canadian universities have been the recipients of his largest donations outside Asia.

Financial Results For 2013

Bank Stock
period revenue change earnings change assets change equity change div change
ICBC 6-mo 372.507 17.5% 138.347 12% 18,723 10%
JPMorgan 9-mo 73.450 0% 12.645 (18.9)% 2,463.309 6% 206.67 3% 1.06 0.16
HSBC 6-mo 40.523 (7)% 11.346 25% 2,645.3 0% 174.07 5% 0.28 0.05
Citigroup 9-mo 47.76 (7)% 11,217 77% 1,899.5 (2)% 200.85 7.5% 0.01 0%
TD Bank 9-mo 17.92 4% 5.040 3% 835.1 4% 49.42 6% 2.39 0.27
BNP Paribas 6-mo 19.97 (0.1)% 3.347 (29)%
Itau Unibanco 9-mo 58.14 (3)% 11.576 13% 990.2 3.5% 81.3 7% 0.38 (0.01)

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