Electrolux eluxy Doubles US Market Share (whirlpool whr), Jaguar Tata Motors ttm Organic Growth China luxury vehicle market

If you're into retail stocks here's one to consider -  Electrolux eluxy aka Sweden's version of Whirlpool is taking the US by storm.  On September the 8th it acquired General Electric's (ge.n) appliances business for $3.3 billion (7 times ebitda multiple).  The move doubles Electrolux's market share in North America ($4.0 billion in sales -> $10.0 billion) putting it in direct competition with market leader Whirlpool whr.n.

Electrolux is already the number two player worldwide but this deal means a lot given that the US is the world's third largest market for sales of major appliances (2013: 28% of Electrolux sales come from Europe vs 32% stateside).. also note that American demand for appliances is estimated to grow by 9% in 2014 (up from previous estimate 7%).  And don't forget about the $300 million in synergy cost savings.. increased profitability right off the bat !  Less competition in the industry could mean higher prices - but even if that doesn't happen, Electrolex will undoubtedly have more control over the market price of its products.

Electrolux was doing well in North America even before this move - organic growth there is at 7% compared to 0.4% in Europe.  Whirlpool has a market value 40% greater than Electrolux despite having similar revenue;  Electrolux quarterly profit though has been wildly inconsistent.  Annual earnings are comparable to Whirlpool with the exception of 2013 ($827 million vs $93 million) but don't let that bother you - Electrolux is expanding rapidly in emerging markets (also a gradual move in production to low cost regions is estimated to boost 2014 earnings by a hefty $284 million) and the costs associated with that process have been high but, by establishing itself early in those regions Electrolux is setting itself up for the future (and gaining an edge over the competition).

Tata Motors is growing.. very fast

Tata Group (private) is perhaps India's most diversified company.  It sells beverages such as coffee and mineral water, generates electricity for public use, mines salt, manufactures automobiles (both high and low end), provides telecommunications services in India (Virgin Mobile India), is a service company (hotels, airasia, financial services).  Its largest publicly traded subsidiary is Tata Motors nyse:ttm.  In 2012 the auto division was worth $15.2 billion, today it's at $25.2 billion (all organic growth !).

Despite no major acquisitions over the last few years, auto division Tata Motors finally appears to have an asset capable of providing organic growth.  In 2008 it acquired struggling automarker Jaguar Land Rover from Ford for $2.3 billion (today the Jaguar unit represents 95% of Tata Motors' valuation which translates into $23 billion !).  The deal instantly gave Tata a foothold in overseas markets (a plus for a company looking for international recognition) but unbeknownest to Tata, sales at Jaguar Land Rover didn't need much of a push to take off  - between 2009 and 2013 auto sales doubled to 425,000 units ; with 18.8% yoy growth last year.  In 2013 global sales of Jaguar models was up 37% (North America +50% vs -6% the previous year).  Demand from China will have a tremendous impact on future growth (is currently the leading market for Jaguars; will push unit sales up to 1 million by 2020).  Last fiscal year China accounted for 24% of Jaguar Land Rover sales vs 21% the year before.

China is embracing Tata Motors and why not ?  The country has low current luxury ownership rates, rising proportion of affluent individuals, and a strong affinity for premium brands.  

Currently Jaguar represents 7% of all luxury vehicle sales in China (luxury vehicle market); estimates show China's total demand will reach three million by the end of the decade, Tata will account for at least 250,000 units, if its share increases then expect auto sales to rise markedly.
more..  Tata makes electric vehicles and owns South Korea's second largest manufacturer of heavy commercial vehicles (Daewoo has been a part of Tata Group since 2004).  On the flip side Tata Motor's low end passenger vehicle business has fared poorly (sales in India of its own makes including the Tata Nano and Zest are down 33% so far this year 88th -> 58th) but the company is committed to reviving it and has the assets to accomplish that ($7 billion cash, a parent company that both operates leading European and Indian engineering technical institutes and even mines/fabricates the steel used in its cars).

Tata Motors stock price change : 1 mo -10%, 3mo +13%, 6mo +9%

Magna International Expands In India (nyse: MGA)

The largest auto parts marker in North America makes Asia a priority
September 29, 2014 - Magna announces plans for two new facilities to be built in Gujarat, India.  The plants will produce seat systems and body and chassis systems.  Magna already produces various parts in India for GM, Ford, and Nissan.

BlackBerry Undervalued: Investors Ignorant of Q10, Z10 Brand Strengths (bbry unit sales, smartphone market share)

         While BlackBerry has yet to release a low-end, more affordable BB10 phone to compete with Nokia's $99 Asha 501, I don't see that as being a major problem for the company going forward;  1) Its core customer base is still the high end corporate market 2) The market for high-end phones in key international markets is growing (Indonesia, South Africa, India), one reason for that is the modernization of mobile infrastructure capable of handling more data / 4G.  BlackBerry is the top smartphone brand in Indonesia, South Africa, Argentina and a top three player in India behind Samsung and Nokia.
more...   that doesn't mean however that Research In Motion does not need to eventually introduce a more affordable product.  BlackBerry 7 devices (Torch, Bold, Curve) remain popular in the East and with RIM scaling back production of that line, at least one of the newest phones (running on OS10) will need to be introduced to fill in the gap. 

BlackBerry Detractors Already Admitting Defeat
One of BlackBerry's harshest critics, an analyst at Cannacord which had slashed its sales estimate for BB10 phones earlier this year, is already calling the estimate wrong, off by at least half a million units per month. 
Early indicators suggest sales of the both the keypad (Q10) and candybar (Z10) phones are strong however it should be noted that those statistics don't take into account most international markets where the devices have yet to be launched.

Nearly 60% of RIM's 2012 revenue originated outside the US, UK and Canada.  In the Middle East where BlackBerry holds the leading share of the market for new phones at 35%, sales of the Z10 phone though not overwhelming remain promising at a rate of just over 250,000 units a month in Saudi Arabia and the UAE.  The figure doesn't include the Q10, something that has to be taken into account given that the keyboard remains popular among clients in the Gulf region.

Over the past year, Nokia introduced many of its key new smartphones while BlackBerry released nothing new (no full quarters reported on yet).  Despite this, BlackBerry somehow managed to sell the same number of smartphones as Nokia in the most recent quarter (4q2013).  The 6 million unit figure represents just under 3.0% of the global smartphone market, not bad considering BB10 was out for only a month in limited capacity (not available in the US) and that the phones have received rave reviews since being launched in the United States in April 2013.  Altogether, RIM sold 28.1 million smartphones in fiscal 2013 (March to March). 
Last month (April 15 to May 10) Research In Motion stock was up +14% making it one of the best performing tech stocks.

Battery life:  Can't go wrong with the Q10 ! 

The Q10 battery is larger and longer lasting when compared to OS7 phones.  The result ?  10-12 hours of device use on a single charge, more than double what the competitors have to offer.  This is just one reason why I'm optimistic about corporate clients remaining with BlackBerry.  Canadian Tire which has over 3,000 corporate users is one of several major companies already committed to the BlackBerry 10 models.

More reasons to buy Research In Motion:  23 of the 25 leading mobile carriers in the US, EU5 and Canada carry BlackBerry's newest Z10 smartphone compared to only 14 for the Nokia Lumia 920 meaning that RIM is poised to eventually outstrip Nokia in smartphone sales.  Not bad for a company with a market capitalization 40-70% lower.
RIM is succeeding in the high end market whereas Nokia is making a push for the low end market.  I don't expect sales at Nokia to best BlackBerry anytime soon, with Nokia's devices being low-end their margins are quite limited.  Even BlackBerry 7 phones are more profitable than Nokia's newest, and profit from one Z10 equals profit from three Lumias.

20 Largest Banks & Financial Institutions in the World Globally as of September 3, 2012 (revenue, assets, deposits, hsbc, icbc, fiscal, capitalization)

Banks are ranked by most recent financial data, revenue, assets, earnings, market value.  TD Bank data is from the February to July 2012 period. % change in market value over the last year represents the change in total market value.  When USA, NYSE, or ADR is shown it means the stock value was already in USD. Just missed the list: Unicredito Italiano (Unicredit Group), Assicurazioni Generali (Generali Group), Royal Bank of Canada.
           
                        A lot has happened since my last report on the banks exactly one year ago.  In May 2012 JP Morgan's CEO announced that faulty derivatives trading caused the bank to lose more than $2 billion. The news sent the stock reeling, in after hours trading that day the company lost more than 11% of its market value. The loss is significant because that's about the same amount of market cap that separated it from the other top valued financial institutions.

Canadian banks are aggressively pursuing acquisitions ! Between 2008 and May 2012 Canadian banks spent $37.8 billion on ~100 acquisitions which is impressive considering big banks like Citibank and BNP Paribas were trying hard to sell off assets.  To put things into perspective, between 2001 and 2008 Canada's six big banks spent $38.0 billion on acquisitions meaning that today they are spending at roughly twice the rate they used to. One thing to consider though is the fact that a lot of their recent acquisitions bolster their position in Canada rather than overseas;  95% of the purchases they made between 2001 and 2008 were abroad.  So far in 2012 some of the biggest Canadian deals were made by TD Canada (acquisition of MBNA Canada) and more recently the Bank of Nova Scotia (August 31, 2012 closes deal with ING Groep for ING Canada, paying only $1.9 billion net in cash for 3% of the Canadian market for retail banking).  ING used the money to help pay off a government bailout it received a few years ago. That's pretty much it for ING in Canada, if you remember, back on May 13, 2009 ING sold all of its share in ING Insurance to institutional investors for $2.2 billion. Today, that 70% share is worth about $5.5 billion. Why is ING so eager to get out of Canada ?

In the summer of 2012, the Agricultural Bank of China lauched its Canadian operations in Vancouver.  Chinese institutions clearly want a piece of the Canadian market but is it too little too late ?  Canada's retail banking market is already highly congested meaning that Chinese banks will probably have to attempt a takeover or two if they really want to be a player.  Afterall, the first takeover of of a US bank by a Chinese one (ICBC) happened only four months ago on May 9, 2012.  ICBC paid $140 million for 80% of the Bank of East Asia (13 American branches).  ICBC (Industrial and Commercial Bank of China) reported in its 2Q2012 report a rise of 36.6% in the value of its overseas assets in only six months !  ICBC assets abroad are now worth US$ 166.6 billion.  Since the US Fed approved the deal, three Chinese banks are now permitted to operate in the United States.

In China, payment delays are becoming more problematic especially in the mining sector (debt owed to machinery companies up significantly). That's causing headaches for the big four banks there which have seen their market capitalization drop off quite a bit from last year's highs.  More of the loans on their books are becoming risker and investors are taking notice.

Royal Bank of Scotland: I excluded it from my list last year and again this year.  This year the bank's problems go beyond just the unending quarterly losses.  The company's market value remains pennies on the dollar at just over US$20 billion which is lower than it was at this time last year. The bank remains mired in problems which include conflicts of interest, rigging of inter-bank borrowing, IT malfunctions, problems in Ireland. The bank's market cap has been erratic as of late.  It's also 83% owned by the British government.

World's 21 leading financial institutions with data from last six months as quoted in company reports (using domestic currency):  click on link for company interim 2012 report (in the case of TD Bank it's the 2nd + 3rd qtr ending July 31, 2012)

Bank	Assets			Revenue			Net Income
	June 2012	June 2011	% chg	1H12	1H11	% chg	1H12	1H11	% chg
ICBC	16,431,196 (mar'12)	14,896,048	+10.3%	258,900	231,160	+12.0%	123,200	109,600	+12.4%
HSBC	2,652,334	2,690,987	-1.4%	43,672	42,311	+3.2%	9108	9762	-6.7%
ConstrBank	13,505,745	11,754,766	+14.9%	227,812	197,246	+15.5%	106,494	92,953	+14.6%
JP Morgan	2,290,146	2,246,764	+1.9%	48,232	52,000	-7.2%	9884	10,986	-10.0%
AgriBank	12,112,888	10,725,141	+12.9%	210,780	184,633	+14.2%	80,522	66,679	+20.8%
BO China	12,825,590	11,483,498	+11.7%	179,665	165,974	+8.2%	75,002	70.234	+6.8%
Citigroup	1,916,500	1,956,600	-2.0%	38,048	40,348	-5.7%	5877	6340	-7.3%
BO America	2,190,868	2,338,826	-6.3%	44,246	40,113	+10.3%	3116	-6777	up
TD Bank	806,283	713,642	+13.0%	11,591	10,540	+10.0%	3396	2894	+17.3%
Itau Unibanco	888,809	793,679	+12.0%	40,183	35,821	+12.2%	6729.8	7132.5	-5.6%
Santander	1,292,677	1,231,908	+4.9%	22,544	21,403	+5.3%	1704	3501	-51.3%
AIG	555,383	610,427	-9.0%	35,566	34,119	+4.2%	5788	3554	+62.9%
BNP	1,970,041	1,983,154	-0.7%	19,984	22,666	-11.8%	5082	5246	-3.1%
Goldman Sachs	948,638	936,910	+1.3%	16,575	19,175	-13.6%	3071	3822	-19.6%
UBS	1,412,043	1,419,162	-0.5%	12,934	15,515	-16.6%	1252	2822	-55.6%
Lloyds	961,371	978,951	-1.8%	8,965	10,868	-17.5%	-641	2278	up
Barclays	1,631,265	1,492,922	+9.3%	15,475	15,299	+1.2%	480	1983	-75.8%
Deutsche	2,241,174	2,164,103	+3.6%	17,214	19,014	-9.5%	2063	3363	-38.7%
ING Groep	1,237,248	1,240,731	-0.3%	7,759	7,137	+8.7%	1851	2888	-35.9%
IntesaSan	666,417	644,673	+3.2%	8944	8720	+2.6%	1274	1402	-9.1%
SocGen	1,246,666	1,158,008	+7.7%	12,583	13,122	-4.1%	1405	1897	-25.9%

Highlights and Some Key Data To Keep In Mind:

Industrial and Commercial Bank of China
Revenue growth outpaced growth in operating expenses (13.7% vs 12.6% for the half) and that pushed the cost to income ratio down to 25.57% which is a first half record low.  EPS 0.35 RMB up from 0.31 RMB qoq.
On July 6, 2012 ICBC announced the closing of the acquision of 80% of the Bank of East Asia, a deal that gave it a foodhold in the US market.
By June 30, 2012 ICBC middle east operations already surpassed their 2011 full year earnings.
S&P has a slightly higher rating of the bank vs Moody's (outlook positive vs stable). 
June 2012:  ICBC is present in 34 countries, overseas asset value at US$ 166.6 billion +33.6% since December 2011.

Banco Santander
Profit from continuing operations was €3472m down only 11.9% from (€3940m).  The real profit decline of 51.3% --> €1704m is due to the setting aside of €1,304 million in the 2Q12 in provisions for property (real estate exposure in Spain);  That reduced 2Q12 net income from €1,404 million --> €100 million.

American International Group Inc. AIG
Insurance premiums contributed 53.6% of revenue ($19,080m / $35,566m) which is down from 56.8% in 1H2011 ($19,380m / $34,119m)

Deutsche Bank
In euros, assets (+3.56%) and deposits (+0.61%) went up in value but because the euro lost -8.19% of its value relative to the USD when denomited in dollars both experienced a decrease in value.

Societe Generale
Asset value actually went up +7.66% however the euro lost -8.19% of its value relative to the USD and that caused SocGen asset value to fall slightly when denominated in dollars.

Agricultural Bank of China Breakdown of Customer Deposits 
June 30, 2012:  53.4% are demand deposits (28.3% individuals / 25.1% corporate), 41.4% time deposits (39.8% individuals / 11.6% corporate), rest are other.
June 30, 2011:  57.4% demand deposits (28.6% individuals / 28.8% corporate), 38.9% time deposits (28.7% individuals / 10.2% corporate), the rest are other.
Revenue is quoted as operating income, customer deposits are referred to as Due to Customers.

China Construction Bank
EPS  basic and diluted are the same, 0.43 rmb up from 0.37 rmb
The bank's cost to income ratio down to 32.73 from 36.19 year ending December 31, 2011
Customer deposits breakdown:  June 30, 2012:  51.2% are demand deposits (18.3% personal / 32.9% corporate), 48.8% time deposits (27.9% personal / 20.9% corporate), rest are other.
June 30, 2011:  53.5% demand deposits (18.5 personal / 35.0% corporate), 45.2% time deposits (26.7% personal / 18.5% corporate), the rest are other.

Toronto-Dominion Bank
TD's 3Q2012 was one of the best on record;  EPS (basic) up to $1.92 from $1.84 in 2Q2012, $1.77 in 3Q2011.  Though the company's bottom line was much improved, it didn't result in any dividend hikes (still at 0.72 q2q, but up from 0.66 last year).
For the recent third quarter wealth and insurance net income was +3.15% --> $360 million (21.1% of total group profit).
In just the last 3 months TD's total assets are up +4.28% !
Revenue grew +1.6% between April 2012 (2q) and July 2012 (3q) compared to 5.2% between April 2011, July 2011.
Only 16% of its wealth and insurance net income comes from its ~ 30% stake in TD Ameritrade.
In 2012 TD acquired MBNA Canada.

About the table at the top of the article, currencies used*Average fx rate calculated myself using data at x-rates.com and google finance exchange.
Exchange rates used to convert to USD for the 6-month period (used for customer deposits, revenue, net income/profit)
Chinese RMB 1hfy12 0.158243255555, 1hfy11 0.1529334634 up 3.47%.
Euro 1hfy12 1.29745937777, 1hfy11 1.403703906 down 7.57%.
Swiss Franc 1hfy12 1.07705781666, 1hfy11 1.10659625 down 2.67%
Brazilian Real 1hfy12 1.86424560555, 1h11 1.6312765625 down 14.28%.
British Pound 1hfy12 1.57693847777, 1hfy11 1.61702795275 down 2.48%.
Canadian Dollar 1hfy12 1.00605145856, 1hfy11 0.9704058232 down 3.67%

Currencies used for assets last day of most recent reporting period
Chinese RMB   June 30: 2012  6.3550, 2011 6.46350
                           March 31, 2012 6.29700  (ICBC)
Euro  June 30: 2012   1.266350,  2011   1.451931
Swiss Franc  June 30: 2012  0.947650, 2011   0.84160
Brazilian Real  June 30: 2012   2.00950, 2011  1.560491
British Pound  June 30; 2012   0.636679, 2011   0.62250
Canadian Dollar  July 31: 2012   0.955100, 2011   0.955100

Research in Motion (RIMM) Down But Definitely Not Out (undervalued techstocks, competition, blackberry 10)

      Research In Motion sold 260,000 playbooks between March 3 and June 2 of 2012 which though down quarter to quarter, is still one of the best quarters for tablet sales since their launch one year ago (500,000 in 4q12, 150,000 in 3q12, 200,000 in 2q12 & don't forget that playbook now owns 15% of the Canadian tablet market up from 5% in early 2011); Also, keep in mind that the less popular 16 GB playbook is being discontinued. RIM has yet to unveil the rumoured 10 inch model meaning that the company literally had NOTHING NEW to offer last quarter but still did reasonably well on the sales front. Only recently has the company allowed blackberry messenger users to view facebook and twitter updates so the full impact of that on sales won't be realized until another quarter. Remeber also that earlier this year sales of BlackBerry phones rebounded strongly after one of the worst quarters in company history.
Signs pointing to a recovery in stock price: July 2, 2012 Hudson Square upgrades RIMM to buy from hold consequently establishing a price target of $10 or 33.9% higher than now (July 3 start of trading). Also note that Lazaridis, one of RIM's biggest shareholders with 30M shares or 5.6% of the company (last major purchase was for 3.1M shares back in February) has not been a seller, indicating his confidence in a recovery.  Oct 31 through Nov 4 share price up +14.5% to $8.71 giving it a market value of $4.56 billion (Nokia up +3.0% to $2.80).

September 2012 Update:  For the three months ended September 1, 2012 Research In Motion posted better than expected results.  Although the company's bottom line remains in the red at -$235 million or -$147 million adjusted (27c/share) the loss is 43% lower than the expected -47c/sh.  In the two quarters prior RIM lost $518m (-99c/sh) and -$125m (-24c/sh) respectively.  Despite not releasing any new products, RIM's quarterly revenue was up +2.10% from the previous quarter at US $2.873 billion.  Negatives : 2013 second quarter cash flow was only $432 million $278 million less than in the previous quarter.  Shipping volume for smartphones was 7.4 million down -5.1% from the previous quarter.  As of September 2012 BlackBerry subscriber base is 80 million (+2 million last three months).

Financials : The Good News
$2.2B in cash equivalents + short & long term investments = $100M more than it was at the end of the previous quarter. That means that in the short term, RIM does not have to part out portions of its business (like Nokia is doing with Microsoft) to survive (why I especially don't think the company will give up either of its two core units, hardware or services, afterall it didn't consider selling either six months ago when the stock was worth 60% more).
The adjusted earnings loss in this first quarter of 2013 is actually a first for RIM (-$192M or -37 cents a share). In the prior quarter adjusted net income was actually $418 million which isn't bad considering Nokia went through a number of quarterly losses before investors punished the stock.

Subscriber base up +1M to 78 million giving RIM's cash flow a stronger foundation.
The last two quarters provided a combined unadjusted net loss of $643M only about a third as much as Nokia ($2.01b) even though RIM launched NO new products but Nokia had its Lumia 900 (2 million units sold up from 1 million last year).
Research and Development spending was almost identical to the November quarter of 2011 ($368m) but down only slightly q2q from $386m (March 2012 quarter), not bad considering it had 33% less revenue to work with ($2.8b vs $4.2b). Services (bbm, etc) accounted for 36% of revenue up from 27% in the previous quarter.

Research In Motion is trimming its workforce by about 5000 but that includes job cuts through to the end of 2013 (the quarter BB10 is released) so the good news here is that this is rock bottom ! Job cuts will save the company one billion dollars a year.
BlackBerry Jam (began last month, May 2012) aims to improve blackberry app world by bringing together industry leading application developers in order to help them innovate and get their products to market faster (one of the attractions for app developers is the fact that the top 10% of vendors are making more money at BB app world than at Android or even Windows).

RIM vs Nokia
Including the half a billion dollar loss in this quarter, RIM profited +$556 million over the last 4 quarters, so operating losses are still relatively new (by contrast Nokia lost -2.437b in 52 wks ending March 2012).
RIM sold $1.6 billion worth of devices (7.8M/260th playbooks); Nokia sold $4.2 billion worth of devices (83M cellphones, 12M smartphones). Nokia avg selling price for devices: €51, RIM avg selling price: ~ $200.

RIM's enterprise server/security platform (playbook first to be approved by the US government) basically makes it a major player in the corporate market regardless of how well developed or freely accessible its app market is (BlackBerry used by 90% of fortune 500 companies, on June 26,2012 the UK government approved use of blackberry security software important since the blackberries now offer mobile voice solutions; this is just one of many such approvals the long term positive effects of which are enormous).
In the latest quarter RIM shipped 7.8 million smartphones which is only 3.1 million less than Nokia (by contrast at this point last year the difference was closer to 10 million). 7.8 million is low but not THAT bad considering sales weren't that much higher at 10.6 million in the quarter nine months ago (and recovered in the following quarter when sales improved to a near record high of 14 million). It made $1.652 billion from the sale of 7.8 million phones and 260,000 playbooks. Comparing that to the $3.066 billion it made in 2q12 from the sale of 10.6 million phones and 200,000 playbooks indicates that the average selling price of a BlackBerry went down since then. I'd put the average playbook price at about the same as the phone (remember, the company now sells playbooks at $199-$299 down from over $500 earlier last year). That comes out to around $206 per device or 29% lower than the average selling price of a blackberry 7 phone earlier in the year according to Abramsky. You have to think, how much profit can RIM make from the next generation phones ? especially considering the vast amounts of features they're going to have.

Refering to the BB10 phones CEO Thorsten Heins said that he's confident they'll provide "a ground-breaking next generation smartphone user experience". The delay in launch is due to the time consuming process of integrating key features which RIM has had success developing (main carriers of the BB are more than satisfied with the platform).

Financials : The Bad News

If you're an investor then be prepared for a wild ride over the entire fiscal 2013 period, and it's only the 2nd quarter ! Operating losses, though still new at RIM, won't end until after we witness the consumer markets response to BlackBerry 10 qnx phones. That's quite a risk to take considering you're going to have to support a company bleeding money for the next nine months and then you have to hope that BB10 (aka BBX) will be THE gamechanger (by that time a slew of new android phones will have already hit the market, each better than the last).
If it were me, I'd take the risk. You see, it was only last month that the US military committed to buying more blackberry devices, which instantly validates the company's security, platform and features. The military, among other DoD and enterprise customers, was particulary impressed with enhanced features on the newest model 7 phones (near field communication technology/voice activated search) and with mobile payments facing increasing scrutiny from government lawmakers, blackberry's devices are already government approved (security) and that could mean a lot in the future.

Sobeys (EMP.A) Did Well in 2012 Even Compared Loblaw Companies LTD (L), Metro Inc (MRU.A)

Empire Company Ltd (tsx:EMP.A) is the parent of Sobeys Stores Limited, the food retailing unit which contributes 99.0% of revenue to the Empire Group (up from 98.3% in 2011 due to the divestment of Wajax property business but that will change next year due to the inclusion of 236 more gas stations as part of operations). Empire Company is still looking like a solid investment (ebitda margin grew the most out of the three companies however it's still in 3rd place at 5.5%).

It upped its dividend payout to 24 cents a share from 22.5 cents which represents an impressive +6.7% jump (had been 20c for a number of quarters prior to that). That beats Loblaw companies LTD last quarterly dividend payout of 21 cents a share back on April 30, 2012 (no growth quarter on quarter) and 21.5c at Metro Inc (up 12.0% from 19.2c which is a nice return). Metro had no problem hiking dividends, with earnings per share up +12 cents (82-->94c) compared to +14 cents at Empire Company (121-->135c) and -13 cents cents at Loblaw Companies Ltd (58-->45c).

Same store sales: Metro 2Q12 (March 2012) +1.0%; Loblaw Companies (march 24, 2012) -0.7%, Empire Company (June 2012) +0.7%

Although sales were down slightly in the last quarter of 2012 (-1.8%), after accounting for the period length being 1 week shorter empire's total sales were actually up +3.0% or $474.9 million (fiscal 2012 only 52 weeks vs 53 weeks in fiscal 2011). Sales were also +3.0% higher for the year after accounting for 2011's extra week & the impact on sales resulting from acquisitions & divestments of convenience stores/gas stations (sales difference between 2011 and 2012 goes from $290m --> $474.9m). Empire Company's EBITDA (unadjusted) ended 2012 on a strong note, up +$14.4m over last year's quarter compared to only +$13.6m for the entire fiscal year (meaning it actually contracted over the previous three quarters). In 4q12 only $10m ($35.3m for the year) in profit came from investments and other operations up from $6.5m in 2011. In the thid quarter, Sobeys food business contributed $3.94 billion to revenue (out of Empire's $3.98b) while in the fourth quarter it was $4.02 billion (out of Empire's $4.07b) which is about 99.0%. In terms of profit, Sobeys was the source of only 89.54% of Emipre's over the last two quarters.
Ebitda margin for last quarter; Metro Inc still leads the industry at 6.9% (up from 6.7%), Loblaws is still in second place at 5.9% (down from 6.6%); Empire Company, though last went up more than the other two: 5.5% (up from 5.06%).


Business at Empire Theatres appears to be strong with revenue from Empire's non food business up +7.2% to $50.6m (from $47.2m); Most of the revenue in that category comes from cinema operations. For fiscal 2012, that revenue reached $204.5m up from $200.5m.
$10M in ebitda gains in fiscal 2012 are attributed to 'dilution gains' from a change in ownership level of Crombie Reit. Normally it's $74.8m (vs $69.4m) but that changes to $64.6m (vs $62.6m) after removing items not considered part of underlying business.
Funded debt fell -$21.6m to just over $1.1 billion (1.3xebitda). Funded debt/total capital fell -1.7 basis points to 25.0%.

Market Share
If we base the market share each has in Canada's food retailing industry on the food revenue of each company during the last two quarters, we can assume Sobeys is at 23% if we believe Galen Weston Sr (Loblaw Companies) when he puts his company's share at 40% (Sobeys sales last six months $7.9632 billion vs Loblaws $14.034 billion last two reported quarters ending March 24). It follows that Metro Inc has 15% of the market (all of its revenue comes from food).

More information about the grocery industry can be found at another website I launched recently at www.grocerynews.org

Planes Trains and Bombardier (competition)

   I talked about the jet segment before but what about trains, better known as Germany based Bombardier Transportation?

Yes, Bombardier is a top three player in the light jet segment with exactly 50% of its 2011 third quarter revenue (53% for nine month period) coming from the aerospace division ($2.3B up 27.8% from 2010) on net orders of 34 (up 48%) coupled with 68 final deliveries (up 33.3%) and a backlog of $22.3 billion (up 16%). The aerospace division relies sales of business aircraft which should be reassuring given that it's a global leader both in terms of revenue and units (43 business jets in the nine months up from 31 in 9M10). Business aircraft command relatively higher prices per unit and so that's also a key source of cash flow. By comparison, the leader in airplane deliveries, Boeing sold 127 planes (737's) for total sales of $17.7b (up 4%), earnings of $1.1b (up 31%); Only considering Bombardiers aerospace division, Boeing revenue was 7.7 times greater (profit 5 times greater) which is comparable to the market cap difference, however remember Bombardier only gets 50% of its business from planes, there's also the profitable train division from which it receives the other half of its revenue. In my opinion that makes Bombardier undervalued.
The Aerospace division is in the process of building its newest manufacturing plant in Morocco. The new plant will cost the company $200 million to build, be in construction mode for eight years but will begin manufacturing planes (and provide sub assembly capabilities) by 2013. By 2020 it will employ 850 workers.
In August 2011 Bombardier signed a deal (intent) with a major company in Russia for the sale of 10 midize CSeries aircraft for $660 million. The Russian deal may be a sign the company's larger aircraft business is about to take off or maybe I'm being too optimistic but keep in mind, the company's first 150-200 seater C919 series aircraft are on deck pending joint venture with China's Comac. January 19, 2012: PrivatAir SA becomes the eleventh company to order Bombardier's C Series planes after it entered into a contract for five 100 to 149 seater aircraft worth $309 million (and optioning another five for $327 million). The order, worth as much as $636 million brings the number of orders to 138 (262 including options) and first delivery of any of them hasn't even happened yet (end of 2012). Why are Bombardier's larger aircraft gaining popularity? Maybe it's the 20% improvement in fuel efficiency over existing planes. Lufthansa and Korean Air are two of the eleven companies with orders already placed. During Prime Minister Harper's trip to China in February 2012 it was revealed that Chinese private airline, Express Airlines is the Chinese company that purchased six 110-150 seater midsize CRJ900 NextGen planes back on October 29, 2011 for $254M. That company already uses 50 of Bombardiers older version of the model (CRJ200). The deal is significant since only about 80 Bombardier aircraft are currently in use in China. Depending on whether China Express picks up an additional five planes through an option agreement, the value of the deal could reach $491M.

Now let's look at the train segment dubbed Transportation. It is world's leading supplier in 7 of 11 product segments giving it a recognizable edge in the industry. As of October 31, 2011 the backlog is $33 billion (unchanged) or 50% more than Bombardier Aerospace not a great sign considering the difference was 75% at this time last year. Revenues of $2.3 billion in the quarter is steady with the previous period with any minor change attributable to currency effects (however in the nine month period revenue for the division is up 13%). Orders were down for the quarter and in the UK specifically, Bombardier Trains has contracted in size slightly, already beginning the process of cutting as much as half the workforce of 3,000, a plan conceived in July 2011 after failing to secure a key contract.
Part of the reason it struggled last quarter (orders down 57% in the third to $1.6 billion) is due to a controversial decision made by Britain's government in August to award a £1.4  billion contract to German company Siemens over Bombardier even though Bombardier would have built the trains at Britain's only remaining train factory in Derby (kind of ironic given that Bombardier Transportation is also based in Germany); that decision came only about two months after Germany chose Siemens over Bombardier for a £5bn contract. Another blow to the company happened the same month on July 25 when Bombardier made rail cars were involved in a massive bullet-train crash in Wenzhou that was ultimately blamed on design flaws. On the day of the crash, July 25 its stock fell 2.29% to 5.98; since then stock has fallen another 34.8% brining it down to 3.90 (by comparison Boeing stock is up 2.73% to 73.26, Embraer SA is down 15.0% to 24.95). I think investors overreacted to third quarter results, the company was banking on the contract and it wasn't really expecting to lose it given public opinion in the UK. Public opinion in Britain is continuing to pressure the government to support Bombardier's factory in Derby and really the only way for them to do that is to continue to award it key contracts which are also seen as job security for British workers. As recently as 2004 the company threatened to cut jobs at Derby but ended up not going through with it; it did however cut 7,000 jobs worldwide that year (since then the company's workforce has nearly doubled meaning the company is in a long term growth spurt).

The transportation division has strong support in India and America with new orders more recently coming from traditional customers in Chicago ($331 million order for 300 cars July 20), New Delhi ($120 million for 76 cars September 5) and Sao Paulo ($96 million order by mass transit September 21, 2011). Don't be fooled by third quarter results. During the nine month period the train division was the source of 53.1% of company revenue, $7.453 billion up 13.13% yoy with gross margin up 10.5% to $1.248 billion; That's 32.8% more than aerospace's $940 million.

Recent Good News
UK: December 28: Won a US$269 million contract to supply London South with as many as 130 Electrostar rail cars (adding to the 2,000 Electrostar models already in use there).
Germany: December 23 Receives new order worth US$648 million for 90 430 series electric trains to be used in Frankfurt. That's in addition to 87 others already ordered by DB Regio AG in 2011. The trains won't be delivered until sometime in 2014.

Over 100,000 rail vehicles presently in use around the globe, were built at a Bombardier Transportation factory. Bombardier rail equipment is designed and manufactured at 59 locations throughout the world however more than half of them are in Europe where 73% of its 35,000 employees work in 16 nations, with most residing in Germany (research is based in Switzerland). Outside of Europe, the company employs people in Canada (Ontario/Quebec), Australia, United States, and Mexico where Bombardier's newest Learjet plant was built. There's also India and China giving it a presence in Asia. In China the company has train and large commercial jet partnerships with local companies including newly formed Comac. For trains, Bombardier has three joint ventures and seven 100% enterprises in China, under which it manufactures propulsion equipment and signaling equipment. 13% of transportation 2011 fiscal revenue came from Asia. China is the focal point for Bombardier's future in the region which isn't a bad plan considering China plans to spend $434 billion on railway infrastructure between 2011 and 2015, that figure is the latest and is 41% higher than the previous one.

Bombarder remains a solid company in which to invest. It pays a dividend which has gone up every year for the past three years. The dividend has gone up from nothing in 2008 to 10 cents a share annualized in 2010 and is on track to reach 11.5 cents in 2011

Undervalued Blackberry Far From 'Game Over' (subscribers up 35% to 75 million, competition affects US market share)

   RIM is far from game over as implied by cnn's Paul R. Monica, not that he has a track record for giving blackberry credit when appropriate; for instance no mention of the 33% quarter to quarter increase in bb unit sales up to 14.1 million in the 3 months ended November 2011 (from 10.6 million units in the 2nd, 13.2m in the 1st quarter) putting it in record company territory or the 35% increase in subscribers over the last year to 75 million. (Globeandmail: Holding out hope in RIM’s hometown) RIM is also Canada's biggest R&D investor at $1 billion/year, Canada represents 11,000 of it's 17,500 workforce. It still holds a leading market share in Latin America 25.6% (Sept 2011, ahead of Samsung at 24%), Canada 36% (platforms, ahead of iPhone at 30.1%), Indonesia 46% (Sept 2011, 2nd is Android at 29%) & South Africa 70% (where Nokia takes 2nd place); Latin American share was also quoted as 28% in August (Argentina has all but banned iPhone sales however BlackBerries are allowed since RIM now manufactures in the country). In the UK Blackberry was in a virtual tie for 2nd place with Apple in 2011 after claiming 27.7% of the market (8.5M British BB subscribers). Another feature unique to the BlackBerry: alert settings ! Users are given more control over ringtone and volume settings as compared to the iPhone.

Things looking up for PlayBook! PlayBook now has 15% of the Canadian tablet market which is amazingly good considering it was just 5% five months ago. The change is attributable to losses in market share by Apple's iPad (now 68% from 86%) and the PlayBook becoming more affordable ($300 compared to $500 introductory price).  Later, in February 2012 Wordpress released an app that allows users to update/create blog content from the playbook tablet.  RIM still has a lot of work to do. Only about 1% of the global tablet market is held by RIM however the company is in an enviable position, the tablet market will grow by 43% in 2012 and much of the growth will come from the developing world where demand for BlackBerry products continues to be strong; First nine months of 2011 more than half of RIM's revenue came from countries outside the USA, UK and Canada (58% of RIM revenue which is up from 39% in 2010). Graphs, tables and general BlackBerry information can be found at more on BlackBerry In the first week of March 2012 BlackBerry's PlayBook outsold iPad at Canada's leading electronic retailers, Best Buy and Future Shop.

Rim is not Palm since Rim continues to have a definite market presence not only in America but globally with a 30% market share outside the U.S. (international market contributed $3.6 of $5.6 billion or 64% of revenue in the 1q12; that compares to 53% for Google) versus 9.2% within the USA (down from over 20% in 2010). Abroad, blackberry is particularly popular in Thailand (>33%) and Indonesia (46% up from 40%) where market share continues to grow even without the next generation QNX operating system being applied to any of its products as of yet (remember QNX alone is worth more than a third of RIM's market cap at present, the QNX product is unique, cutting edge with its technology already used by spacecraft and car guiding systems); In Indonesia there are 6 million blackberry users making it the most popular brand, in fact its popularity combined with a half price offering on the $540 Bold 9790 to the first 1000 buyers, was enough to cause a stampede in Jakarta in November; the strong showing for such an expensive phone is also exciting given that Rim has traditionally relied on the US market for sales of its higher end devices. Smartphones are on track to account for as much as 49.6% of all mobile device shipments to Thailand by 2015 up from the current rate of 17%, so as long as RIM maintains a top two position in that market it should see a significant boost to sales in the near future. In an effort to stem any erosion of market share RIM introduced its first touchscreen phone, the Curve 9380.

Update: BlackBerry and Java ME were the only operating systems to gain share during the month of December (keep in mind that Java ME was down for the year while BB was not); The figure considers all mobile devices even the ipad and other tablets (smartphones represent only about 25% of mobile devices worldwide).
Apple and Nokia's problems in Western Europe will give BlackBerry more opportunities which is great news for RIM considering it's not that far behind (1st quarter of 2011 RIM shipped 3.5 million blackberries to Western Europe, enough to give it a steady 16.5% market share in smartphones). 2011 saw a lot of new companies enter the handheld device market, that was enough to bring Nokia down from 1st place (40% share) to only a couple percentage points higher than 3rd and 4th place RIM and HTC (16.5% each), unlike Nokia RIM is holding onto its European market share. Android continues to dominate among operating systems, in the 2Q2011 51.9 million units were sold worldwide which represents 48% of the global market; Samsung led Android device makers at 17M.

RIM sold over 14M smartphones in the just ended third quarter which ties its record high of 14.2M in the quarter ended November 2010 (was about 25% lower than iPhone sales). For the year, Apple sold 70 million iPhones, 30 million iPads and 59 million other products. RIM also continues to attract the attention of major investment firms with NY based Omega buying up 1.43 million shares last quarter. In the just released quarter RIM posted earnings of 51 cents per share ($265m overall) and revenue of $5.17 billion in line with analysts expectations of $5.26 billion (with a 27.3% gross revenue margin/36.3% in the nine months). By comparison Motorola Mobility Solutions (mobile devices) with 38% more market cap, lost 10.7 cents per share (still independent Motorola Holdings with twice the market cap posted only 39 cents per share profit) last quarter while Nokia continues to post losses ($68m, $368m last two quarters, respectively). As of Nov. 26, 2011 total assets are $14.037b up 9.0% qoq with current assets accounting for half of all assets (down 3.8% to $7.2b but still up 20% from August 2010). As for Microsoft (the platform that Nokia has anchored itself to) it had trouble keeping even its 5.8% mobile platform market share.

RIM's encryption security, made even better in 2011 with the addition of Near Field Communications features to Java-based BlackBerry 7 Bold 9900, is so advanced the playbook, Blackberry's answer to the iPad, remains the only tablet endorsed for purchase by the US Federal Government (since July 2011). Additionally, blackberries are ten times more efficient than the competition when it comes to bandwidth usage which is one of the reasons they are doing so well in developing countries like Indonesia, where bandwidth is limited. RIM's leading edge security features

November 14, 2011: BlackBerry 7 phones awarded common criteria EAL4+ Certification meaning that the combination of security mechanisms and product design meets the highest level of accreditation. This applies directly to the BlackBerry® Bold™ 9900, BlackBerry® Torch™ 9810, BlackBerry® Torch™ 9860 and BlackBerry® Curve™ 9360. February 2012: Blackberry 7 operating system receives FIPS 140-2 (Federal Information Processing Standard) certification. The FIPS 140-2 certification for BlackBerry 7.0 and 7.1 gives the company bragging rights when it comes to encryption security. Since the award was granted all of BlackBerry's latest smartphones and Playbook tablet are now all certified by the FIPS program. FIPS is an award issued by the Canadian agency 'The National Institute of Standards and Technology (NIST) and Communications Security Establishments of Canada".

Platform diversity makes it easier for Android to compete BUT in the long term it will lead to new problems
Unlike the competition Rim is still betting mostly on its own devices and sotfware. Google is taking a more liberal approach; as long as device markers comply to the Compatibility Definition Document industry standard, they can use just about anything produced by Android. Platform diversity, something that RIM and Apple are more wary of getting into, is already beginning to have negative effects on Android in the form of Android fragmentation; Multiple phone manufacturers with one carriers apiece, simultaneously supporting more than one active version of Android. That has led to more troubleshooting problems and other hardware & software issues that are increasingly difficult to resolve due to there being less consistency across devices. Also a problem: Google can't address an issue as efficiently as say rim can because google doesn't design the mobile devices. As a result carriers are losing as much as $2B a year from phone returns/replacements; In fact during the 4Q2011 Sprint, the #3 US carrier reported a $1.3B loss, it sold 1.8 million iPhones and added 1.3M more net subscribers. There's also the issue of patents. Any patent infringement charged to Android affects all of device manufacturers that use it including market leaders like Samsung, HTC and LG.

Over the years Blackberry has improved battery life (fewer of the less popular apps, though next generation phones could require more power if they run on multi core processors), zooming/scolling (liquid graphics display), operating system speed (BB7 which runs the Torch 9810, Torch 9860 and Bold 9900 is 40% faster than BB6 and 100% faster than BB5) and screen resolution/display brightness. The company spent $369m on research & development an increase of 3.4% vs 3q2010.

For manufacturers relying on another's platform (Samsung/HTC on Android, Nokia on Microsoft) future patent laws could provide major stumbling blocks to growth; For example in late Dec 2011 Apple was granted a patent that can be used to keep HTC from bringing several of its newer Android products to the American market. That could eventually lead to other similarly used patents, severely limiting growth for companies without their own operating systems. (bgr: Apple’s new app-switching patent could be trouble for Android) Considering Rim is a patent rich company (1400 patents comprising at least $4B worth of intellectual property according to Bank of Montreal analyst Tim Long) it is in an enviable position. Google is also limited in how it handles troubleshooting problems since it doesn't design the mobile devices which run its operating system (one of the reasons Android phone replacement/repairs cost carriers over $2B a year that's much higher than at RIM & Apple. Apple update 1Q2012 - As of end of December 2012 Apple is selling iPhones at a rate of 285/minute. The company has $97.6B in cash and a 65% share of the tablet market (down from 90% a year ago). For carriers like Verizon and Sprint, carrying the iPhone is bittersweet; Since Verizon added the iPhone to its repertoire in late 2010 it has seen its ebitda margin decline to 42.2% from 46.4%, but at the same time it added hundreds of thousands of new subscribers (1.3M at Sprint).

My response to some of Paul's criticism;

Paul "There is no sugarcoating RIM's latest earnings report. The company warned that sales and profits for the next quarter will be far below already reduced forecasts."
Me - Nokia's earnings have reached nil and even google has reported reduced earnings (experienced 29% decrease q2q 1q11) proving that the success of a product is not directly related to earnings. Margins ARE being reduced industrywide (why Apple's iphone4S was rejected by the US's 6th largest carrier US Cellular because the product is not profitable, competition has reduced the profit margins significantly over the last year with new companies HTC and Samsung entering the market). Additionally, RIM's latest quarterly earnings of 51c/share also took into account a $485m loss attributable to unsold tablets & $50m loss due to the October outage, meaning smartphones didn't do all that bad (company's smartphone business makes up just over 50% of the market cap compared to just 2% for tablet division). Don't forget about the last of 2011 when Google's $864 million q2q increase in revenue actually translated into an earnings decline of 0.9% or 21M. In the same quarter, Apple's profits which amounted to more than $13 billion, actually exceeded Google's quarterly revenue by 23.4% ! Apple sold more iPhones during the last quarter than over the entire 2010 calendar year (285 iPhones sold per minute).

Paul "We now believe that RIMM needs to adopt an existing ecosystem (Windows Phone) in order to remain a relevant player in the smartphone market"
Me - Blackberry remains neck to neck with Apple in the corporate market with a near 40% market share. That means that blackberry's operating system is one of only two with widespread use in that market.
On Millenial Networks out of the top 20 handsets the ones that ran on Apple's operating system represented 12.55% of the market compared to 9.72% for blackberry. (Millennial: Android usage doubled iOS in Q3, iPad king of tablets with 456% growth). So blackberry's operating system remains a player even without the QNX upgrade. Blackberry continues to be even more relevant than Nokia and that's with Nokia (and Samsung) relying on other companies to provide them with an operating system (even Samsung doesn't run its own operating system - so if android or windows or iOS face encryption problems Samsung and Nokia can't do anything about it - can't downplay encryption security with 90% of US companies hacked in 2010).
Of the top 5 mobile original equipment manufacturers only Apple gained market share in terms of US subscribers in September versus June (10.2% vs 8.9%) proving once again that Rim is not the only company experiencing market share loss in the US (LG and Motorola lost about the same % share as Rim in the OEM category); but because the US smartphone market is still growing in size company sales aren't dropping as fast as market share would indicate. The reason it's taking RIM so long to bring QNX bb10 phones to market is because RIM has to rewrite the Blackberry Enterprise Server so that it's tailor made for QNX. Don't forget that Apple is losing market share quickly in Europe's two largest markets, Germany and France. Apple's situation in Europe is deteriorating quickly with the loss of patent wars in Germany. Though Android is gaining, particularly in the key market of France (nearing 60% market share), Apple's problems in Europe are giving companies like RIM more opportunity to expand.

Paul - Blackberry is irrelevant evidenced by earnings drop/market share drop
Me - That's an overreaction. All smartphone companies are seeing their profit margins squeezed due to higher competition (average blackberry phone price decreased from $362 in 2005 to $308 in 2010). Blackberry's sales stabilized in the 3Q of 2012 fy at $19.8B annualized (according to Brigantine) while sales of the newest Blackberries released November 15 were seen as healthy by Royal Bank of Canada. The market share drop is limited to just the US market which only accounts for 36% of RIM's revenue. Even so, the market share drop shouldn't be a concern given that blackberry sales remain near record high (quarterly) and subscribers are up 35% to 75 million in just the last year. Also to keep in mind the last quarter included $485 million in losses due to unsold tablets and another $50 million from the outage in October.
It also depends on what region you're looking at. Blackberry remains more popular than ever outside of the US, UK & Canada; Outside of that region revenue is up to $8.24B for the first three quarters of 2011 up 48% from $5.57B in the corresponding period of 2010; Meanwhile revenue from the US market was down 44% proving that BlackBerry's future lies beyond the US market. Without taking the non US market into account it's impossible to properly evaluate RIM.

What's more, Google's 1st quarter earnings drop of 29% (quarter to quarter) was not an aberration, profit in the quarter ended December 2011 fell slightly from the previous quarter ($2705m vs $2728m) even though revenue grew by $865 million.

Consider the 3rd Quarter of 2012
*According to ad Impressions RIM was the only company posing significant threat to Google and Apple in the connected device & smartphone mix on Millenial networks, with a 13% overall market share compared to 56% and 28% for iOS and Android, respectively. RIM also had the 3rd (Curve), 7th (Bold) and 9th (Torch) most popular mobile phones which combined to represent 9.03% of the market; out of the top 20 handsets the ones that ran on Apple's operating system represented 12.55% of the market compared to 9.72% for blackberry. As a manufacturer, RIM ranked 4th overall just behind HTC at 11.05% with 4.6X the market share of Nokia.

*Revenue from outside the USA, UK & Canada up 48% to $8.24B in the first nine months of the 2012 fiscal period. That region now accounts for 58% of total revenue up from 39% last year.

*Sales stabilized at $19.8B annualized for 2012. Sales of the newest blackberry models were healthy according to RBC. Sales of the newest phones don't show up until late 3Q/early 4Q meaning previous quarters didn't realize the full impact.
*Blackberry sales still at near record high of around 14m (quarter ended Nov 2011) with the lowest future forecast of 11 million (quarterly) being only about 25% lower than the record high for a quarter (meaning when bb10 comes to market sales are guaranteed to break into new record territory).
*9.2% of all handheld devices in the United States ranked top 4 ahead of Nokia, Motorola (25% of all mobile sales are smartphones)
*18.9% of all subscribers in terms of platform (study by comScore, quarter ended September 2011), Continues to have a piece of the tablet market (only 1% or 150,000 units shipped/160,000 sold last quarter however with the tablet market growing by 42% to 29 million in 2012 holding onto that 1% could mean higher playbook sales). Worldwide tablet sales increasing to as much as 253 million in 2016. The iPad2 is expected to dominate in 2012 with market share estimates ranging from 69% to as high as 90% (the rest residing mostly with Android devices like Amazon's kindle fire). Sales of RIM's playbook have been lackluster not because of a lack of interest from end users but rather because the big three American retailers Sprint, AT&T and Verizon Wireless have yet to carry it, they say the market for tablets is currently too crowded and RIM will have to wait. That has forced RIM to bear the burden of sales and marketing.

*In the three months beginning 2011 64% of RIM's revenue came from outside the US ($3.6B out of $5.6B) so a hit in its US market share doesn't mean nearly as much for RIM as it did for PALM (another reason the comparison is nonsensical). Sales of Bold 9870, Curve 3G make up a healthy fraction of total sales signifying that the high end market in emerging economies is growing.

*As an investor you have to be excited about the $1.1 billion cash on hand and zero total debt. That's basically the same position it was in a year earlier, on November 26, 2011 when the stock was 4.3X higher at $59.20/share (cash was only $300m higher at $1.435b) and its cash isn't necessarily in a downtrend; between the 2nd and 3rd quarters of 2012 fiscal year (Feb->Feb) cash on hand was up 32%. At $13 a share even the most pessimistic observers have to be somewhat curious about the company considering the sum of its parts could be as high as $15-$18/share. You also have to take into consideration the P/E ratio which is remarkably low for a company in an industry where P/E ratio's average around 16X. Neither Motorola Mobility or Nokia have reported any profit for the past couple quarters though their P/E ratios remain seven times higher than RIM's.

*Blackberry has over 75 million subscribers!!!! 35% more than it did a year ago. Its p/e ratio rock bottom at 3.90 is especially ridiculously low when you compare it to Nokia (20.48) and Motorola (20.52); it suggests that RIM has fallen far behind those companies when in fact the opposite is true; it has maintained market share and popularity (and even some earnings) despite not turning to other platform providers (specifically android and windows) when the going gets tough.
Net earnings at $256m in the three months ended November 2011, that's down from $911.11m the previous year (though sales are stable) but remember all smartphone markers are suffering in the earnings department due to profit margins being squeezed industrywide (carriers like US Cellular have rejected the iPhone4 because of profitability issues). RIM is still reporting hundreds of millions of dollars in earnings, in stark contrast to Nokia which has been operating at a loss for over half a year (-68M, -368M profit in the last two quarters respectively). During the 2011 year BlackBerry was one of only three operating systems to gain overall US market share in the mobile device category, what's more during the last month of the year it was the only one of those three (iOS, Android, BBX) to increase its share.

*In Indonesia, the world's 4th most populous nation, Blackberry remains the most popular smartphone brand with an impressive 6 million users. What's even more exciting is that high end models such as the $540 Bold 9790 'Bellagio', are gaining popularity.

Now on to QNX Blackberry 10 smartphone technology (QNX operating system, QNX technology also known as Neutrino)
*Probable that 1st QNX phones will have their own native e-mail since playbook is getting its own native BES compliant e-mail just before Colt launch.
*Next generation phones also compliant with Android apps making the apps difference (6X more at Android than RIM apps world) irrelevant.
*QNX phones will have a more fluid touch screen than even the iphone due to the application of leading edge technology (with better screen resolution). The Liquid Graphics technology utilized in the Java-based blackberry 7 already gives it seamless zooming and scrolling.
*Thinner than the iPhone, same resolution as the tablet (1024 x 600), similar resolution to the iPhone4S (16/9).

key rim stats (Dec.22 data)

* Share Price: 13.50/share (reached $14/share by the end of Friday Dec.23)
* Book Value: 19.45/share
* Cash on hand: 2.49/share
* Analyst EPS Growth Consensus: -2.61%
* Debt: No Debt
Grmike's advice - Even in liquidation mode the company is not overvalued with its intangible patents (worth as much as $5B), QNX division ($2-3B) and other assets including current assets (cash over $1B). At this point it has to be considered a value stock with high reward/little risk. Considering it still has a growing market share internatinally (30%) and that developing economies are adding millions of people yearly to their middle class (Brazil especially with nearly 20 million added last year) the RIM brand could be in for an upswing even though the US market countinues to be a hostile place for it. The smartphone and tablet market is growing in size at a rapid pace and that makes any amount of market share increasingly valuable. Look for trends in call options, when they pick up don't hesitate to buy a couple. The risk is minimal with share price so low but the reward is high and there are many cases in which a high reward would be realized. Don't underestimate the interest RIM garners as a takeover target now that Motorola is off the market, Nokia is expensive, isn't commited to developing its own independent operating system (Symbian has all but been abandoned in favour of Microsoft), is unprofitable and has no tablet. I think it's very telling that one of Research in Motion's biggest investors to date has been Jaguar Financial, a group whose sole purpose is to "invest in underperforming, undervalued or unappreciated companies".

General Commentary - China recently surpassed the US as the biggest smartphone market in terms of unit shipments (not revenue though) and Nokia still leads there (but with rapidly declining share) meaning that there's an opportunity for RIM to capitalize (if Android's Samsung, LG don't take it). Apple's still experiencing problems in Europe (not as bad as Nokia which got its share cut in half in 2011) with the iOS getting dangerously close to 20% in France and Germany meaning it recorded negative 5-10% growth over the last year, the opposite of what's been happening with Android. In Germany, Android holds 3X the market share of Apple which means a lot since Germany is Europe's biggest market. Germany has been a hostile place for Apple (just look up the patent ruling in favor of Motorola) so it could be a while before Apple makes up any of the share losses.
All is not lost for Apple abroad though. The iOS is still at over 30% in the UK (only European country that's over 30%), Japan (38%), Australia (41% and growing) and of course the United States (36% and growing). South Korea is Android dominant (85% share) while Nokia/Symbian still lead in China and Brazil but Nokia is losing market share fast as it transitions out of Symbian and over to Windows.

other info
71.1% of mobile subscribers in the United States used the text messaging services (September, up from 69.6% in June) and 31.1% of them accessed blogs/social networks (up from 29.1%).

Sobeys challenging Loblaw Companies' dominance in Canada's grocery market (superstore competition, provigo, no frills, loblaws)

   Between the years of 2008 and 2011, annual sales at Empire-Sobeys Ltd rose 12% to over $16B (53 weeks ended 2Q12 up from $15.5B the year prior, in the 1st qtr $4.15B up 3.2% while operating income for the qtr was stable at $150M) compared to only 4.9% for Loblaw Companies (in the 3q11 sales were 2% higher qoq, 2q11 qtr Loblaw sales didn't grow at all qoq steady at $7.27B (rev up 6% though quarter to quarter)/ income up 16m, ebit up 3m) and 0.8% for Metro Inc (fiscal 2011 $11.431B). Since 2006 the first full year that A&P Canada was part of Metro, Metro's sales have increased by only 4.3% compared to 24.7% for Sobey's; Minor boost for Sobeys came in 2007 when it acquired BC chain Thrifty Foods for $260M, for the past six years Sobeys has led the industry in same-store sales growth. Sobeys latest quarterly dividend was 22.5 cents per share. When we look at the last fiscal year annual revenue at Loblaw Cos was up only 0.3% compared to 3% for Sobeys (Sobeys 12 month period ended in May 2011, Loblaws January 2011). Most of the increase in Sobeys revenue came from 1) Larger new stores (in terms of square footage, closing the gap between it and Superstore 2) Modest inflation 3) Product/services innovation. Investments/other operations provided roughly 1.2% of revenue ($51.1M). Food retailing sales up 3.3% in the quarter (surpassing $4B to $4.106B). Consolidated funded debt fell 12.8% to $1.1004 billion. In the discount market Loblaw's No Frills leads all other grocers, just the 152 No Frills stores in Ontario made $3.4B in sales in 2010 more than Sobey's FreshCo and Metro's Food Basics combined. (June edition: Grocery Trade Review)

Food retailing market share in Canada among grocers: Loblaw Companies 43%, Sobeys 21%, Metro Inc 16%. (Atlantic Farm Focus: Sobeys to supply Target)

Sobeys same store sales growth was 1.7% in the 1st quarter of the company's 2012 fiscal year (ended August), that compares to Loblaw Companies reported 1.3% in its 3rd qtr (ended October) and -0.1% in its 2nd; Sobeys led the industry in same store sales for six consecutive years (the latest a 1.3% increase in 2011).  In the 2nd qtr Sobeys same store sales +1.9% vs +2.5% for Loblaws.  Loblaws earnings in the quarter ended October 2011 totalled $236M up 19.8% even though revenue increased only 2.0% to $9.7B, only the second quarter to quarter increase since a 3.5% decrease back in March (4Q sales grew strongly at over 3%). Loblaws revenue has been inconsistent quarter to quarter due to flat food sales and lower sales in drugstore, apparel and general merchandise. Parent Empire Company Limited has actually been controlled by the Sobeys clan since 1947 when Frank Sobey bought it for its land and ability to be transformed into an investment company. 1947 was also the year Sobeys opened its first supermarket store in Pictou. It was on the eve of Sobeys' 100th anniversary celebration of JW's birthday (JW was originally a marketer of meats) that Sobeys purchased Empire Company outright, acquiring the 27.9% of shares it didn't already own for $1.06B on April 26, 2007 for $58/share ($2-4 premium over the fair market value). In the fourth quarter of fiscal 2011 sobeys attributed the drop of 13.8% in sales from other operations to lower box office attendance due to movies having less consumer appeal. In the discount food market FreschCo is a new invention by Sobeys aimed squarely at Loblaws' No Frills ($3.4B in revenue or about 11% of Loblaw Companies annual sales). No Frills has been in business since 1978. Only about 12% of the grocer market in the maritimes is in the discount market, that's in stark contrast to Ontario (45%) and Quebec (33%). No Frills sold $3.4B worth of goods in Ontario alone in 2010 more than its two main competitors combined. (June edition: Grocery Trade Review)

In 2011 Sobeys expanded 12 stores (down from 13 in 2010/11 in 2009), opened 44 (up from 41 in 2010/47 in 2009) and closed 39 locations (down from 52 in 2010). Sobeys went private in 2007 when it became a subsidiary of Empire Company Limited following Empire's purchase of $1.06b worth of Sobeys outstanding common shares bringing its interest up to 100%. The company's 2011 revenue is 61% higher than it was in 2002 (145% increase in book value per share: 47.76).

Brand Diversification and the Ethnic Market
Sobeys has also been more open to diversification of its brands; After Metro acquired A&P it spent $200M to completely convert Loeb/A&P locations into Metro stores, however Sobeys chose a different route; After acquiring Price Choppers in the 1990's it left the brand largely intact for more than a decade before rebranding it as FreshCo, the other acquisition IGA/Oshawa Group ($1.5B deal in 1998 tripled its size and made it into a national company) was left intact. Initially, Sobeys did this in a bid to win over customers through customer appreciation efforts however brand diversification appears to have benefited Sobeys in the long run because it has allowed it to tap into different markets more effectively (Loblaws gained a bigger market share after it acquired T&T and launched No Frills and now Sobeys is doing the same with FreshCo, that chain has proven popular among ethnic customers, a consumer base that already represents over 35% of shoppers in Ontario and will represent 31% of all Canadians by 2031. (Sobeys takes on Loblaws/Weston to court discount and ethnic shoppers)

Sobeys has experienced tremendous growth over the last decade even before its recent success, between 2001 and 2006 Sobeys stock price rose by over 68%. Sobeys also has a significant stake in Canadian real estate (45.9% of Crombie real estate investment trust, 40% of Genstar Development Partnership) and with Canadian real estate prices climbing (average home price up 6.5% in September/# of properties sold up 2.7% qoq) those investments are bound to pay off for Sobeys. Crombie reit's properties include both high end assets (Barrington Place Shops, Cogswell Tower, CIBC Skyscraper in Halifax) and more traditional retail assets (Greenfield Park IGA plaza, Quebec). Sobeys also holds 100% ownership of Canada's second largest chain of movie theaters, Empire Theatres (Sobeys has operated cinemas since 1984). 2011 is also the year Sobeys converted most of its mainline locations into 24 hour supermarkets taking away from Superstore a key competitive advantage. About 85% of Empire's assets are associated with the food retailing business. Sobeys first reached $1 billion in sales in 1987, in 1999 (2000 fiscal year) Empire-Sobeys sales surpassed $10 billion for the first time (reflecting the first full year the Oshawa Group was part of it). Although revenue increased 75% that year, net income fell 35.7% to $86.7m.

Agreement With Target Canada Gives Sobeys Deeper Market Access
    On September 23, 2011 Target Canada announced that an agreement had been reached with Sobeys in which Sobeys will become the primary supplier of grocery items. The deal is big for Sobeys because it will be able to sell its own private label items outside of its own locations of Sobeys, FreschCo, IGA, etc. A similar agreement made in the US between Target and SuperValu Inc significantly boosted SuperValu's revenue and market access (operates over 2,500 locations but that number nearly doubles when Target and other stores it serves as primary distributor are included). 125-135 Target locations are slated to open begining in 2013. Since the news broke about a month ago Sobey's stock is up 6.2%. In the discount supermarket sector Sobeys' FreschCo competes directly with Loblaw's No Frills throughout much of Canada (though FreshCo hasn't yet been introduced to key areas such as Halifax), while Superstore (Real Canadian or Atlantic depending on the region, the superstore brand represents 1/5th of Loblaw's corporate run locations), Provigo (taken over in 1998/1999, presently Provigo is the largest brand by locations, 2X as many as Superstore), Maxi. Great Food and Zehr's take on Sobeys, IGA and Foodland head to head in regular priced food retailing in central and eastern Canada. About 30% (<400) of all Loblaw locations are discount 'no-frills' (removal of non-essential items to keep prices low) grocery stores (no-frills/valuemart/freshmart/wholesale club), that compares to less than 20% (252) for Sobeys' thrifty foods/freshco. No Frills sold $3.4B worth of goods in Ontario alone in 2010. (June edition: Grocery Trade Review)

On November 15, 2011 announced that it had reached a deal with the National Bank of Canada involving the sale of 15,000 tonnes worth of CO2 greenhouse gas emission gas credits (annually) to the bank, allowing the bank to be a neutral emitter (Sobeys currently has an excess of credits in Quebec due to improvements at IGA locations where harmful refrigeration gasses have been replaced).
Stats from the last two reported quarters
Empire-Sobeys - Fiscal 1q12 & 4q11: revenue was $8.3415 billion up 6.1% from the 1q11 & 4q10 ($7.8585), ebitda $512.8m up 6.3% from $485.8m, profit $171.7m up 7.5% from $159.8m.
Loblaw Companies - Fiscal 2q11 & 3q11: revenue was $16.841b up 1.2% from 2q10 & 3q10 ($16.646), ebitda $1143m up 7% from $1068m, profit $433m up 14.6% from $378m.
Metro Inc. - Fiscal 3q11 & 4q11: revenue was $6.233b up 1.8% ($11.4306b up 0.8% for the fiscal year)
ebitda $420.7 million down 2.9% ($773.4m up 6.8% for the year) with net earnings of $211m down 1.1% ($386.3m up 3.4% for the year).

For Empire-Sobeys, food retailing made up 98% of sales and 90% of operating income in both 2011 & 2010. The commercial real estate business contributes about 30% of funds from real estate operations even though it only contributes less than 15% of real estate revenue. Food Retailing: net debt/net total capital ratio was at its lowest level in 2011, hitting 13.4% it was as high as 32% just three years ago (2008). There are about 286 standalone Sobeys locations across Canada (25% of the company's locations). In fiscal 2011 57 freschco stores were opened, which exceeds units opened by main competitor No Frills. In 2005 it acquired the Oshawa Group, owner of IGA Canada. In March 2002 Sobeys sold Serca Foodservice to SYSCO for $411M.

Sobeys sells Wajax Income Fund but Maintains Interest in Halifax property owner Crombie Reit
->Since March 2006 Sobeys sold 105 properties to Crombie REIT raising $897m in 2 transactions.
->In 2010 Sobeys lowered its debt to capital ratio from 32.7% down to 29.3% and consequently (in May) both Standard & Poor's and DBRS raised Sobeys credit rating.
->In 2011 Sobeys divested itself of Wajax stock by selling 27.5% of Wajax Income Fund for $121.3m (used the proceeds to pay down debt). The market value of all of its real estate investment holdings was $451.2m on May 7, 2011 compared to $487.7m a year earlier (decrease was entirely due to the divestment of its Wajax investment which was worth $117.9m in 2010).
->During fiscal 2010 food retailing/real estate represented 94% of net income. At the end of 2010 total locations (food retailing) under the various banners numbered 1,334 (28.1m square feet) in 836 communities. In 2011 free cash flow fell to $132.6m from 350.1M.