Street Life: Analysis
(Street Life is a regular feature that focuses on what's playing in the stock market.)
* ACT I: The Home Run Canada Southern Petroleum (TSX:CSW) $10.15 Up 89.7 per cent (two-week run since takeover offer).
Canada Southern isn't going down without a fight, and that has shareholders gushing over a potential bidding war for the company. Since Petro-Canada (TSX:PCA) stunned the oilpatch in early May with a hostile takeover bid for Canada Southern at a 58-per-cent premium to the stock price at the time, shares in the Calgary oil and gas company have been racing on speculation of a white knight raising the stakes. Canada Southern's board has recommended shareholders reject the Petro-Canada bid, characterizing it as "financially inadequate," considering the company's Arctic assets.
* ACT II: The Bomb QGX Ltd.
(TSX:QGX) $2.42 Down 30.6 per cent (two-week selloff).
It turns out that you need more than a degree in geology to speculate on junior mining stocks these days. Shareholders in QGX have been getting a geography lesson lately and finding out the hard way that Mongolia isn't the politically friendly locale for mining stocks that many believed. Shares in QGX have been in a freefall since the Mongolian government passed a windfall profits tax law relating to copper and gold revenues - just as prices in those commodities have been flying high. QGX has extensive mining assets in Mongolia focused on gold and copper.
* ACT III: The Takeover Hummingbird Ltd.
(TSX:HUM) $30.75 Up 20 per cent (one-day move on takeover news).
A one-day pop of 20 per cent for a slumping stock in a floundering tech market sounds pretty good, eh? But not according to some major stakeholders in Hummingbird, who felt the company could have done a better job of soliciting takeover bids. California-based holding company Symphony Technology Group offered the money-losing Toronto-based software maker $465 million US in an all-cash deal. In a hostile conference call, shareholders and analysts challenged Hummingbird chairman Fred Sorkin over the deal. Sorkin said the company would consider any counter bids.
* ACT IV: The Retail Wonder Canadian Tire (TSX:CTC.A) $67.85 Up 118.9 per cent (four-year run).
You'd be hard-pressed to find a finer four-year chart than that of Canadian Tire. The stock's consistent runup has netted a spectacular four-year gain. But now the stock has been getting a push from U.S. hedge fund manager William Ackman, whose rave reviews of the hardgoods retailer gave the stock a nine-per-cent boost in intraday trading. Ackman, of Pershing Square Capital Management, a major stockholder in Canadian Tire, lit a fire under the stock with his comments at an investment conference. Ackman's word carries a lot of weight. An activist shareholder, he has influenced companies such as Wendy's International and McDonald's. More recently, he has challenged Sears Holdings Corp.'s takeover bid of its Canadian division of Sears.
* ACT V: The Breakout Payless ShoeSource (NYSE:PSS) $26.01 US Up 26 per cent (two-day rally).
Payless, known for its 2-for-1 deals, provided its shareholders with a nifty 2-for-1 special on news. The footwear retailer put some serious traction under its shares by releasing robust earnings results and then, within an hour, announcing that it had acquired the American Eagle Brand of footwear and accessories from Jimlar Corp. The company, based in Topeka, Kan., said its fiscal first-quarter earnings (through April 29) were 53 cents per share, compared to 45 cents in the year-ago period. Shares in Payless, the No. 1 footwear specialty retailer in the U.S., have gained 53 per cent in the past 12 months.
* ACT VI: The REIT Breakdown Retirement Residences Real Estate Investment Trust (TSX:RRR.UN) $8.43 Down 15.7 per cent (since putting itself in play as an acquisition target Feb. 14).
Unitholders are clearly losing patience with Retirement Residences and its prospects of an attractive takeover bid. The recent selloff came after the pool of potential suitors was reduced by at least one. Chartwell Seniors Housing REIT (TSX: CSH.UN), which was considered a logical contender, announced it has withdrawn its bid for the company. Retirement Residences is Canada's largest provider of accommodation and care for seniors. The REIT pays a monthly cash distribution of seven cents per unit.
* ACT VII: The Metals Play Aurizon Mines Ltd.
(TSX:ARZ) $3.18 Up 38.3 per cent (one-day move on takeover bid).
Northgate Minerals threw out the first pitch for Aurizon, but analysts believe the game may be just beginning. With consolidation heating up in the mining sector, Northgate, a Vancouver-based gold and copper producer, made an unsolicited offer for Aurizon, offering $435 million in an all-share bid. But it remains to be seen whether someone sweetens the pot with a competing bid. Northgate is keen on enhancing its gold prospects and becoming a mid-tier producer. Aurizon, whose stock has soared 155 per cent over the past 12 months, is coveted for its Casa Berardi gold project in Quebec.
* ACT VIII: The Sleeper Play Zecotek (TSXV:ZMS) $1.55 Up 101 per cent (year to date).
Zecotek is not a mining company. It is not an oil and gas company. It is not a uranium company. And when you're not a player in the red-hot commodities market these days and you're trading on the TSX Venture Exchange, that may be a difficult thing to admit. Yet, punters haven't held that against Zecotek, a tech company that boasts resource-like returns this year. The UBC-based bio-photonics company has been garnering some serious attention in the market, based on its development of a crystal for solid-state lasers. It recently introduced what it terms a rare-earth fine oxide (RFO) crystal, billing it as a "significant breakthrough."
(Stock prices are based on results through May 26.)