2024 Has a New Meme Stock and Nuvei Goes Private

[00:00:00] This is The Canadian Investor, where you take control of your own portfolio and gain

[00:00:06] the confidence you need to succeed in the markets.

[00:00:10] Hosted by Braden Dennis and Simon Belanger Welcome back to The Canadian Investor Podcast.

[00:00:17] I'm here with Dan Kent.

[00:00:19] We're back for our regular Thursday news and earnings episode.

[00:00:23] Dan, so this week I'm sick.

[00:00:25] You're feeling better?

[00:00:26] Yeah.

[00:00:27] I'm a friendly bet on when we think we'll both feel it be feeling good for recording.

[00:00:31] But it feels like it hasn't, has had to be at least a month since we've both feeling

[00:00:37] good for recording.

[00:00:38] Yeah, I've never, like, typically never get sick but for some reason, I've just been

[00:00:43] this has been the second or third time since I've been on the podcast here.

[00:00:47] I mean, I promise to try and not hurt people's ears this week because it was probably

[00:00:51] pretty bad last week.

[00:00:52] Yeah, after you were done recording, I could see Dan searching for a piece of his

[00:00:57] log on the floor.

[00:00:58] So for me, it's just, you know, that little my daughter 18 months and she's just like

[00:01:05] catching every single thing from daycare, catching it.

[00:01:09] So I'm just hoping that after this one, I'll be good for a good chunk of this spring.

[00:01:15] That's my hope because I guess we're officially in spring now.

[00:01:18] Yeah, it doesn't feel like it here.

[00:01:21] It is not good.

[00:01:24] Speaking of spring, I don't know if it's a good transition but I guess it's spring time

[00:01:29] or looking positive for a new way who announced that was going private.

[00:01:33] So do you want to tell us a bit more on that deal that was announced yesterday?

[00:01:38] Yeah, so if you were listening the last few weeks, we talked about the possible chatter

[00:01:44] of, of new way going private but it had nothing had actually happened yet but the stock went

[00:01:49] up like, I think it was 35 or 40% based on the news.

[00:01:54] So just like some insight into new way, they're a payment processing company.

[00:01:57] They IPO'd, I think it was in 2021, Ryan Reynolds is a major backer and they were halted

[00:02:04] early Monday morning and it seemed like at that point it was kind of inevitable that

[00:02:08] a deal had been made.

[00:02:09] It just depended on you know what the premium was.

[00:02:13] So the deal is for 34 US dollars a share which is a low single digit premium to what the

[00:02:19] stock is trading at right now.

[00:02:21] I'm a bit surprised as to why it's trading below the acquisition price because I don't

[00:02:26] really see any way that this deal doesn't go through an article I read pretty much said

[00:02:30] that the transaction has the support of shareholders Philip, Philip Faire, new vase founder chairman

[00:02:37] executive Nova Cap and I'm not exactly sure how do you pronounce that.

[00:02:42] Okay, it's the Depoit Plasma to Quebec which is the managing arm of the QPP so the Quebec

[00:02:50] pension went amongst other things so they managed that money but other things as well

[00:02:55] but yeah it's a say they PQ if you want to say the initials.

[00:03:00] It's probably a CDPQ if you want to say I knew I was not getting that one right but yeah

[00:03:06] so they represent roughly 92% of the voting shares and they've kind of said you know they're

[00:03:12] all right with this deal.

[00:03:13] So typically you would see a company trade at a bit of a discount to the purchasing price

[00:03:18] if the market you know believes the deal may fall through.

[00:03:21] I'd say the most notable situation we saw with this would been when Activision was being

[00:03:26] purchased by Microsoft so there was a lot of chance well there was a lot of rumors you

[00:03:30] know speculation that the deal might fail because regulators may shut it down so it traded

[00:03:37] that one was a much larger discount.

[00:03:38] I think it was trading at like a 20 to 25% discount to the acquisition price.

[00:03:43] I ended up buying it actually and it ended up being a pretty good play because it kind of

[00:03:48] maintained that price level throughout the whole bear market in 2022 and then the deal

[00:03:52] eventually closed in 23 so while the S&P was kind of taking a beating this kind of held

[00:03:58] steady but this one kind of seems like a done deal for the most part unless another company steps

[00:04:04] in and offers more but even then I don't know.

[00:04:07] I'm kind of confused as a why I would trade at a premium unless it's leveled out today but

[00:04:11] I don't think it has.

[00:04:12] Fair who is the founder of new Vable remain on trading at a discount?

[00:04:18] It is.

[00:04:19] Yeah okay it's trading at a discount to the acquisition price by I think around two US dollars a share.

[00:04:25] Yeah so probably like around 5% discount roughly.

[00:04:30] No it's actually leveled out so it has leveled out this morning it's only trading at about

[00:04:34] a 20 cent discount to the price so yeah it was trading at a discount but obviously the market

[00:04:40] is pretty confident that this is going to go through now so it's kind of leveled out but I mean

[00:04:44] the point the discussion on just how these companies do end up trading at a discount to acquisition

[00:04:51] price is still rings true.

[00:04:52] I mean it's typically when the market doesn't feel the deal is going to go through or there's a chance

[00:04:56] that it could follow so the entire leadership team is sticking around and the buyer is

[00:05:04] Advent International it's a US based firm they've been making deals in operation for more than

[00:05:09] three decades.

[00:05:10] It's expected to close in the latter half of 2024 or the first quarter of 2025

[00:05:17] and for many people who purchase new vey it's probably at higher levels than this so

[00:05:24] for a lot of people the mid 40 dollar premium likely isn't going to be enough to get them

[00:05:28] into the green unless they average down for quite a bit while it took a bit of a beating over

[00:05:33] the last few years.

[00:05:35] By the looks of it they IPO'd at around 5.8 billion dollars in 2020 and this deal looks to be

[00:05:40] in the low 6 billion dollar range so it's like not much more than their

[00:05:47] their IPO price which is a bit surprising but I mean overall there's been a huge reset in the

[00:05:55] valuation of payment processors because at its peak this company had a market cap of nearly 25

[00:06:03] billion.

[00:06:04] So you're looking at a 25 billion you know market cap and I think that was what probably

[00:06:08] October, November 2021 to just selling for just over 6 billion now but yeah it's kind of

[00:06:17] it seems low to me I mean relative to other payment processing companies.

[00:06:21] I mean new vey was it was profitable it was growing earnings it was cashful positive whereas

[00:06:26] you know a lot of the companies like say like light speed is a bit you know they're more cash burn

[00:06:30] right now but I mean this kind of sets a precedent in terms of valuation compared you know relative

[00:06:36] to others but it's a pretty interesting deal.

[00:06:39] It was actually you know it's a pretty big payment processor here in Canada.

[00:06:43] Yeah and so I have a chart here for a joint TCI listeners so I have in purple so you have

[00:06:49] the returns total returns of new vey and that's the TSX right so it kind of varies depending

[00:06:55] if you're looking at US or the Canadian listing just because it's dual listed and obviously the

[00:07:00] exchange rate has an impact on that but purely looking at the TSX listing it's down pretty much

[00:07:07] or flat like it's down 1% total returns because clearly they've been paying I think a dividend

[00:07:13] for a couple of orders now which doesn't make all that much sense to me but it is what it is and

[00:07:18] that's compared to if you just take the XIC which I believe is the TSX 60 fun which has returned

[00:07:27] much better I mean it's per turn less than the S&P 500 but since the IPO it's returned close to

[00:07:33] 51% so unfortunately for those who bought it around the IPO like you said they're down their investment

[00:07:40] and they're definitely trailing the index but also the S&P 500 or even the NASDAQ if you want to

[00:07:45] compare them to a bit more the same kind of tech companies I'm assuming it's even more pronounced

[00:07:52] for the NASDAQ so it's definitely interesting I think for me what it tells me is that there might

[00:07:57] not be that premium anymore for these type of payment process or is that people are willing to pay

[00:08:02] and I think we talked about that where I think it just becomes more and more a commodity you have

[00:08:08] a couple of big players I'll say at time and time again like a Visa Mastercard yeah I guess you can

[00:08:13] put AMEX in that category although they're kind of a hybrid between like Visa AMEX and a bank

[00:08:20] I would say and they're much smaller than the two so you have those that are kind of the staples

[00:08:25] and then you have all the other payment processors at least that's the way I view it yeah it's just

[00:08:30] and the competition is just so like there's so much competition in the space that I think you know

[00:08:37] I'm kind of curious as the why valuations got so high during the pandemic I guess it was just kind

[00:08:43] of I mean low policy rates fueled by just kind of a bit speculative investing I guess because I

[00:08:48] mean the company so new vase sold it looks to be trailing 12 month EV a bit of 22x and during

[00:08:57] the pandemic it was over 40 so you're looking at like almost half the valuation and it's just like

[00:09:05] a lot of people expected these to kind of return to higher valuations but I mean I think just

[00:09:10] overall the competition in the space like you said like Visa Mastercard the crazy modes that they

[00:09:15] have I mean it's just I just don't think investors are willing to pay these higher valuations for

[00:09:22] these companies and I mean it like if you look at the company it's sold for like I said practically

[00:09:27] it's IPO price and it traded for it traded on the market for well that be like almost four years

[00:09:34] it's crazy and they and they accept like almost unanimously accepted deal for pretty much what

[00:09:39] what an IPO that a good nice little round trip they did yeah exactly crazy and it'll be

[00:09:45] interesting to follow like you mentioned I think it was last week light speed whether that has an

[00:09:50] impact on them I just don't know how much of a nap atite there would be to take light speed

[00:09:55] private just because of what you mentioned they're not profitable and typically from the research

[00:10:00] I've done for private equity they tend to focus more on profitable companies so I think there might

[00:10:06] be some I don't know if the demand will be there is what I'm saying if you know DAX is hoping for

[00:10:13] a similar kind of deal for his business yeah I just don't see it now and then even then like

[00:10:18] it just seems I figured that if new they got a really high premium that it would impact light

[00:10:23] speed share price but I mean I think this was probably a bit lower than you know a lot of holders

[00:10:28] would have wanted especially those who bought it you know in 2021 and paid like 120 150 dollars

[00:10:36] of share that kind of hurts to you know accept 44 now but yeah it's it's an interesting deal I

[00:10:44] wonder if this will spur any other deals in that space but I kind of doubt it yeah yeah I'm

[00:10:49] definitely in the same idea I think it's we'll have to see which I'm missing the name but

[00:10:56] which company that's private can you you know like they do the payment processing for Shopify

[00:11:02] you know which one I'm talking about their super large company

[00:11:07] I know they're planning to go public somewhat soon you must I mean I can't yeah I think it's

[00:11:14] the cold I just can't remember the name yeah no I'm not I can't think of it either I'm trying

[00:11:19] to look it up here okay well maybe when I do your next segment I'll probably I like that up

[00:11:26] because I'm about to to start something you that's okay I think people will probably be screaming

[00:11:32] knowing what company I was referring to yeah but I know all that to say I know that their valuation

[00:11:40] you know going public is definitely less than then they were expecting this mysterious company

[00:11:45] that I can't think about right now but that's okay we'll transition to something else I guess in

[00:11:52] the payment space but a bit different so SBF San Bankman-Free gets 25 years in prison so in case

[00:11:59] people are not familiar with the story I'll just do a quick overview because if you're in

[00:12:04] the finance world I'm sure you're aware of it but if you're new to the podcast as you may have

[00:12:09] heard of this guy or an FTX but you might not quite know the whole background so FTX was

[00:12:15] founded by San Bank and Free it also known as SBF during the last crypto bull market FTX became

[00:12:22] one of the largest crypto exchanges in the world Alameda Research with was a crypto hedge fund

[00:12:28] primarily owned by SBF started using FTX customer funds to cover losses resulting in resulting

[00:12:36] from risky crypto and venture bets it's really hard to know exactly when the problem started

[00:12:42] occurring but it's probably safe to say that they started having issues in late 2021 when crypto

[00:12:47] and unprofitable tech started going down obviously new ways an example I'll do I think they were

[00:12:54] profitable at the time but we saw a lot of growth in the stock market but also crypto I started

[00:13:00] going down from the peaks in late 2021 and then on November 2nd 2022 CoinDesk which is a publication

[00:13:08] that focuses on the crypto space was able to get the balance sheet of Alameda Research which showed

[00:13:14] that it was filled with sorry for the lack of better terms but shit coins including FTT which was

[00:13:22] the token issued by FTX so essentially what it showed is the balance sheet of the Alameda the hedge

[00:13:29] fund was filled with this kind of created cryptocurrency that was issued with by FTX and there was a lot

[00:13:37] of intermingling between the two and from that point on it took only nine days for FTX to file for

[00:13:43] bankruptcy as it was not able to repay all of its customer deposits I mean if you're interested

[00:13:50] in a store I do encourage you there's tons of documentaries on YouTube that are free really

[00:13:55] interested that kind of details a crown and not details in order the events that happen and I know

[00:14:03] I'm struggling with some words today just kind of hard when you're all stuffed up and also

[00:14:08] you know with my friend Shaxx and so I do apologize for that now last week Sambay Sbf was convicted

[00:14:16] of seven counts of fraud and conspiracy by jury last November so in 2023 it was actually almost like

[00:14:22] almost to the day compared to that story when it came out about the balance sheet issues a year

[00:14:29] prior to that and last week Sbf received his sentence from Judge Kaplan who was overseeing the case

[00:14:36] to 25 years in prison now the sentence was a bit kind of in the middle between what the

[00:14:43] prosecutors were asking so they were asking 50 to 60 years while his defense was asking

[00:14:49] in the middle single digits I think they were asking about like five six years the defense

[00:14:55] was arguing a softer sentence because they said FTX customers will be paid in full now that's

[00:15:01] very misleading and I listen to the all in podcast which is very popular with you know Shama and

[00:15:08] David Saks and the two others there Friedberg and I'm missing one and I think they you know

[00:15:15] I definitely like like hearing what they have to say but I think they were really wrong when

[00:15:20] they addressed this because customers are yes they're being paid in full but that's in fiat

[00:15:26] terms and fiat is just like you know money that we use every day but for customer who had Bitcoin

[00:15:32] in Ethereum for example it won't be the case that's because the amount owing is in USD so meaning

[00:15:39] that the people really received the equivalent of what they had in crypto in USD value add the time

[00:15:46] of bankruptcy well the issue is that Bitcoin at that time was below $20,000 US and now it's above

[00:15:53] 65,000 as we're recording this so a big chunk of the money they were able to recover was simply

[00:16:01] appreciation and various cryptocurrencies that FTX the estate of FTX following the bankruptcy had

[00:16:09] access to without that price appreciation even if it remained like flat from that time to right

[00:16:16] now they would not have been repaid in full obviously they made some venture bets including

[00:16:21] there was one in an AI firm that did quite well but again to me that would not be a valid reason

[00:16:27] even if you're trying to argue that customers will be paid back in full because you're you're kind of

[00:16:33] you are but you're not really right just based on what the customers would want back you're not

[00:16:38] giving them the choice of having into back in whatever you know whether it's in USD or Bitcoin right

[00:16:45] so I think that's a bit misleading definitely when you know you start seeing that I wanted to provide

[00:16:50] some context on that part specifically now anything you want to add before I continue and just

[00:16:56] take a breather from my stuff in it no I mean that's I actually didn't know that that you know it was

[00:17:03] only being paid back in in USD I figured it would be in the currency in the in the crypto currency

[00:17:09] obviously but yeah clearly I mean Bitcoin has gone through the roof if if it was still in the tank

[00:17:15] it's probably a very different situation yeah and just to make it simpler for people

[00:17:19] or trying to rub their head around it just take it this way so when they file for bankruptcy last

[00:17:25] like about a year or 18 months ago let's say I had money on FTX so I had one Bitcoin on FTX

[00:17:33] they filed for bankruptcy the one Bitcoin was worth 20,000 and now you know 18 months later

[00:17:40] they're saying well we're paying you back 20,000 so you're we're making you whole even though

[00:17:46] that Bitcoin's worth $65,000 now so I think you know whatever you think about Bitcoin and not I think

[00:17:53] that's debatable whether people were made a hole or not so that's why I think you see the headlines

[00:17:59] and stuff and it doesn't bring a lot of this stuff into context there's been other bankruptcies

[00:18:05] I think depending on the bankruptcies they do give people the option or not I think there was

[00:18:10] the genesis bankruptcy that was also blockfied so it's not the only one but I think some of the other

[00:18:15] ones they did it a different way to establish a value and now just to finish on this the Judd

[00:18:21] did recommend that he put SBF in a medium security prison in San Francisco instead of the one in

[00:18:27] New York where he was being held that because of his vast wealth is autism and social awkwardness

[00:18:35] which would make him especially vulnerable in a high security prison in a statement that Judd said

[00:18:41] SBF committed perjury was evasive and repeatedly dodge question during his trial SBF apparently

[00:18:48] spoke for 20 minutes but did not seem to be remorseful of his actions and put some blame on others

[00:18:55] which is pretty consistent with what we've heard from the trial because I was just accounts from

[00:19:01] reporters that were attending the trial and the judge definitely did not seem to appreciate the

[00:19:07] fact that he was unwilling to take responsibility his parents said that they will continue to fight

[00:19:12] for their son and for those who were you were not aware his parents are also facing some legal

[00:19:17] troubles relating to their involvement with FTX so that's a whole other story that maybe we can

[00:19:23] visit at some point and my thoughts here is that I am happy to see that he got a tough sentence

[00:19:29] and hopefully it will act as a deterrent for people to commit white collar crime. Whether people want

[00:19:36] paying this with just being specific to crypto or not, there's a litany of white collar crimes in

[00:19:42] the traditional financial markets I don't think it's anything new. My big thing is that they need

[00:19:48] to set an example for any type of white collar crime because it's hard to quantify how it affects

[00:19:56] people but I did search and there's definitely at least a handful of people that committed suicide

[00:20:02] because of this. So I know it's not as straightforward as someone walks into a convenience store and

[00:20:08] kills someone with a gun but the impact that it has on people's life can actually be way broader

[00:20:15] and more impactful than a like a better term, like kind of traditional crime if you'd like

[00:20:22] and just a fact that SBF is just not remorseful. I think it's just I just don't understand. I mean,

[00:20:29] the only thing to say and I don't know what's causing it whether it's the way his brain works

[00:20:34] I'm not quite sure but how you cannot be remorseful with the amount of pain that you inflicted on people

[00:20:41] I just don't understand. Yeah and that's kind of why I thought like the sentence was I figured he

[00:20:45] would get more like if you probably if you consider the amount of money that a lot of people lost the

[00:20:52] amount of lives he's ruined I figured like 25 years was pretty soft. I wonder can you get out any

[00:20:57] earlier? Probably can. I would imagine so. I don't know. Yeah, I had heard that because it's like a

[00:21:04] federal sentence you can't but I'm not sure I'm not like a I really am not sure that's what I

[00:21:11] heard but I can't say whether it was like you know I'm certain that I had to be honest. I wonder

[00:21:18] just quickly do you know what is his parents are facing legal troubles? I actually haven't kept

[00:21:24] up on this story much at all but I'd be interested to see how his parents are involved.

[00:21:28] Yeah, so that was there's a lot of stuff that came out. I think it was last year regarding his parents

[00:21:34] involvement and just the parents giving kind of legal advice to him. Yeah, I guess they're

[00:21:40] charging like high fees. Yeah, getting paid through FTX. I mean, I'm just kind of throwing stuff

[00:21:46] out there because it's been a while since I looked at that but yeah, there's definitely and I

[00:21:51] think one of the other things was the parents involvement in doing like donations to politicians

[00:21:58] in the US and apparently they were not very they did not discriminate. They were spreading the money

[00:22:04] evenly across the aisle so they wanted to make sure that you know it was well received regardless

[00:22:11] of the allegiance over there. Yeah, I mean he deserves what he got I guess I would figure

[00:22:17] he deserved more but because I mean the only really the only way you stopped this kind of stuff is

[00:22:21] to come down really hard on people for doing it and yeah, yeah exactly so yeah we'll see

[00:22:29] I look at I mean there's been it's not the only one that you know that has done financial

[00:22:34] scrim I mean there won't be the last to me the fact that yeah exactly and the fact that there was

[00:22:40] I don't know if there was any conviction maybe there was one or two from the great financial

[00:22:45] crisis but I know there was no very major convictions were very minimal and I think it's time for

[00:22:52] you know people to be a bit more accountable when there is like egregious cases of fraud like

[00:22:56] that obviously I know it's not always easy to you know to be able to prove that but I think

[00:23:03] when you have strong sentences it hacks as a deterrent for sure yeah for sure and before you move on

[00:23:09] to BRP so the company I was talking about earlier for the payments is strife oh well yeah I figured

[00:23:16] yes strife payments but I their Shopify's main payment process that makes sense I yeah I believe so

[00:23:23] they haven't officially announced an IPO date that's the latest I can tell but I'm assuming

[00:23:29] that they're probably keeping an eye on something like new vei I know they're much larger than new vei

[00:23:34] but oh way larger yeah from what I've been reading I last year did some reading on that and their

[00:23:39] valuation was significantly down as well so that's another example it'll be interesting with the IPO

[00:23:45] for whether kind of what we're seeing with new vei may translate to a larger company like strife if

[00:23:51] they decide to IPO or not yeah I was just looking at bargagal now they figured like a 65 billion dollar

[00:23:59] valuation that's just off a quicksir so you're talking like yeah 10x what new vei just sold for

[00:24:06] I don't know how but again they're in the same space I know they kind of serve different clients but

[00:24:12] I'm sure that it will be part of a potential comp if they're trying to base some prices for

[00:24:18] for an IPO in the future yeah yeah I mean they're integrated across so many things like you can

[00:24:24] pretty much put a strife payment gateway on anything you can imagine really and yeah I don't know

[00:24:30] how I don't know how neither of us didn't think of that no I don't know like I was just like you

[00:24:36] know when you have that it's at the tip of your tongue but you just can't think about it

[00:24:42] enough about that let's talk about some skiddo's and sedues yeah so BRP which is

[00:24:50] Bumbardi a recreational like no main relation to the Bumbardi a stock they're separate they've

[00:24:56] been separate for 20 some years I think so they reported revenue and earnings that missed expectations

[00:25:02] on both the top and bottom lines so this company is pretty well known for topping expectations so

[00:25:08] it was a bit of a surprise and then in addition to this it downgraded its guidance I'll get

[00:25:12] to the guidance in a bit you would think the stock would have taken a dive post earnings when in

[00:25:18] reality went up by 6% it was up another 8% on Monday and then this morning as of Tuesday morning

[00:25:25] it is up another 3% today so it's it's gone up quite a bit I'm not exactly sure why for the

[00:25:33] the big escalation in price I mean that amount in in three days but the company said that

[00:25:39] the warmer winter is no doubt having an impact and I'm starting to wonder if maybe investors

[00:25:45] are treating this as a bit of a one off and the results actually aren't as bad as they seem

[00:25:49] because you know that warmer winter might just be offsetting earnings for a single year because

[00:25:54] that is pretty much the only segment you're seeing struggling right now is things like snow mobiles

[00:26:00] so much so that when you exclude the snow mobiles snowmobiles numbers from the overall company

[00:26:06] numbers like considering the circumstances you know economically that we're in like sky high

[00:26:12] policy rates you know lower spending like they're still growing earnings and are sorry revenue

[00:26:19] so earnings are declining and sales aren't growing as fast as they were but I mean again considering

[00:26:26] you know the situation weren't it's really not that bad so overall sales in the fourth quarter

[00:26:30] showed a decline of 10% but when you strip snowmobiles out revenue only decline 2%

[00:26:37] so on the year total sales grew by 8% and if you strip out the decline in snowmobiles it actually

[00:26:44] grew at a 12% clip so this is pretty much a pure recreational vehicle company so I mean the fact

[00:26:50] that they're still selling right now as mentioned is is pretty good and they issued their 2025

[00:26:55] fiscal 2025 outlook so this is one of those companies that is kind of like half a year ahead in

[00:27:00] terms of fiscal years so their next quarter which will be the second the second quarter of you

[00:27:06] know the calendar year 2024 will be their first quarter fiscal 2025 so it's just a bit of a weird

[00:27:13] year end so that's why you're seeing these types of you know years but they expect revenue to be

[00:27:19] in the 9.1 to 9.5 billion dollar range and earnings will come in around $7.25 to $8.25 so this would

[00:27:29] be declines of 8.3% on revenue and 25% on earnings however it states that the warm winter will be

[00:27:37] impacting the start of fiscal 2025 as well and they figure it'll hurt earnings by about a dollar

[00:27:44] $25 per share throughout the whole year so if we were to kind of look at this as a one-time event

[00:27:49] you could possibly see how you know a return to normal in terms of winter conditions could

[00:27:55] pretty much result in it in a pretty big jump in earnings almost right away for the company

[00:28:01] so i mean it seemed like most of the declines and earnings were already priced in in terms of other

[00:28:06] notable items on the guidance so it expects kpex of around 500 million which would be a 86

[00:28:12] million dollar reduction from last year and it expects to close out fiscal 2025 with a share

[00:28:18] count of 76.2 million so this is about a 3% dip and if you followed BRP for any amount of time like

[00:28:27] it buys back shares like crazy so over the last 10 years it's bought back 37% of its total shares

[00:28:33] outstanding 22% of those buybacks have come in the last 5 years they've started to return more

[00:28:41] money to share holders through dividend growth they kind of slow down dividend growth and even I

[00:28:45] believe they even halted the dividend or at least reduced it during the pandemic but they raised

[00:28:51] it this quarter by 17% getting back on track to becoming a pretty strong dividend growth stock and

[00:28:58] overall it's like if you were to look at strict declines and numbers it's really not all that

[00:29:03] good of a quarter on the surface but in reality they're operating pretty well considering

[00:29:07] how much of a struggle it's been for a lot of consumers i mean right now i don't even know who's

[00:29:12] thinking of like what do you financing a snowmobile or a boat at like 10% right now i just can't

[00:29:19] imagine yeah i mean do you know if they like they're waking through a backlog because i know they had

[00:29:24] a big backlog during yeah i mean and it's going down yeah in 2021 20 22 yeah and then they had

[00:29:32] like 2022 they had like supply chain issues and all that kind of stuff that was impacting them i mean

[00:29:37] it's been a crazy few years for the company but they have huge market share i believe i can't

[00:29:42] remember what their market share is in the snowmobile space it's over 50% i think it's it's pretty

[00:29:46] crazy and it's continuing to grow so yeah it was pretty good quarter all things considered

[00:29:52] yeah i mean i i don't know exactly what the valuation is on here but to me it's something i would

[00:29:59] approach with caution i mean it's not too bad it's only trading at 10.9x expected earnings okay that's

[00:30:06] not too bad yeah i mean as long as the earnings go yeah go the way as they hope right yeah i mean

[00:30:12] if you look at this is just 10 year median price to earnings ratio of 20 20x and right now it's

[00:30:19] trading at 10.6 so i mean it's a lot different of an environment i think like you know it was a

[00:30:26] pretty good pretty good bull run from what would that be 2014 till 2024 so yeah it's i mean they're

[00:30:33] only trading at 7.3x they're trailing free cash flow so i mean that's not too bad yeah i think

[00:30:39] it just obviously the overhanging thing is if there's macroeconomic headwinds in North America

[00:30:46] that could definitely impact the results and are they my other question i don't know the company

[00:30:52] super well but you know how how much was the backlog masking a potential decline in demand is

[00:31:00] probably the other question i've had for the business yeah it's i mean that's definitely

[00:31:05] something to consider they they do expect a slowdown again this year but then they like just

[00:31:11] if we look at analyst numbers but it's really really hard to actually project into 20 20 6 20 27

[00:31:19] it's pretty much a guessing game at that point but they do expect you know 2025 to be relatively

[00:31:25] rough and then rebound again in 20 26 and 20 27 which i mean kind of lines up with how you'd figure

[00:31:33] you know policy rates and everything go if we expect you know rate drops end of this year really

[00:31:38] next year i mean that could spurs more spending because again like i would imagine the financing

[00:31:43] rates on these things are not cheap and the products just aren't cheap either i mean i don't

[00:31:48] know who could afford one right now but i mean it was relatively easy during the pandemic which is

[00:31:54] why they saw some pretty crazy growth but i mean i the fed put baby yeah that's what

[00:32:01] that's all you got to bank on but no that that was interesting i mean i know bradin falls

[00:32:06] this one pretty small position in them so i guess yeah no it's i think i i mean bone bath

[00:32:15] Z was a one-see darling in the back and they just managed to sell off every good part of the

[00:32:21] business exactly they did quite well yeah they did quite well but let's move on to something more

[00:32:26] entertaining i thought that was a good transition so trump media IPO so last week the merger between

[00:32:34] DWAC and i guess it's trump social media group something like that let's just say trump and truth

[00:32:42] social was approved DWAC was the SPAC that was announced that it would eventually merge with truth

[00:32:49] social the announcement had been made more than two years ago but was delayed because of an

[00:32:54] SEC probe that was eventually settled for 18 million last July and that would need to be bade should

[00:33:01] the merger happen now for those who are new or to the podcast are not familiar what a SPAC is so

[00:33:08] that's a special purpose acquisition company we talked in 2021 how there was a lot of euphoria in

[00:33:14] the markets a lot of valuations got stretched while SPACs were definitely yeah definitely part

[00:33:21] of those cuz um yeah they traded pretty pretty pricey didn't really make much sense and a SPAC

[00:33:29] is basically a shell company that IPOs with the sole purpose of acquiring or merging with a company

[00:33:36] and during the pandemic like i said we saw a lot of these packs IPO in the hype around them was

[00:33:41] just crazy they would go up and it was just just on the rumor that they might merge with a

[00:33:47] specific business without any concrete evidence that's how crazy it was and they would typically

[00:33:53] list for $10 and then you'd see the SPAC kind of go crazy during the 2021 boom and if you look at

[00:34:00] the SPAC and new issue ETF ticker spcx it's down close to 30% since its highs of February 2021

[00:34:09] i think it started trading around that time if i remember correctly that ETF now if we go back to the

[00:34:16] wac merger with trump media and technology groups so that's the official name but i mean it just had

[00:34:23] one brand underneath it as true social which is trump you know social media platform and the stock

[00:34:30] now trades under ticker djt which is also the initials of donald j trump and is now known as again like

[00:34:37] i said as trump media and technology group the company had a net cash position of 245 million as of

[00:34:45] December 31st 2023 they had a bit more than 4 million in revenue last year so that's that's

[00:34:55] quite the gear in revenue yeah you can probably hear my sarcasm here they lost 58 million

[00:35:02] they had a net loss of 58 million on that 4 million of revenue last year and although the company

[00:35:08] hadn't reported user metric the estimation i've seen was that they have around 5 million users per

[00:35:15] month globally and 1 million user per month specific to the us and for comparison twitter has over

[00:35:22] 350 million monthly users worldwide and over 50 million the us alone so it's not even close to

[00:35:31] what an axe or facebook or you know name your social media platform that's well known and

[00:35:37] there is also a key individual risk here to the business obviously if anything happens to trump

[00:35:43] if trump doesn't use the platform as much i mean he's not young either i think he's in his late 70s

[00:35:50] at this point like is he like 78 or something like that yeah i think when he was president he was

[00:35:56] like 74 75 so yeah he'd be up there yeah he's 77 so it's pretty close so he's 77 obviously i mean

[00:36:04] i don't know what his health is and whatnot but that's definitely a key risk for this company that's

[00:36:10] so reliant on this one person i mean the brand is literally built around him and at the same time

[00:36:17] it could be a really interesting stock just to look at from a social point of view i would say because

[00:36:24] you know whatever you think about trump i think it's fair to say that he has a very loyal following

[00:36:30] who may want to buy this stock simply because they believe in him regardless of what the business does

[00:36:36] just to show his support for him and you know i think it's probably going to be a bit of a meme

[00:36:42] stock but with an added element of loyalty to the shareholder base because of that i think it'll

[00:36:48] be fascinating just to kind of see how it looks like in the coming months especially when the

[00:36:53] lockout period comes up which trump owns a lot of this stock i can't remember exactly what the numbers

[00:37:00] are but right now what's happening is there's a very small float so that just means that there's not

[00:37:06] that many shares that are available in the public markets and when the lockin period ends there's

[00:37:11] going to most likely be a flood of new chairs coming to the market and what will that have as an

[00:37:18] impact on the existing shares i don't know but typically if there's a lot of people selling

[00:37:23] obviously if the demand is not there to buy those shares then it will pressure the stock price down

[00:37:29] so it'll be interesting to see what happens i mean obviously people who invest in this are not really

[00:37:37] kind of investing in the company i think they're more gambling i think that's fair to say but again

[00:37:43] i think there's just so many dynamics that play i just don't think the business is that relevant

[00:37:48] for this stock to be honest it's rare that i say that but i just don't think it is yeah i mean they have

[00:37:55] you're talking about shareholder loyalty and it seems like you would have to be pretty loyal because

[00:37:59] they have four million in revenue and their market cap from what i'm looking at is six billion dollars

[00:38:05] yeah i think you're right yeah so i mean it's probably fluctuated from a billionaire to in the last

[00:38:09] couple days anyways i mean these facts are just i do remember it back in 2021 it was absolutely

[00:38:17] crazy i remember they even had oh man i can't remember the name they had a guy on youtube they actually

[00:38:22] called him oh he called himself the spack man and he had like a little logo i think his logo was

[00:38:28] like the pac man guy and he was like eating the word spack what was the big one uh oh was tattoo

[00:38:36] chef i think they were a big spack and i think they went bankrupt not too long ago i'm pretty sure

[00:38:41] they were a spack yeah that was just complete euphoria this seems to be nothing short of the same

[00:38:47] i mean what a twitter sell for it was 42 billion or something yeah something like that yeah and

[00:38:52] they have 70 times the user base as this yeah and there's an advertiser is and you know like

[00:39:01] much more active user base and i think that's the issue right what if trump stops

[00:39:05] you know true thing whatever that's called on the true thing on the platform posting on the platform

[00:39:12] obviously that's a big risk um advertisers may not want to advertise there i mean some may be

[00:39:17] reluctant because they you know they don't want to be seen as partisan or something like that so there's

[00:39:22] definitely a lot of things to take into account nonetheless i mean they may be able to tap to the

[00:39:29] public market it's pretty easily if again there's this loyal following for trump that's ready

[00:39:36] to put money in it is just i just find it fascinating there's just so much in terms of the social

[00:39:41] aspect around it oh for sure like he's pretty much the entire thing like if he isn't around i mean

[00:39:47] who's what's the point of of going on the platform really i mean crazy times g dj t g r so donald

[00:39:56] j trump jr that would be true yeah yeah oh man oh i think enough about this meme stock i think we've

[00:40:07] uh we've covered it enough and you want to go over in a vales uh read earnings and we're definitely

[00:40:12] talking about some smaller names uh clearly earning season is winding down yeah so this one

[00:40:18] i had thought about because last quarter we talked about it and it was just the read is in

[00:40:26] some pretty rough shape so this is they're pretty much a european office read so i'm pretty sure

[00:40:32] they have a lot of exposure to france spain germany i believe so where it all started to go down

[00:40:41] for the reats was i believe it was in 2020 or 2021 so they bought a sole occupied building in

[00:40:50] paris for 51 million dollars uh by sole occupied i mean there's one tenant that occupies the entire

[00:40:57] building so it was meant to improve ffo funds from operations per unit in the high single digit

[00:41:05] but in 2022 the company got noticed that the tenant would just not be renewing its lease and it

[00:41:12] would be leaving the building completely so they bought a sole occupied tenant building for 51 million

[00:41:18] dollars which is quite considerable considering the size of the reap and the tenant had a two year

[00:41:23] lease left on it and it's a sole occupied building so the tenant left the building is you know down to

[00:41:31] 0% occupancy so i mean the company is down 82% over the last three years it halted the distribution

[00:41:38] so i mean it was trading pre-covid at around 1120 a share and it's now a dollar 20 and again as of

[00:41:46] right now the occupancy rate is 0% over 334 thousand square feet of space that is just not getting

[00:41:54] leased i took a quick look at their occupancy rates and their annual report they just put their

[00:41:59] average occupancy rate on france properties is just over 50 with one building being at 32%

[00:42:06] and of course the acquired building being at 0% the company has around 37% of its leases

[00:42:12] maturing in the next few years i'm pretty curious as to whether or not they'll be able to drive

[00:42:16] rent increases considering like i mean you got imagine a veer in a building they offer and it's 37

[00:42:22] percent occupied i mean you're probably you have so much leverage in that in that aspect it's like

[00:42:29] but yeah they they reported adjusted funds from operations of just a penny on the quarter so

[00:42:35] this is down from 11 cents when we look to q4 last year and overall adjusted funds were down 20%

[00:42:42] the fair value of its investment properties for the company is declined by 6.5 percent

[00:42:47] debt to gross book value is up weighted average interest rates on its loans i've increased from 1.93

[00:42:53] percent to 2.75 considering the company's average loan to maturity is just 2.9 years it's probably safe

[00:42:59] to say the company needs rates to come down interest coverage ratios drop from 3.5 x to 2.4 x

[00:43:06] so i find in a valus interesting and way because it highlights the fact that often where there's

[00:43:10] smoke there's fire this company traded like very cheaply for quite some time but i mean it was

[00:43:16] probably just a result of you know the single client leaving its Paris building it's been downhill

[00:43:22] all since another thing is this company had a very high yield for a long time so if you did a quick

[00:43:29] screen on reats you'd probably find this company had a very low valuation with a very high dividend

[00:43:34] yield but it kind of looks like like obviously the writing here was kind of on the wall and it's

[00:43:40] still just kind of blows my mind that the company would make it make an acquisition that large

[00:43:45] on a single building with a single tenant that has less than a couple years left on the lease

[00:43:51] so i mean the pandemic didn't really help all that much and i would imagine if this was pre-pandemic

[00:43:56] they probably filled a building a little bit easier but i mean it was a risk nonetheless

[00:44:01] it kind of it kind of shows you that you know these management teams on any sort of company like

[00:44:07] they're human they uh they make some pretty big mistakes at times yeah yeah i mean it's uh

[00:44:15] yeah when did they do that purchase for that building it was it was either late 2020 or 2021

[00:44:22] let me look it up well they were bullish on working from home trend not continuing i guess

[00:44:29] let me see yeah and sometimes too you'll find management just feel pressured to do something to

[00:44:35] make the company grow but sometimes i mean it's better to be patient especially when you get

[00:44:40] into leverage because let's be honest like reeds are typically pretty highly levered i think it's

[00:44:47] around 60 65 percent i think for most reeds in terms of leverage ratios so if you take on more leverage

[00:44:54] i mean you better be sure that it's a good move because um you know dan fosh and i will have an

[00:45:01] episode coming soon about real estate and that's one of the things we talked about right leverage can

[00:45:06] really magnify your gains but it can completely crush you if it goes the wrong way both ways yeah

[00:45:13] just quick search it looks like i mean it looks like it was the worst timing ever because it was in late

[00:45:19] 2019 so i mean you're talking like they didn't do it during the pandemic it was prior to the pandemic

[00:45:25] but i mean god that's just horrible timing yeah january 23rd 2020 it was announced and two months later

[00:45:32] global pandemic yeah yeah i mean i guess management can be forgiven a little bit there just because

[00:45:42] obviously if the pandemic doesn't happen it probably looks way different but again i think it's still

[00:45:48] something to keep in mind when you have just one tenet or any other kind of business when you

[00:45:53] just have one customer or just a handful of like major customers if you end up losing one of those

[00:46:00] can really impact your revenues and i think that's one of the things that we talk when talked about

[00:46:06] in video is you know most of the revenues are coming just from three four key customers and at the

[00:46:13] end of the day that's a risk people may think that it's not a risk or they might dismiss it but they're

[00:46:19] wrong it's still a risk will it materialize maybe maybe not but the concentration of that customer

[00:46:26] base is definitely a big risk yeah i mean in this situation i mean it seems to me like if you were

[00:46:32] to go and purchase this building with that short of a lease you think you would you know maybe try

[00:46:38] to negotiate prior to the purchase yeah in advance because it just like it just killed them it was

[00:46:46] so i yeah i just thought it was interesting to talk about because like i said i think it was

[00:46:50] maybe even two quarters ago we talked about it and uh it hasn't gotten any better it's actually gotten

[00:46:56] it's gotten worse yeah yeah i guess uh you know buyer beware well on this note i think we i think

[00:47:04] i'll have time to do a quick recap so we i had done these earnings a while back and i figured

[00:47:11] it would be a good idea just to look at it because speaking of pandemic this was a name that was

[00:47:15] pretty affected so synoplex they they came out with earnings about a month ago i'll do it quickly

[00:47:22] here so total revenues were up 26% to 1.4 billion for the year box office revenues were up 30% to

[00:47:29] 600 million food revenues up 27% of 483 million media revenue was up 6% to 119 million

[00:47:40] amusement revenues were up 20% to 97 million and then other was up 34% to 91 million net income

[00:47:48] was positive but that was the only that was only because of deferred income taxes they had an

[00:47:54] operating loss of 9.5 million versus 10.4 last year so essentially unchanged from that standpoint

[00:48:01] the good news is that they generated 157 million of free castle for the year which is almost three

[00:48:07] times that of the previous year free castle per share has been slowly trended up since 2020 but

[00:48:13] so well below pre pandemic and that's kind of the thing the theme here is a lot of the things are

[00:48:19] still well below pre pandemic level management said that they were pleased with the result especially

[00:48:25] despite having box office supply challenges in 2023 if we think back of 2023 there was the i think

[00:48:32] the actor and the writer strike which affected the yeah the you know the quality of movies if

[00:48:38] you'd like that came to the big screen and according to them they outperformed their North

[00:48:43] American peers by 795 basis points for box office revenue growth they have now over 14 million

[00:48:50] members of their scene plus loyal program which you know I'm one of them and I haven't used it

[00:48:56] in forever so we'll take that with a grain of salt and they expect 2024 to be strong especially now

[00:49:04] that again the actor and writer strikes are in the rear view mirror one thing that's not so great

[00:49:10] for synoplaxes or interest expanse it's grown 27% you over a year and as increased from 122

[00:49:17] million to 155 million they also announced that they had issued 575 million of senior secured notes

[00:49:24] at a rate of 7.625 percent so I mean it is interesting I know one of the things I had looked and

[00:49:33] I forgot to add I guess I was working off a spreadsheet here but their revenues and the

[00:49:40] attendance is still significantly down compared to pre pandemic level and there's a big gap in

[00:49:47] you know the drop in attendance and the revenue compared to pre pandemic levels so the revenues

[00:49:53] are closer because they're clearly charging more but the foot traffic is just not back just

[00:49:58] there yet so I don't know whether that will pick back up whether people are just deciding that

[00:50:04] you know what it's not worth it to spend money on that or not so it'll be interesting how it

[00:50:09] actually evolves in the next couple of years yeah I think the foot traffic is probably down I think

[00:50:16] maybe because of just the lack of good movies that are coming out recently I mean maybe because of

[00:50:22] that probably would have been a bit but because of the strike I mean we had Oppenheimer and then

[00:50:27] what was that other one that was big Barbie Barbina Marriott and then we had I think late last year

[00:50:35] I don't know if it would still be impacting on this quarter but they had the Taylor Swift

[00:50:39] I think you could go there and see your concerts or whatever so that drove like I remember that

[00:50:43] was a huge chunk of their foot traffic but they're just like I'm somebody who's so my wife has a

[00:50:49] scene card okay she used it all the time like I don't think we've paid for a movie in 10 years

[00:50:55] because we don't go very often and when we do like it's always on the house but like there's

[00:50:59] been absolutely nothing you know what you say yeah what you're you're richer than that thing exactly

[00:51:04] scene points yeah I mean I and I was able to find the difference so they had essentially the

[00:51:13] attendance is down about like 28% over that time frame so 2019 to the most recent year and then

[00:51:22] the revenues are down 15% so they were able to I guess charge more but again the foot traffic

[00:51:28] is just not bad yet so it'll be interesting I mean we haven't gone but I think for us it's

[00:51:34] it's more a reflection of having an 18-month old you know and finding a babysitter and all

[00:51:39] that stuff I'm sure we'll try to go when we have a chance yeah the movie gets a lot more expensive

[00:51:43] when you go to pay for all that yes yes it's in a flexes god they've gone they used to be one of the

[00:51:52] like I'm pretty sure they're one of the faster growing Canadian stocks for a while

[00:51:56] and then I believe they got like a buy-out offer from I can't remember what that cinema place was

[00:52:01] yeah but it fell through or something and then it just ended up bombing yeah I think it was

[00:52:07] so they had a buy-out offer in a world I want to write before the pandemic yeah yeah I was

[00:52:13] right before the pandemic and then they backed out because of the pandemic oh yeah and I think

[00:52:20] there were it went to court or some yeah I'm just going based on memory that was a while back but

[00:52:26] yeah 2.8 billion dollars they got the offer was for out of it out of it okay and right now

[00:52:33] cineplex has a market cap of 450 million so that's yeah yeah yeah yeah that's a good move

[00:52:42] very good movie by cinewere older whoever yeah even though they probably had to pay some fees

[00:52:47] I'm sure it has been more than worth it for them to dodge that bullet yeah exactly well

[00:52:53] I think that's it for today I think it was still a good episode I appreciate people bearing with me

[00:52:59] despite my stuffiness and difficulty pronouncing certain English words but I think it should be

[00:53:05] better next week although I suspect I may be coughing a little bit that's usually how it goes for me

[00:53:10] I get a cold and then turns into a cough after but if you haven't done so you know make sure

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[00:53:43] for listening everybody the Canadian investor podcast should not be construed as investment

[00:53:49] or financial advice the host and guest featured may own securities or assets discussed on this podcast

[00:53:56] always do your own due diligence or consult with a financial professional before making any

[00:54:02] financial or investment decisions