KeyStone’s Your Stock Our Take is Macro Enterprises Inc. (MCR:TSX-V) Our Star is Aurora Cannabis Inc. (ACB:TSX), & Our Dog is High Liner Foods Incorporated (HLF:TSX)


This week in our Your Stock, Our Take segment we look at Macro Enterprises Inc. (MCR:TSX-V), a pipeline and facilities construction and maintenance services to companies in the oil and gas industry in western Canada. After the company announced a $200 million contract this week, a listener asks us if the turnaround is on and whether it is a BUY, SELL, or HOLD. Our Star of the week is Aurora Cannabis Inc. (ACB:TSX), one of the world’s largest and leading cannabis companies, with funded capacity in excess of 570,000 kg per year and sales and operations in 14 countries across 5 continents. The stock jumped 51% in the past week outperforming most in this hot segment, powered by optimism surrounding big dollars flowing into names such as last week’s star Canopy Growth from larger established companies such as Constellation Brands (STZ:NYSE).  For it’s part, Aurora reported strong revenue growth in its last quarter.. Finally, our Dog of the week is High Liner Foods Incorporated (HLF:TSX) – a North American processor and marketer of value-added frozen seafood. The stock is down 31% since early July and dropped 19% last week after reporting weak Q2 results. The company is restructuring – is it a Dog or an opportunity?


If this is your first time listening, then thanks for stopping by. This podcast is produced every week for your enjoyment and show notes are found at Come back often and feel free to add the podcast to your favorite RSS feed or on iTunes. You can also follow us on Twitter @KeyStocks and on Facebook.


Now, let’s dig into the show.


I welcome back my co-host, KeyStone’s VP and Senior Analyst, Aaron Dunn.


Your Stock, Our Take

I know you follow pipeline construction company Macro Enterprises. Is it a Buy following the big contract announcement this week?


  • Maria via Twitter.


Macro Enterprises Inc. (MCR:TSX-V)


Current Price: $3.64

Market Cap: $110 million


What does the company do?

Macro Enterprises Inc. is a Canadian-based oil and gas company. It provides pipeline and facilities construction and maintenance services to companies in the oil and gas industry in western Canada.


Key Points:


On June 19th, a joint venture project that Macro was in with Spiecapag Canada Corp. had announced the execution of a construction contract with Coastal GasLink Pipeline Limited Partnership for construction services on a pipeline project. The Project is approximately 166 km of 48-inch pipeline. The initial estimated contract value is for CAD$900 million of which Macro has a 40% stake in the joint venture. The Final Investment Decision is expected to be received by Q4 2018, and an expected in-service date for the pipeline in Q4 2021. In the two weeks following this announcement, the stock dropped 12%.


What has been driving the stock?


This week, on August 21st, Macro announced that it has commenced construction of the Aitken Creek Section of the North Montney Mainline Project. This section is 67km of pipeline valued at approximately CAD$200 million. Substantial completion is planned for Q1 2019. In the day following the announcement, the stock jumped 14%.


Recent Quarterly Financials (do not paint a bright picture):


  • Revenue for the first quarter ended March 31, 2018 was $8.8 million, a 31% decrease over the prior year period.
  • Net loss was $2.3 million in the first quarter of 2018, compared to $2.6 million in the first quarter of 2017.
  • EBITDA was a loss of $1.3 million in the first quarter of 2018, compared to a loss of $1.7 million in the first quarter of 2017.


From MD&A

The decrease over prior year was due to an overall decline in business activity, particularly large scheduled project work that has been since delayed until further notice.  Generally, work levels continue to remain below historical averages as a result market uncertainty, some scheduling and permitting issues compounded by commodity price volatility.


Our Take:

P/EBITDA: 33.40x

Current Ratio: 6.04

Cash Ratio: 4.39

Net Cash: $32.5 million

D/E: 0.04


From purely current fundamental standpoint, the stock is not cheap based on the past 12-months numbers. Falling revenues, negative earnings, and negative Q1 EBITDA are – well, frankly negatives. However, the company has several major projects in the pipeline that could easily bring about a reversal of fortune.


The latest project appears to have less hurdles ahead of it than the potential Trans Mountain contract and should increase cash flow in upcoming quarters significantly.


It would appear that many investors see an upcoming reversal as well, as we have seen a 61% increase in share price since late May. Their balance sheet is very health, with plenty of cash and little debt. There is strong reason to believe that when returns are seen from recently started and upcoming projects, the Company’s financials will improve markedly. The company is well run, but an industry veteran.  If the Trans Mountain expansion project moves forward as contemplated, the stock appears to offer good speculative value. Macro is not what we consider a long-term investment as it services a cyclical and contract driven business that is subject to significant volatility, but as a speculation on a number of large energy projects, it is a viable option.


Weekly Star


Aurora Cannabis Inc. (ACB:TSX)


Current Price: $8.05

Market Cap: $7.64 billion


Star Performance:

On August 14th, the stock was trading for $5.34. Since then, in one week, it has jumped up 51% to $8.05.


What does the company do?

Aurora is one of the world’s largest and leading cannabis companies, with funded capacity in excess of 570,000 kg per year and sales and operations in 14 countries across 5 continents. Aurora defines itself by its extensive automation and customization resulting in high quality product with low costs.


What is driving the stock?

On August 14th, it was announced that Aurora had completed its acquisition of Anandia Laboratories, a cannabis-focused science company specializing in genomics, metabolite profiling, plat breeding, disease characterization, and cultivar certification. This lead to a 19% jump by August 15th.


Between August 17th and August 20th, the stock jumped 18% following the setting of the record date to August 24th for the spin-out of subsidiary Australis Capital. For every 34 Aurora shares held, an Australis unit will be distributed, which includes a share and a warrant.


Since August 20th, the stock has grown an additional 6% following the confirmation of supply agreements between both Aurora Cannabis and its major subsidiary MedReleaf with Ontario Cannabis Stores, a key market in the Company’s adult consumer use strategy.


Financial Results


Q3 2018 compared to Q3 2017

  • Revenue was $16.1 million compared to $5.2 million, up 211%.
  • Net income was a loss of $20.8 million compared to a gain of $0.1 million
    • On a diluted per share basis, a loss of $0.04 compared to essentially $0.00
  • Adjusted EBITDA was a loss of $6.9 million compared to a loss of $1.8 million



Current Ratio: 7.03

Cash Ratio: 5.14

Goodwill and Intangible Assets make up a combined 56% of Total Assets

Net Cash: $79.3 million

D/E: 0.15


Like our star last week, Aurora is one of the biggest players in the cannabis space, which has seen tremendous growth in the last few weeks. With massive revenue growth from last year and an increasing gross profit coupled with the Company’s supply agreements that will kick in upon Canadian legalization in October, Aurora’s growth potential is exciting to say the least. However, much like last week’s star, it is difficult to actually value the Company before we see how its able to cope with the growth it is likely to continue to see. Both its TTM earnings and EBITDA are significantly negative, and until the Company is able to adjust to its growth pains and cut costs, if it is even able to do so, the negative earnings are likely to continue. Because of its negative earnings and questions about when the Company will actually become profitable, it does not meet our criteria for investment. Nevertheless, the massive gains it has seen recently has made it or Star of the Week!

Weekly Dog


High Liner Foods Incorporated (HLF:TSX)


Current Price: $5.62

Market Cap: $188 million


Dog Performance:

The stock is down 31% since early July 17% and on August 14th, the stock dropped, 19% down in one day.


What does the company do?

High Liner Foods is a North American processor and marketer of value-added frozen seafood. High Liner Foods’ retail branded products are sold throughout the United States, Canada, and Mexico under the High Liner, Fisher Boy, Mirabel, Sea Cuisine, and C. Wirthy & Co. labels, and are available I most grocery and club stores.


What is driving the stock?


On August 14th, the company released weak quarterly financial statements to unimpressed investors, resulting in the 19% drop in share price in 24 hours that occurred.


Financial Results


Q2 2018 compared to Q2 2017

  • Revenue was $245.3 million compared to $232.4 million, up 6%.
  • Net income was $2.8 million compared to $0.6 million, up 335%
    • On a diluted per share basis, $0.08 compared to $0.02.
  • Adjusted EBITDA of $12.1 million compared to $13.4 million, down 10%.
  • Dividends paid per common share were C$0.145 compared to C$0.140, up 4%.
  • Adjusted net income was down 42% to $ 0.11 from $ 0.19.


From MD&A

“Overall, the first quarter of the year is historically the strongest for both sales and profit, and the second quarter is the weakest – this was a weak Q2.


“Consolidated sales volume for the second quarter increased…[compared] to the same period in 2017 primarily due to higher sales volume in our U.S. business reflecting the following:

  • An additional 3.5 million pounds in the second quarter of 2018 from Rubicon, which was acquired on May 30, 2017, as compared to the same period last year; and
  • Lower sales volume during the second quarter of 2017 associated with the product recall in 2017 (2.5 million pounds)”



P/E: 5.62x

P/EBITDA: 2.82x

Current Ratio: 2.19

D/E: 1.37


Revenue growth is marginal at present, EBITDA and adjusted earnings are decreasing. The company is in the midst of a restructuring – changes have been made to optimize the company’s structure by aligning the organization by core function, instead of by geography. The estimated cost savings is $10 million – good start, but it will likely have to do more.


Uncertainty – On July 11, 2018 the U.S. Administration announced additional proposed tariffs that, if implemented, would apply to certain seafood imported into the U.S. from China. The Company currently purchases its seafood raw materials from more than 20 countries around the world, including from the U.S., to meet U.S. consumer demand. A portion of this raw material is imported into China for primary processing and then exported to the U.S. for sale and secondary processing. Proposed tariffs, may or may not affect – uncertainty is never good near-term.


The stock does not appear to be the catch of the day and the drop in the past month, make it our Dog of the Week!

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