KeyStone’s Your Stock Our Take: Evergreen Gaming Corporation (TNA:TSX-V), Barrick Gold Corp. (ABX:TSX) and PFB Corporation (PFB:TSX).

This week in KeyStone’s Stock Talk Podcast we answer three listener questions in our Your Stock Our Take Segment. The first on profitable micro-cap Evergreen Gaming Corporation (TNA:TSX-V), a licensed gaming company currently operating four smaller casinos in Washington State. A listener noted its lower PE and asked if we see it as good value.

Our second Your Stock Our Take is on gold giant, Barrick Gold Corp. (ABX:TSX). Barrick is one of the world’s largest gold producers, operating mines in North America, South America, Australia, and Africa. With the price of gold moving higher once again, a listener asks us how the current valuations look on this widely followed gold stock.

Our final Your Stock Out Take this week and year is on PFB Corporation (PFB:TSX), a small-cap company operating in the building construction sector. PFB develops, manufactures and markets, insulation building products and technologies based on expanded polystyrene technology. The company pays a 2.6% dividend and is profitable, showing solid growth but operates in what can be a volatile building sector. A listener asks us if it offers value at present.


Your Stock, Our Take

Evergreen Gaming Corporation (TNA:TSX-V)

Current Price: $0.41

Market Cap: $51 million

What does the company do?

Evergreen through its U.S. subsidiary companies, primarily Washington Gaming, Inc. (WGI), operates four casinos in Washington State: The Riverside Casino in Tukwila, Goldies Casino in Shoreline and Chips and Palace Casinos in Lakewood. These are mini-casinos (or house-banked card rooms) which offer to persons of legal age a variety of card games of chance at which the player may win or lose money, a business commonly referred to as “gaming”. The company also operates bars and restaurants in each casino, as required by state law.

The casinos currently offer card games such as Poker, Blackjack, Spanish 21, 4-Card Poker, PaiGow and Baccarat. Each casino has up to 15 gaming tables and, in accordance with Washington State gaming law, the maximum single betting limit is $300. They also offer a game known as “pull tabs”, a game in which the player can win specified prizes by matching certain combinations concealed under perforated strips on each paper game piece.

Key Points:

Recent Financial Results:

Q3 2019 Results

Revenues for the quarter were down 1.5% to $10.3 million compared to the same period in the prior year. Table games drop decreased by approximately 6% but managed to increase by 2% the hold percentage resulting in an increase of $1,144,177 in table games revenue. Poker revenue decreased by $475,839. Operating expenses were $8,602,910 in the quarter ended September 30, 2019 compared to $8,757,596 in the prior year third quarter. Labor and benefits expenses increased by approximately $285,947. The increase was primarily due to the minimum wage that went from $11.50 to $12.00 effective January 1, 2018.

Net Income dropped 27% to $1.37 million from $1.87 million in Q3 2018.

The company’s MD&A is low on details as to why the drop. It does labour costs increased roughly $285,947 due to the minimum wage that went from $11.50 to $12.00 effective January 1, 2018. This took a bite out of profitability. 

Our Take:

From a valuation perspective, Evergreen Gaming appears attractive. The stock trades at approximately 7.41 times earnings with a cash rich balance sheet. However, the slight drop in revenues in Q3 which has been part of the story for the balance of 2019 and the more significant decline in earnings causes us to be concerned about the growth moving forward.

Again, as we stated, the company’s MD&A is very light on details and Evergreen Gaming does not conduct quarterly conference calls so we would have to contact management for a potential outlook on growth if growth exists.

It appears to offer value, but at present the growth is negative and with no future guidance we would be inclined to monitor the stock until we noted a growth path moving forward.


Your Stock, Our Take

Barrick Gold Corp. (ABX:TSX)

Current Price: $24.30

Market Cap: $43.2 Billion

What does the company do?

Barrick Gold is engaged in the production and sale of gold and copper to world markets and its activities include both exploration and mine development. The company is one of the world’s largest gold producers, operating mines in North America, South America, Australia, and Africa.

Key Points:

The share price performance has been positive over the past year, with the stock up around 32%.

Part of this has been driven by an increase in the price of gold – which has broken to the upside of a 5-year trading range – and is currently up around 20% this year to US$1500/Ounce.

In early 2019 Barrick completed a merger with London-listed Randgold Resources Limited where Barrick acquired 100% of the issued and outstanding shares of Randgold for $7.9 billion. With Randgold shareholders receiving 6.128 new Barrick shares for each Randgold share. Both companies’ operations and net assets have been consolidated starting January 1st, 2019.

Recent Financial Results:

  • Barrick Gold released its Q3, 2019 financials on November 6th.
  • Revenue was up 46%, to $2.68 billion compared to $1.84 billion for the same quarter last year.
  • Adjusted EBITDA was up 67%, to $1.3 billion compared to $776 million for the same quarter last year.
  • Adjusted earnings per share were up 88% for Q3 and up 17% year to date.
  • Adjusted earnings per share over the last 12 months were US$.41 which places the price to earnings valuation multiple at around 45 times.
  • Their D/E ratio is .196 and net debt-to-EBITDA ratio under 1 which is healthy.
  • Currently, the company pays a yield of 1.1%.

Our Take:

Over the past two years Barrick’s revenue and net income have certainly shown a lack of growth with trailing-twelve-month figures similar to that of a year ago.

With Barrick’s operations and share price not performing very well for shareholders for much of the past decade. I personally believe that management has been focusing on sizeable mergers and acquisitions to create shareholder value through possible synergies as we have seen with the merger with Randgold and even their failed hostile takeover of rival gold miner Newmont in mid 2019. In regard to the merger with Randgold, it will certainly be interesting to see if the whole of the two major gold miners is really greater than the sum of its parts but this has yet to be seen.

With optimism surrounding precious metals going into 2020 and seemingly new enthusiasm coming to Barrick after their merger with Randgold – it could possibly be a good name to invest in if one expected the price of gold to perform well going forward. However, Barrick is certainly trading at a premium to the market considering their P/E multiple and lacklustre growth in past years and there is no guarantee any synergies will be realized from the recent merger.

If gold continues to perform well there may be some upside in the stock but it’s not something that we would recommend our clients buy right now. We have said it before, but KeyStone tends to avoid businesses with operations tied to an underlying commodity. As even if management executes perfectly, if the price of the underlying commodity slips, operations can be drastically affected.


Your Stock, Our Take

PFB Corporation (PFB: TSX)

Current Price: $13.22

Market Cap: $ 88.4 million

What does the company do?

PFB Corporation has two operating subsidiaries, Plasti-Fab Ltd. that operates in Canada and PFB America Corporation that operates in the United States. Both segments develop, manufacture and market, insulation building products and technologies based on expanded polystyrene technology; that, when used as components of a building envelope, enable residential and commercial structures to be highly energy-efficient.

Key Points:

PFB is a small-cap company operating in the building construction sector. It does pay a regular dividend which yields 2.6%. The company also paid additional special dividend of $1.00 per share in November. There is very little trading volume and lots of volatility but the stock price has performed well over the last year; up nearly 40%.

Financial Overview

  • PFB reported third quarter financial results on October 24th.
  • Q3 revenue declined 6.3% to $36.9 million.
  • Adjusted EBITDA was up slightly to $6.08 million compared to $5.97 million in the previous year.
  • Earnings per share were $0.51 compared to $0.49 in the same quarter last year.
  • Management stated that sales in the quarter were down due to product mix and project timing. However, continued stable raw material input costs resulted in improved gross margins and the slightly improved adjusted EBITDA.
  • For the 9-month period, revenue was up 3.6% to $96.4 million, adjusted EBITDA grew 14% and earnings per share increased 29%.
  • Historically, the company has grown its revenue consistently over the past 4 years although there has been some fluctuation in gross margins and profitability.
  • The stock is trading today at about 11 times trailing earnings.


Overall, PFB appears to be a solid business with generally consistent revenue growth and profitability. We like the consistent dividend and how management is returning capital to shareholders.

We would consider PFB to be at the higher end of the risk spectrum due to its small size, low trading liquidity and exposure to the building construction sector. Raw material costs have fluctuated historically which can have a large impact on gross margins and profitability. Revenue as well has slowed in 2019 compared to the previous year; currently only in the low single digits.

PFB is not a company that we are recommending but it does appear to have some positive investment merits long-term. We would advise any investors who want to purchase the company to keep any position sizes relatively small. As well, we would expect to see continued volatility in the share price and financial performance over time.



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