KeyStone’s Stock Talk Podcast Episode 118

This week in our Your Stock, Our Take segment we start by taking a listener question on Canadian communication companies. Specifically,  whether Telus Corporation (T: TSX), is a good dividend/growth investment at its current price. Our second YSOT comes in from a listener on StorageVault Canada Inc. (SVI:TSX-V), which owns, manages, and rents self-storage and portable storage space to individual and commercial customers.  A listener asks us our take on whether the stock remains a good growth opportunity. Finally, our Dog of the Week is Nikola Corporation (NKLA: NASDAQ), a stock we took a hard pass on earlier this year when it was included as a question in our YSOT segment. Nikola, which purportedly designs and manufactures battery-electric and hydrogen-electric vehicles, saw its founder, Chairperson, and largest shareholder, Trevor Milton, step-down amid allegations, he hasn’t exactly been truthful with investors. The stock dropped 20% on the day and is off 79% from its June highs. 

Your Stock, Our Take

Clay via Twitter

What’s your take on SVI-T?


StorageVault Canada Inc. (SVI:TSX-V) 

Current Price: $3.38

Market Cap: $1.24 Billion

Yield: 0.31%

What does the company do?

StorageVault Canada’s primary business is owning, managing and renting self-storage and portable storage space to individual and commercial customers. The corporation also stores, shreds, and manages documents and records for customers. 

As at June 30, 2020, the company owned over 74 thousand self-storage and portable storage units and had a total of 8.3 million rentable square feet across 7 provinces.

Key Points: 

  • The storage industry in Canada is highly fragmented which supports their strategy of making acquisitions to consolidate the industry. 
  • In the company’s MD&A they indicate that the Canadian Storage Market is estimated to be 90 million square feet. Seeing that the company has 8.3 million rentable square feet, this provides Storage Vault with approximately 9% market share. 
  • The company is the exclusive supplier to Costco members across Canada, which means that the company has exclusive access to Costco’s membership base as a marketing channel.  

Recent Financial Results: (Q2 2020)

  • Revenue was up 9.2% to $37.4 million, compared to the same period last year. 
  • AFFO was $10.5 million, an increase of 14.1% from $9.2m in Q2, 2019.
  • AFFO per share was $0.03 per share, up approximately 20% from $0.025 in Q2 of 2019. 

Showing the progress of the company’s financials over the past 4 fiscal years: 

YearRevenueShares OutstandingAFFO Per Share% Growth in AFFO Per Share


So, from these annual figures we can see that revenue has been increasing at a solid pace and AFFO per share has grown at an average rate of approximately 33% over the past 4 years. Appearing to taper off   

Because the company essentially invests in real estate, they do maintain a large amount of debt on its balance sheet, with approximately $1.1 billion in debt, providing the company with a net debt-to-Adj. EBITDA multiple of ~13x which is quite high. To put this into perspective, the highest Net Debt to-EBITDA multiple among reputable Canadian power producers in our Canadian Alt. Energy report was ~8x. Now of course I am not comparing apples to apples here – but the point that I am trying to demonstrate here is that a Net Debt-to-EBITDA multiple of 13x is something that would not meet our investment criteria and possibly raise some concerns.

On a relative valuation basis, the company is trading with a trailing EV/AFFO valuation multiple of ~31x. Despite its solid growth in revenue and AFFO per share, I believe that this multiple indicates the stock is trading at a premium and possibly even overvalued. 

Our Take:

Looking at the price action over the years the stock had a very impressive run up from 2015 to mid 2017 – increasing over 400%, which of course was driven by the business’ solid financial performance and an increase in AFFO per share of around 50% in 2017. But from mid 2017 to now, the stock really hasn’t done too much, up around an additional 30% from the gains that I highlighted earlier. 

Seeing that growth has slowed in both topline revenue and on an AFFO per share basis. All while the company grows through acquisition, funded by debt, while its leverage ratios are getting to the upper end of where we would like to see them. And still trades at a premium valuation, we do not have them under coverage. 

However, it is a good business with a great track record, as well as a relatively defensive stock that pays a small yield. There is a possibility that a large U.S. based storage company may acquire the business in the future, but essentially it isn’t a name that we could justify an investment thesis on. 

Dog of the Week

Nikola Corporation (NKLA: NASDAQ)

Current Price: $27.58

Market Cap: $ 10.45 Billion

What does the company do?

Nikola Corporation operates as an integrated zero emissions transportation systems provider. It designs and manufactures battery-electric and hydrogen-electric vehicles, electric vehicle drivetrains, vehicle components, energy storage systems, and hydrogen fueling station infrastructure.

Key Points: 

We were asked our take on Nikola earlier this year and we took a hard pass on it. 

The stock dropped 20% on Monday, as its founder, Chairman and largest shareholder, Trevor Milton, step-down amid allegations, he has not been completely truthful with investors. The allegations came via a short-report. The stock has cratered 79% from its June highs.

Financial Performance:

Let’s take a quick look at the financial performance of the company. Our look is short and sweet, as there are no numbers to speak of. No revenues and, of course, no earnings. So we move on. 

In June, the company had a market cap of just under $30 billion based largely on pre-orders for trucks that don’t exist yet.


There is a couple items to break down here.

Many would place the stepping down of Nikola’s Chairman Trevor Milton in the same category as Elon Musk stepped down from Tesla. Perhaps it is, but I would ask if we really should be comparing Nikola to Tesla. Other than the namesake, in terms of financial performance, they have nothing in common. Say what you want about Elon Musk, he’s managed to do something that Milton hasn’t yet: manufacture and sell cars.

Switching gears, there have been cases of CEO’s stepping aside amid controversy and the company moving forward. The CEO of Uber stepped down amid complaints of discrimination and sexual harassment at the company, and Uber has moved on reasonably well. But Uber is the world’s largest ride hailing app and had the sales to prove it.  Nikola has none. Can you see a pattern here?

Milton’s resignation or not, scandal or no scandal, Nikola is not investable based on our criteria. 

You want to stop exposing your self to massive 50 or 70% plus losses, stop investing in companies with massive market caps and zero revenues.

Your Stock Our Take

What are your thoughts on the Canadian communication companies? Would you recommend Telus as a good dividend/growth investment at its current price?


  • Lance – via email. 


Your Stock, Our Take

Telus Corporation (T: TSX)

Current Price: $23.62

Market Cap: $30 billion 

What does the company do?

Telus is one of the big three telecom companies in Canada. With 9 million mobile phone subscribers, the company has approximately 30% of the wireless market in Canada. The company also continues to provide wireline services in Western Canada, including Internet, television and landline phones services. Telus’ other businesses include international business services, telehealth, and security.

Key Points: 

One of the reasons why I like Telus over Rogers and Bell is because historically it has had better growth. As well, Rogers and Bell have more exposure to media assets, such as television stations and radio, and in the case of Rogers, they own the Toronto Blue Jays. Telus, on the other hand, has expanded into software services. A very interesting part of Telus’ business is Telus Health, which is a provider of digital healthcare solutions, connecting patients with physicians through its mobile apps. We see long-term potential in the digital healthcare space and this is especially relevant in the context of COVID-19. 

I have had a few concerns about the Canadian telecom sector in the past. One of these is that it is a fairly mature industry with not a lot of growth to divide among the 3 top players. The industry also always seems to be in the federal government’s crosshairs. I remember the Conservatives under Harper implemented several policies in order to open up the market to more competition and reduce prices. The Trudeau government as well had stipulated some price controls previous to COVID-19 which were supposed to take effect after 3 years. 

During COVID-19 we have seen a decline in earnings across all 3 of the big telecom companies. 

However, over the long-term, we do see some interesting growth drivers. The launch of 5G is going to mean more traffic on the internet and through mobile devices which should be a gradual boost for the telecom industry. As well, people will be upgrading their phones to 5G. In the case of Telus, we like the digital healthcare component. The company doesn’t break out the financials for Telus Health but it is currently a tiny part of the company. Still, I believe they are the largest digital healthcare player in Canada so there should be plenty of opportunity for growth over the next 5 to 10 years. 

All 3 of the major telecom companies pay nice dividends that are grown on an annual basis. Telus currently yields 5% and has targeted annual increases of 7% to 10% per year. Telecom is an essential service, and generally speaking, we believe that the dividends are relatively secure (although of course that is never a guarantee).  

Recent Financial Performance

  • In its most recent quarter (Q2), Telus reported total revenues of $3.7 billion which were up 3.6% compared to last year. Adjusted net income declined 28% which reflects the financial impacts of COVID-19.  
  • Last year (in 2019), total revenues grew 2.5% and adjusted earnings per share were down 2.9%. 
  • The valuation on Telus right now is about 20 times trailing earnings per share. 


In conclusion, I think that Telus is a good company and certainly a stock that long-term, income investors could consider owning. It pays a nice yield and the dividend is increasing. As I said previously, there has not been a lot of growth generated by the big telecom companies over the last few years. There are a few potential growth drivers upcoming for Telus but these are long-term in nature and I certainly don’t see the company as having any major catalysts to move the stock meaningfully higher in the next 6 to 12 months. If you want to own Telus, expect to hold the company for 5 to 10 years, collect the dividend and over time it should be well positioned to produce a reasonable rate of return. 


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