KeyStone’s Stock Talk Show, Episode 241. 

We have a busy show for you this week including 4 Your Stock Our Take segments as well as discussion from my recent presentation at the Vancouver Resource Conference and our upcoming appearance at The World Outlook Conference in Vancouver. Aaron kicks off the festivities answering a viewer question on Algoma Central Corporation (ALC:TSX), a provider of marine transportation that owns and operates dry and liquid bulk carriers, serving markets throughout the Great Lakes St. Lawrence Seaway and internationally. The company pays a strong 5% dividend and has seen growth accelerate in recent years. Aaron let’s you know if this income stock is worth a look in your portfolio. I will tackle a viewer question on SSC Security Services Corp. (SECU:TSX) the largest publicly traded security company which is debt free and pays a solid 4.29% dividend. The listener asks our thoughts on the microcap security consolidator. Brett answers a question on AirIQ (IQ:TSX-V), which provides wireless asset management and location services in Canada. We included AirIQ as a company we MONITOR in a recent larger special report. While a nanocap, with the market cap of under $15 million, AirIQ is profitable with a solid level of growth and a strong balance sheet for a company of its size. Brett reviews the current operations and looks at the business from a fundamental perspective. Finally, Brennan plays closer, answering a viewer question on Nutrien Ltd. (NTR:NYSE), the world’s largest provider of crop inputs and services, producing and distributing approximately 27 million tonnes of potash, nitrogen and phosphate products world-wide. A volatile business based off underlying commodity pricing, Nutriens share price had a tough 2023 as pricing in its segment was lower across the board. Brennan let’s you know if the share price drop is an opportunity.

Let’s get to the show – we welcome my cohost, Mr. Aaron Dunn and the killer B’s, Brett and Brennan.

World Outlook Conference – come see myself and Aaron speak at the event, we will be attending the event and would love to shake some hands and kiss some babies in person. But seriously, if you are a current client or looking at becoming a current client, all four of us will be at the event, we have a booth so we would love to see you there in person – below this video we will have a link to tickets to the World Outlook and in our weekly Podcast email distribution we will send tickets.


SSC Security Services Corp. (SECU:TSX) 

Stock Price$2.75
Market Cap$53.11 M


SSC is the largest publicly traded security company in Canada, debt-free, and has approximately 3,000 employees from coast to coast. The company provides physical (~85- 90%), electronic security (~5%) cybersecurity (~5%) services to corporate and public sector clients via two wholly owned subsidiaries (SRG and Logixx).

SSC was previously known as Input Capital Corp. which was founded in 2011 as an agriculture commodity streaming company providing several flexible and competitive forms of financing which help western Canadian farmers solve working capital, mortgage finance and canola marketing challenges and improve the financial position of their farms. On February 1, 2021, Input acquired SRG Security Resource Group Inc. as a platform for growth in the cyber and physical security business in Canada. On September 14, 2021, Input announced that would change its name from Input Capital Corp. to SSC Security Services Corp. and to consolidate its common shares

Today, SSC’s agriculture commodity streaming business is known as its “Legacy Business” and consists of agriculture real estate assets held for sale including farmland mortgages. The Legacy Business book is shrinking rapidly due to farmer buyouts via refinancing. The maximum term remaining is < 8 months. The company is collecting accounts and making slow but steady progress turning assets to cash working through the legal system. As SSC continues to wind down its remaining legacy assets, we expect that those cash flows allocated to legacy assets will be reallocated to the security services portion of the business.

Recent Quarterly Numbers:

The increase in revenues was due primarily to the acquisition of Logixx and the inclusion of Logixx’s revenue starting on June 1, 2022. Sequentially, revenue increased by 5.2%, primarily a result of seasonality.

Adjusted EBITDA for the quarter ended June 30, 2023, was $1.0 million ($0.05 per share), as compared to $0.4 million ($0.02 per share) during the same quarter last year. A

Comprehensive net profit for nine months ended June 30, 2023, was $0.2 million (profit of $0.01 per share), compared to a comprehensive net loss for the same nine months last year of $0.0 million (loss of $0.00 per share).

Growth plans – security business.

  • The security business is a highly fragmented industry in Canada. According to Statistics Canada, there are over 2,700 companies providing some kind of physical security services in Canada. Many of these are small owner-operated businesses, with a tier of mid-sized and larger companies as well.
  • An opportunity to use SSC’s balance sheet to grow into a solid, well-capitalized, profitable, and growing security platform.
  • Strategy is to deploy the company’s balance sheet into growth via acquisition and organic growth opportunities in the physical and cyber security industry, along with adjacent verticals. .$200 to $300 million annual revenue company over the next 3-5 years.


SSC currently trades with a trailing 12-month EV/EBITDA of 10.02 and a price-to-sales of 0.52 which are relatively low and should progress lower as revenues build and profitability increases over the next year.


SSC is an intriguing albeit low-margin business that holds a strong balance sheet (23% of market cap in cash) and as the company continues to convert its Legacy Business assets into cash the company’s cash balance should help SSC make further potentially accretive acquisitions.

SSC is a low margin business with an adjusted EBITDA margin in the last period of a scant 3.8% in Q3 2023. Management has stated the business should progress to the 5% EBITDA margin range near term and it has the potential to move slightly higher longer-term which could give the business decent profitability in its sector and help SSC build cash as revenues are projected to be significantly higher over the next 1-3 years. We are not opposed to investing in a quality lower margin business if it checks off a few boxes including no debt, cash-rich, low valuations, and above-average growth. SSC checks off most of these boxes, but we do not see the company’s trailing 12-month valuations as low. Additionally, the current margin profile at well under 5% adjusted EBITDA is too low to be investable in the near term. If we saw an improved margin profile, cash accumulation, organic growth, and better valuations, we would consider SSC. At present, we MONITOR the business.



We got a question in one of our weekly small-cap stock chats on AirIQ and we had a couple of follow-up questions on it afterward so we thought it would be worth going through on the show.

AirIQ symbol IQ on the TSXV provides wireless asset management and location services in Canada. The company also develops and operates a telematics asset management system by digitized mapping, wireless communications, internet, and the global positioning system. Its web-based platform provides fleet operators and vehicle owners with a suite of asset management solutions to monitor, manage, and protect their assets. The stock currently trades at $0.49 at a market cap of $14.5 million up 88% over the past year.

A quick look at the last quarter Q2 2023 ending Sept 30th so shifted a quarter. Total revenue increased 15% to $1.35 million from $1.17 million Recurring revenue increased 13% to $1.08 million from $958 thousand. The company recognizes the recurring revenue as the software service where the non-recurring is the associated hardware.

Roughly in line with revenue growth gross profit increased 14% to $804 thousand from $708 thousand.

Net income came down to $182 thousand from $282 thousand a drop of 35% but this is largely due to a significant foreign exchange gain in the prior year of $141 thousand.

Additionally, the company has a large cash position of $3.0 million or $0.10 of cash per share which is a big plus. I will note I could not find any potential uses of cash in the filings so this would be something we would ask about in a call with management as it represents just under a fifth of the share value.

In the question we were sent, they asked specifically about the taxes boosting earnings, which occurred in Q4 of the prior year. So, when you are doing a trailing valuation this lowers price to earnings dramatically.  In the Annual financials end March 2023 we can see a deferred income tax recovery for $2.8 million which for a company valued at $14.5 million is huge. So, where does this come from? If you look next to the line item on the income statement it says note 14 so we go there.


And can see the deferred tax asset comes from the recognition of previously unrecognized tax credits. Really what this means is the accountants now believe that tax credits which they did not expect to be able to be used are now likely to be able to be used. Ultimately, it comes down to accounting expectations, which are a forecast and why you get large adjustments like this, normally at a company’s year-end. As well you can see here that they have additional unrecognized differences of $29.6 million which the company did not recognize at this time because the company’s accountants are yet to believe it is probable they will be able to use the tax credits in the future, so future benefits could be recognized or removed if the outlook turned negative.
The next part of this question is how you deal with the impact on valuation. As far as earnings go when you want to compare to other companies it is beneficial to normalize the earnings as if the large tax recognition for the quarter didn’t exist. Not to say tax benefits aren’t a positive its just for comparability of valuations.  So if you remove the tax benefit the valuation on a price to earnings basis is 17 times compared to an unadjusted PE of 4 times, quite the difference. With this adjustment as well the company isnt deducting tax from earnings as it is lowering its deferred tax assets, so the company is still seeing the positive impact from having the deferred tax assets just not a lump sum recognition like in Q4 2022. And of course you can look at other valuation metrics like price to cash flow which in this case is 9 times but can be influenced by cash flow lumpiness.

For the actual valuation it is getting quite expensive, given the lumpy growth it has seen in recent years due to the hardware sales being volatile. As well it is working off a small base revenue so you should expect higher percentage growth compared to a larger company. And the gross profit isn’t going directly to the bottom line as SG&A has risen along side revenue so the company isn’t seeing that hockey stick economies of scale at this time. As well, as the company is a nano-cap so trading volumes on the stock are quite low needing a liquidity premium for many investors to jump in. That being said small investors can use potentially use volatility to there advantage to accumulate during the natural pullbacks due to the higher volatility. 

Concluding, it is always good to see a nano-cap with a strong balance sheet and growth, but the growth is volatile and not hitting the bottom line at the full gross margin like youll see in some software companies scaling recurring revenue. So valuations are on the high side I would like to see a lower whether price or earnings growth. As well don’t get sucked into super low valuations due to tax recognition, youll normally see this is fiscal Q4’s and is not a negative but can have significant impact on valuations due to accounting expectations. For now we will continue to monitor the business.

Your Stock Our Take

“It would be interesting to get your thoughts on Nutrien on its recent pull-back”. – Question on Youtube


Slide 1

Nutrien (NTR:TSX) 

Current Price: $69.82

Market Cap: $34 Billion

Dividend Yield: 4.1%


Nutrien is the world’s largest provider of crop inputs and services, playing a critical role in helping growers increase food production in a sustainable manner. They produce and distribute approximately 27 million tonnes of potash, nitrogen and phosphate products world-wide. They have 6 potash mines in Saskatchewan.

Slide 2

I covered Nutrien back at the beginning of 2022 when the stock traded at $110 per share and with a forward Price-to-Adj. EPS multiple of 5x and an EV/EBITDA of 4x based off of management’s FY2022 guidance provided in May 2022.

In that conclusion from 2022 I said “if one believes Nutrien’s management is right and that the supply/demand picture will remain tight for the next few years elevating fertilizer prices, I believe there is a reasonable case to be made that the company could offer value over the next 2-5 years.”

But throughout 2022, the company lowered its initial guidance in August and then again in November because potash prices were declining and natural gas costs were elevated.

Slide 3

As shown by the price of potash per metric tonne on this chart.

Slide 4

Where are we today?

Recent Financial Results: (Q3, 2023) – Keep in mind their results are in USD $$$ 

  • Revenues were $5.6 billion, a decrease of 31% over Q3 2022 due to lower net realized selling prices across all segments.
  • Adj. EPS was $0.35 per share, down 86% Y/Y and Adj. EBITDA was down 56% Y/Y.
  • Looking at the balance sheet – as at September 30th, 2023, Nutrien had net debt of $13.2 billion and a trailing net debt to EBITDA multiple of 1.9x.
  • And I have up on the screen here the company’s FY2023 guidance which is projecting Adj. EPS of $4.57 per share and Adjusted EBITDA of $6.1 billion. Which represents a decline of 65% in Adjusted EPS for the year.
  • looking forward to the rest of 2023 the company trades at about 11x forward adjusted EPS and with a forward EV/EBITDA multiple of 6x.

Slide 5

To conclude on Nutrien, fundamentally I think it is a good business:

  • The company has been returning capital to shareholders through its dividend and share buybacks, paying a nice yield of over 4% and the trailing payout ratio out of adjusted earnings is 35%.
  • The company has long-term targets of growing potash sales to 18M tonnes by 2027 & Nitrogen division to 13.5M tonnes by 2027.
  • The company has just about lapped its tough comparable financial results from when potash prices were elevated and trades w/ reasonable multiples to FY2023 guidance.
  • The balance sheet remains healthy.
  • And management expects a “tighter” potash market in 2024. (HOWEVER, note that at the beginning of 2022 management was also projecting a tight potash market for the next few years…. yet we saw a significant decline in the price of the commodity since then.

So while we may continue to see some weaker quarters ahead in the near future, I think that a contrarian investor who is bullish on potash in general could speculate on a long term position. The company has been increasing its production volume, but I say “speculate” as if potash prices increase the stock will likely do well. If potash doesn’t do well, the stock will likely continue to suffer.

I really think that 2022 was a good case study to look at, as management was projecting a tight potash market for a few years, but ended up revising guidance lower several times when their market projections ended up being wrong and the price of potash began to collapse.


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