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Ray_Rich
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Independent investor specializing in deep value plays.... often called contrarian in my views. My goal with every stock i purchase is to double my money. If a companies stock does not offer the opportunity to at least double in the next 24 months I am looking for a better opportunity. I try to... More
  • Ray Rich Buy List: CHR.B 2 comments
    Oct 31, 2013 11:58 AM | about stocks: ACDVF, CHRVF

    Over the coming weeks and months I will be compiling a Ray Rich buy and watch list. This is the first post on my instablog and I have chosen to discuss a little known Canadian Equity known as Chorus Aviation.

    The Ticker is only available on the TSX and is CHR.B - B class shares are the actual voting shares, the A share are available but don't have voting rights, they basically mimic each other in share price.

    Currently shares are trading in the 2.68 range. I would consider this a strong buy, but I could also see a good point in buying a half position now and waiting to around the 2.50 range to purchase the second half position.

    Chorus is a Canadian regional airline that has a contract with Air Canada (AC.B) and does their regional flights for them. They are one of the top small regional airlines for sustained profitability and always turn a profit into free cash flow.

    Currently paying a 7.5 cent quarterly dividend this company has a yield of over 10% which is sustainable and will likely double over the next year.

    The current price to earning is around 5.5. This is incredibly low for the airline industry. In fact many airlines don't even turn a profit.

    The debt ratio is maybe a little high but the airline business is a very capital intensive business and most airlines have a low coverage ratio.

    So why does the market dislike Chorus Aviation. Simple reason Chorus (the little guy) is involved in a long standing arbitration with Air Canada (the big guy). They decided to slash the dividend in case the arbitration does go Air Canada's way. They wanted to save the free cash flow in case there is a large payment needed to be made to AC.

    They have been talking about increasing the dividend back up to its normal level - Which is about 15 cents per quarter in the coming quarters. This will be a catalyst to push the stock back up and will likely double from this point.

    Additionally Chorus has given on multiple occasions the impression that AC will lose this arbitration and the feeling out there is this should happen within the next quarter or so.

    If Chorus wins the arbitration there will be a large sum of money saved from the cut dividend, I do not know if this will go back into the company and improving the fleet or if this will go out as a special dividend.

    In any case this is a strong buy in the Ray Rich world, and I would say it should double within a year. Also, at the present time a lot of the bad news is priced in so there would be less downside risk involved.

    Best of luck, comments are appreciated.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: i AM LONG CHR.B

    Stocks: ACDVF, CHRVF
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  • Ray_Rich
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    Comments (55) | Send Message
     
    Author’s reply » The double is very close for $CHR.B right now, if this continues it will officially be a double with no further price appreciation after the dividend comes in early Jan. I do see it going a bit higher still,

     

    They raised the dividend to 11.5cents per share and that is amazing. My initial purchase price was 2.20/share on this. The current div is 11.5 c per quarter, and about 45 cents per year. That means its yeilding around 20% of my initial price. That alone may be reason enough to stick around for a few more quarters and let the price tick up more.

     

    Although I may sell have the position once it goes over 100% gain, that way I lock in my profit and I can invest in something else...

     

    POT and IPI are on the watch list and have recently purchased TGD
    18 Dec 2013, 10:46 AM Reply Like
  • Ray_Rich
    , contributor
    Comments (55) | Send Message
     
    Author’s reply » The double is very close for $CHR.B right now, if this continues it will officially be a double with no further price appreciation after the dividend comes in early Jan. I do see it going a bit higher still,

     

    They raised the dividend to 11.5cents per share and that is amazing. My initial purchase price was 2.20/share on this. The current div is 11.5 c per quarter, and about 45 cents per year. That means its yeilding around 20% of my initial price. That alone may be reason enough to stick around for a few more quarters and let the price tick up more.

     

    Although I may sell have the position once it goes over 100% gain, that way I lock in my profit and I can invest in something else...

     

    POT and IPI are on the watch list and have recently purchased TGD
    18 Dec 2013, 10:46 AM Reply Like
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