CP Rail chugs ahead eight per cent in first day of trading since spinoff
TORONTO, Oct 03, 2001 (The Canadian Press via COMTEX) -- Canadian Pacific Railway shares chugged along with a full head of steam Wednesday, gaining nearly eight per cent in their first day of trading since its Calgary-based parent spun off its five subsidiaries.
The other four "baby CPs" didn't fare as well as their older sibling, which traces its history to the early days of Confederation. Shares of PanCanadian Energy, Fording Inc. and CP Ships also rose Wednesday while Fairmont Hotels and Resorts closed the day down from their Tuesday "when issued" price.
Although CP Rail (TSE: CP chart, msgs) had bragging rights Wednesday - gaining $1.77, or 7.9 per cent, to close at $24.28 - veteran market watchers said they saw tremendous potential in PanCanadian Energy (TSE: PCE chart, msgs), one of North America's largest oil and natural gas producers.
"I think the Canadian oil industry in general looks good and PanCanadian is extremely well-positioned," said Nereo Piticco, president of PCJ Investment Counsel Ltd., which focuses on large-capitalization investments.
Calgary-based PanCanadian has a "tremendous portfolio" of oil and gas assets, mainly in Alberta and neighbouring Montana. It also has good exploration potential in Western Canada, off Nova Scotia's coast and internationally, he said.
PanCanadian shares closed at $38, although they traded as low as $35.85 earlier in the day - near their 52-week low of $34.30. Unlike the other CP Ltd. subsidiaries, PanCanadian shares traded publicly before the spinoffs were announced in February.
PanCanadian shares have been trading at a significant premium compared with its domestic peers. As a result, the company's share prices are "vulnerable in the near-term" although PanCanadian remains attractive in the long term, said a research report released Wednesday by UBS Warburg.
UBS maintained its 12-month target share price of $41.
Like other energy producers, PanCanadian's shares have been hurt by current oil and gas prices, which are far lower than what they were last winter. However, by historical terms prices for those commodities are still high.
Even if the oil price stabilizes at $20 to $22 US per barrel, "there will be lots and lots of growth in this industry," said Ross Healy, president and chief executive of Strategic Analysis Corp., a value-oriented adviser to institutional investors.
Although the North American energy sector has been quickly consolidating - with U.S. buyers paying a premium to purchase Canadian companies - Piticco and others have said PanCanadian is likely too large and profitable to be a target now.
Fording Coal (TSE: FDG chart, msgs), on the other hand, is a "very attractive asset that ultimately may be taken up by some of the bigger players," Piticco said.
But Fording is also in a good financial position as an independent company, he added.
"It's the kind of stock that there's quite a lot of comfort in, in terms of its valuation and in terms of its outlook," Piticco said.
Fording shares closed at $21.05, up $1.05, or 5.25 per cent, from their previous "when issued" closing price. CP Ships (TSE: TEU chart, msgs) closed at $11.20, up 25 cents or 2.28 per cent.
Shares of Fairmont Hotels (TSE: FHR chart, msgs), which warned last month that its revenues and outlook would be hurt by the Sept. 11 terrorist attacks in the U.S., fell 50 cents, or nearly two per cent, to close at $27.50.
Healy said Fairmont's shares have "some nice apparent upside potential," especially at current prices. But he warned it's too early to consider buying its shares since there's no improvement in business travel in sight, both because of the weakened North American economy and the terrorist attacks.
"Just because the stock is cheap is no reason to buy it," Healy said. "It could easily get cheaper."
Earlier, executives from all the companies boasted of their potential for success at a ceremony at the Toronto Stock Exchange.
"Their new-found independence provides these companies with the flexibility and the resources with which to realize their full potential," outgoing CP chairman David O'Brien said.
Calling it a corporate "starburst" and an unprecedented opportunity for shareholders, O'Brien noted that all five companies will be among the TSE's 200 largest companies.
"There are relatively few big railways in North America today and we're one of them," CP Rail president Rob Ritchie said of the transcontinental railway with a 20,000-kilometre track network.
Ritchie said the railway's strategy will include partnerships with other railways on various business issues.
Ray Miles, CEO of CP Ships, painted a bleaker picture for his company compared to the heads of the other former CP subsidiaries.
"CP Ships faces some significant challenges in the container ship industry," Miles said, with a "growing excess of industrial capacity."
"Most of our competitors are losing money," he said, adding there are few publicly traded shipping companies to compare it to.
"Apart from that, everything is fine," Miles said to a round of laughter.
The splitting up of the 120-year old Canadian Pacific conglomerate was first announced in February, and shareholders approved the dismantling last week. |
