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I have been a long-silent lurker on this thread. I got my first dose of Eco in their buyout of Industra Services. I thought that they overpaid for Industra relative to both its market price and its earnings performance for several years. The best thing that Industra management ever achieved for its shareholders was selling out to Eco at book value (in Eco shares), which was then well above market price. I was somewhat dubious about Eco on the grounds they had paid a much higher PE ratio for Industra than Eco itself then sported. Hardly the way to get ahead through acquisitions, unless they could markedly improve business performance, which apparently they did. After gaining further confidence in Eco, in part through following this thread, I have increased my position over time. When I saw what was developing between Eco and Dominion Bridge, I bought a bunch of Dominion shares on the Monday that it looked like the prospective deal had fallen apart and the two parties were calling each other names. Bought in at under $1.50 per share. From past history, it seemed to me that Eco might again "overpay" for its quarry, and McGinnis clearly lusted for Dominion as part of his ambitious expansion strategy. Things so far have been developing nicely, for my Dominion shares at least. I believe that McGinnis confirmed in his conference call, in response to one of the questions, that the convertible notes that Eco plans to issue to acquire Dominion will be redeemed for cash in three years (after paying 7.5% annual interest) in the event that they are not converted into Eco shares (either voluntarily or forcibly under specified conditions). Hence, even at today's $2 closing price, Dominion shares look attractive. The only risks that I can see are that the Eco takeover deal either collapses or is materially changed, or that Eco's financial position deteriorates badly over the next three years to the point that they can neither redeem nor pay interest on the notes. Otherwise, you've got an "assured" 50% total return from today's price plus over 11% annual interest over the interim (since it will be 7.5% on the $3 face value) except for the period between now and issuance of the notes. With respect to the conference call, I found McGinnis' explanation of why he was so far off in Q4 and hence annual earnings estimates not only lame but pathetic. He couldn't count the share dilution figures properly? Problems with taxes? Get a proper VP-Finance, or at least a calculator! I won't be dumping my Eco shares tomorrow, as I think the mid-term and long-term outlook for the company are pretty good, but I have found a lot of the postings on this thread to be over-enthusiastic and looking for the bright side of every cloud. One regular poster, I believe, actually has 90% of his portfolio in Eco alone, and others seem to be holding Eco from margined positions. Quite amazing, and not my roadmap to riches! Jay |
