Jimmy mustn’t read blogs

July 23rd, 2008

If there was any doubt about it, I think it is safe to assume that our favourite CEO, Jim Balsillie, doesn’t care what blogs might be chattering about. If he did, then maybe The Boy Genius Report (”BGR”) wouldn’t have been given a new BlackBerry Bold device for a test drive more than a month ago.

I say that because some of us shareholders are worried about the all-too-cozy appearance of Research In Motion’s relationship with BGR. And to give BGR a Bold even before Rick Segal, of the gosh darn “BlackBerry Partners Fund” itself, can get one…well, that’s just plain silly.

Which is not to say that RIM’s internal and external marketing arms don’t focus on the blogoshpere. It’s just that Jimmy mustn’t be focused on this stuff.

For if he was, Rick would get a Bold, and BGR would be on ice — maybe let things cool off after their market-moving leak of last quarter (see prior post “Boy Genius: PR genius, but a disclosure nightmare part 2” May 6-08).

Or worse, maybe Jimmy just doesn’t read us. Now that would be anything but silly.

MRM

Danny King wins Titleist & FootJoy Ontario PGA Championship

July 22nd, 2008

Further to yesterday’s post, Wellington-sponsored pro golfer Danny King won the the Ontario PGA Championship (click through for photo) with a 3 under par 69 in today’s second round. His two-day total was minus 12 at the Barrie Country Club.

Congrats, Danny!

AO

Obama VP sweepstakes

July 22nd, 2008

Senator Barack Obama is currently on a brilliantly-scripted world tour. Joined by a few of the politicians that have been asked to tag along as potential candidates for the second slot on the ticket.

Before the speculation reaches its zenith, I’ll put my five cents on former Senator Sam Nunn. Although Senator Obama won the Georgia primary, Sen. Nunn brings a familiar experience and “southern” comfort to any Democratic ticket. The title former “Chairman of the Senate Armed Services Committee” won’t be lost on anyone who worries about what Senator Obama might do if he gets that infamous 3 a.m. telephone call.

Some will draw parallels to the choice of Dick Cheney, but it worked in 2000, didn’t it?

Not that former Senator John Edwards didn’t look appealing, before the National Enquirer that is.

MRM

BDC’s dismal 2008 financial results

July 22nd, 2008

BDC Fact #12

The 2008 financial results are now out, and we got a quick look at the returns being generated by “Bruce” the Mindless Eating Machine (aka the Business Development Bank of Canada - see prior post “‘Bruce’ the mindless eating machine” May 31-08 and “BDC Fact #4“) with the support of our nation’s balance sheet:

- the total BDC portfolio is now $10.6 billion
- $10.0 billion of the portfolio is in term loans
- $156 million in subordinate financing (another $156 million was sourced for CDP via their JV partnership)
- $476 million in venture capital equity investments (after writedowns of $83 million; about 15%, net of new investments)

For those in Ottawa who think BDC is the federal government’s answer to a crisis in venture capital, consider that only 4.5% of the Crown Corp.’s book is in the asset class. The balance is in loans that, in many cases, the private sector would love to do (see prior post “BDC Fact #1” December 3-07).

But here’s the whopper: a return on common equity (”ROE”) of 4.7%! On a $10.6 billion portfolio, BDC was able to generate merely $16.5 million in dividends for the Canadian taxpayers for the entire fiscal year.

That’s a dividend yield of 0.157%, compared to an average of more than 4% a year generated by the Canadian banking fraternity.

By comparison, this performance compares poorly to the 2008E cash ROE of all of the Canadian banks: RBC - 20%, BMO - 14.2%, BNS - 22%, TD Bank - 16%, National Bank - 18.8%, Laurentian - 12.1%, CWB - 16.8% (estimates from BMO Capital Markets Research).

The new spin is excellent though: “We succeed when our clients succeed. The result: greater prosperity for Canada.” So, even though the ROE is about half what it was in 2007 (8.5%), and below their own target of 7.1%, the BDC is wrapping itself in the Canadian flag - brilliant from a marketing (and political self-preservation) standpoint.

To make it easier to hit an ROE target in 2009, BDC has dropped their financial objective from 7.1% for 2008 to be just 6.3% for 2009. (BDC execs always point to their relative lack of leverage to account for the difference between the BDC’s ROE performance and that of the Canadian Chartered Banks. We’ll analyze that argument tomorrow.)

In other BDC financial news, consolidated net income for fiscal 2008 was $84.6 million, compared to $138.0 million reported in fiscal 2007. The decrease was blamed on increased writedowns on BDC’s venture capital portfolio. BDC Venture Capital reported an $82.8 million loss for the year, compared to a $33.6 million loss in fiscal 2007.

This may explain why BDC appears to be pulling in their horns in VC land (see prior post “What happened to the VC $ at BDC?” June 18-08). If so, that’s a shame.

Income from BDC Financing was $160.9 million, $7.1 million lower than in fiscal 2007. Although revenue from loans increased by $30.2 million, that increase was zapped by a $33.6 million
increase in the provision for credit losses.

Speaking of spin doctors, consider this paragraph from the 2008 MD&A:

BDC Financing’s portfolio rose from $9.1 billion to $10.0 billion in fiscal 2008. This is an increase of $886 million, or 9.7% when compared to fiscal 2007. We attribute this increase to the unanticipated, tightened credit conditions and reduced liquidity that characterized the marketplace in 2007. The average portfolio increased by 7.3%.

However, according to the 2007 annual report, BDC’s “objective” for the “Financing portfolio” was to grow it to $9.7 billion (excluding the subordinated debt portfolio), 6% higher than the $9.1 billion portfolio in fiscal 2007.

So, let me get this straight.

The average portfolio grew by 7.3% in fiscal 2008, just 1.3% more than BDC’s 6% stated growth objective, and this is due to BDC backfilling “unanticipated, tightened credit conditions”?

It seems convenient to claim that the loan growth of fiscal 2008 is due to the absence of other lenders, but BDC’s loan book grew by 39% between 2003 and 2007, a time where credit was widely available. Between 2003 and 2004, BDC grew its loan book by ~11%; ~8.5% between 2004 and 2005, and ~9% between 2005 and 2006….

In reality, if credit conditions tightened during fiscal 2008, BDC didn’t step into the breach. According to its own financial statements, BDC’s loan portfolio grew less in the year, by percentage, than it did in ‘03, ‘04, ‘05 and ‘06.

But, who wants the facts to get in the way of some good spin, particularly when the private sector is challenging the very fundamental premise of the lending side of the organization?

MRM

Danny King leads Titleist & FootJoy Ontario PGA Championship

July 21st, 2008

If you ever get excited about golf, think of what an 8 under par 64 would feel like. And that’s the second round you played that day, on the heels of a 3 under par 69 at a PGA qualifier.

That’s how Danny King did today, one of Wellington Financial’s two sponsored Canadian professional golfers.

Danny spent the morning playing in the RBC Canadian Open qualifer at Rattlesnake Point, and then raced up to the Barrie Country Club for the afternoon.

Although he missed getting one of the four slots in the Canadian Open, he certainly is in good shape for day two of the Ontario PGA Championship tomorrow (click through to the link for a nice photo).

King now looks to put himself in select company as a three time winner of the Ontario PGA Championship. Only a handful of players have won the prestigious Ontario PGA Championship three times. That list includes Canadian Golf Hall of Famers Bob Panasik and Moe Norman, current Champions Tour member Craig Marseilles and finally long time Weston Golf and Country Club Head Professional Herb Holzscheiter.

Best of luck.

AO

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