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Teck Resources (TCK.B)

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Post  Fred Sat May 14, 2011 6:25 pm

Always have been a fan of TCK... I screwed up and sold at $8.25 a while back and it never failed to remind me. Over the past few months it has come down in price due to missing analysts expectations. However, I would say that considering the markets they are in, and the share they have, unless world markets crash, TCK is in an excellent position to recover lost ground. The company is too big for me to present my normal view, so I'm asking for others financial analyses. Look at their recent investors presentation and you will see that they are ranked amongst the elite in their sector and they are diversified (Metalurgical coal, copper, zinc and oil). Too much to go into a detailed analysis of each site/sector. If you think the economy is stabalizing, then this may be for you. I will watch for the price to stabalize a bit, but if I can free up some cash, I think this presents a good buy and hold position.

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Teck Resources (TCK.B) Empty Re: Teck Resources (TCK.B)

Post  Max Tue May 17, 2011 9:51 am

Very very briefly.

Their book value is somewhere around $20. However, the majority of book value is in property and equipment, and should be reduced downward to be conservative, so I would shave another $5 off the book value. They are earning between $3-6 per year based on past results. At $48 per share, it is not a screaming deal, but would be a decent buy if profits hold up to historical levels. What worried me most in the middle of the last crash was their debt level was out of control. Right now the have $5 Billion in debt relative to an estimated $10B in net tangible assets (maybe slightly more). By my calculation, they are still paying a ridiculously high 8-9%, which was part of the restructuring plan, and as I remember, this interest rate was escalating every year that they did not pay it off. If their profitability does not hold for any reason, they are leveraged up pretty high and that could lead to a very rapid share price decline (although I don't think they are really a candidate for full-on bankruptcy).

TCK has also adopeted IFRS. A lot of companies are adopting IFRS this year and as a result their past net income declines, assets go down, liabilities go up, and it has an overall negative effect. However, the past should also be restated, so if you are using the current financial statements reported figures for the past as the basis for comparison, you should still have a half-decent benchmark of company performance. This is an accounting change only, so the real position of the company has not really changed.

I would give it a closer look at $30 where it would probably be a screaming deal (still with significant downside risk of course). At current price levels, I don't think the risk/reward is justified, unless...... There is some off balance sheet information regarding future profitability that might make a big difference.

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