# Advice on VERESEN (VSN.To)



## PuckiTwo (Oct 26, 2011)

I own 2000 VSN (former Fort Chicago Energy) since 2009 as a “buy and hold”. Stk dropped since May about 20%. Present profit 70%. 
Trades presently at $12.50

Dividend 8.7%. No dividend increase since 2008. P/E ratio 40, EPS 0.31.

Veresen announced yesterday 2nd Q results and correction to 2012 guidance. Distributable cash 2012 dropped from $1.05-1.35 to $1.00-1.15. Reason for dropping: decrease in ngl prices and share dilution (issued 20% more shares).

I would like to hold because it’s a good income generator for me but I am worried about the high payout ratio. Analysts seem to suggest that the dividend is safe for the near future. Stk is a Buy at TDW.

Do any of you hold Veresen (VSN) and what is your take on it? Do I need to reduce my position in order to preserve capital and income? If I sell it would mean investing the capital in something with a similar high dividend.. 

I would appreciate any of your opinions. Thks for help. Pook.


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## zylon (Oct 27, 2010)

*Pat McKeough* is a long term value investor; he doesn't concern himself with day to day noise. Things that might look bad in the short term (like dividend cut) might actually be good news for the longer term.

Here is what P.M. had to say about *Veresen* on May 12, 2012 (his recommendations don't change without a very good reason).

*VERESEN $14.40* (Toronto symbol VSN; Shares outstanding: 193.7 million; Market cap: $2.8 billion; TSINetwork Rating: Average; Yield: 6.9%) owns pipelines, power plants and natural gas processing facilities across North America. One of its major holdings is 50% of the Alliance gas pipeline, which runs 3,000 kilometres from Fort St. John, B.C., to Chicago. Enbridge owns the other 50%.

As well, the company owns the Alberta Ethane Gathering System, and Veresen and Enbridge together own 85.4% of the Aux Sable natural gas liquids plant.

In December 2011, Veresen bought the Hythe/ Steeprock gas gathering and processing complex in the Montney region of B.C. and Alberta from Encana Corp. for $920 million. Encana has also agreed to buy most of the facility’s gas under a long-term contract.

In the three months ended December 31, 2011, Veresen’s cash flow rose 15.2%, to $53.2 million from $46.2 million a year earlier. Cash flow per share rose 6.7%, to $0.32 from $0.30, on more shares outstanding. Veresen’s shares yield 6.9%.

To diversify beyond pipelines and gas-processing plants, Veresen continues to expand its power generation business. It now owns hydroelectric facilities in New York State and B.C.; naturalgas- fired plants in Ontario, California and Colorado; and waste-heat plants in B.C. and Saskatchewan.

Veresen is still a buy.

http://www.tsinetwork.ca/suitable-f...vesting/steady-yields-diversified-businesses/



> *All of our articles are available for republishing as long as you provide a link back to the original article.*


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## PuckiTwo (Oct 26, 2011)

zylon said:


> *Pat McKeough* is a long term value investor; he doesn't concern himself with day to day noise. Things that might look bad in the short term (like dividend cut) might actually be good news for the longer term.
> Here is what P.M. had to say about *Veresen* on May 12, 2012 (his recommendations don't change without a very good reason).
> http://www.tsinetwork.ca/suitable-f...vesting/steady-yields-diversified-businesses/


Zylon, thks for yr time to look this up and for the link. I hadn't come across Pat McKeough but it seems to be a good source (I am still learning where to research and glad for any expert recommendations). 

I still wonder if anybody of the CMFers holds or watches Veresen or am I the only lonely owner. P.


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## londoncalling (Sep 17, 2011)

I have it looked at it from time to time but have not opened a position as of yet. Partly due to sector allocation (I do not have much, if any, room left for utilities). Most investors prefer to use telcos and pipelines for their utility allocation. It seems to be under performing which could be a warning sign or it could mean a great buying opportunity. I must admit I haven't looked at this one for a few months. I prefer AQN for power, IPL for pipelines and a variety of energy companies for LNG. They seem to be purer plays IMO. A big hangup for me is that I don't see any dividend increases on the horizon unlike the other companies mentioned above which have provided me dividend growth through increases recently. There are a lot of holders of this stock on FWR so you may be able to find more info there. I wish I could be of more help but I haven't paid close attention to it as of late.

Here is a quick link I found on google by a DIY dividend investor blogger

http://spbrunner.blogspot.ca/2012/06/veresen-inc.html
http://spbrunner.blogspot.ca/2012/06/veresen-inc-2.html


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## PuckiTwo (Oct 26, 2011)

londoncalling said:


> I have it looked at it from time to time but have not opened a position as of yet.
> 1. I prefer AQN for power, IPL for pipelines and a variety of energy companies for LNG. They seem to be purer plays IMO.
> 2. There are a lot of holders of this stock on FWR so you may be able to find more info there. I wish I could be of more help but I haven't paid close attention to it as of late. Here is a quick link I found on google by a DIY dividend investor blogger
> http://spbrunner.blogspot.ca/2012/06/veresen-inc.html
> http://spbrunner.blogspot.ca/2012/06/veresen-inc-2.html


London, thks for links and reference to FWR (that is "Financial Webring Forum", isn't it? I wasn't familiar with this one)

1. I understand you seem to be saying rather to own individual and clearly focussed companies rather than one that is a bucket of "goodies" as Veresen (VSN) is. I will look into it although for power I own EMA (Emera) and own also IPL. I have "inherited" Veresen from our FA and we are going presently through all the securities in our portfolio to see if they make sense or not and if we should keep them or sell them as some of the portfolio is going into a Discount Brokerage account. One criterion is to to check this forum; if I cannot find a stock or equity mentioned on CMF my alarm bells go off. 

2. I am familiar with the spbrunner.blogspot and have read it. However, new to investing I have difficulties to judge how much I can trust her assessments, she seems to be an amateur analyst (that doesn't mean that she couldn't be a good one). Her statements are always very clear and organized.


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## londoncalling (Sep 17, 2011)

1. yes it is. It is a great place with many wise and seasoned DIYers. One must be aware that most of the members are in the withdrawal phase so the advice is geared towards people in that stage of their investing cycle.

2. I would agree that one can never truly trust any analysis professional or otherwise. What I do like is that her analysis gives me a starting point by listing the mean and average P/Es yields ROE etc. It is a good starting point(much like a screener). I myself look to that site for ideas for further research as well as FWR and CMF. Once I have a short list I go to the balance sheets and quarterlies. So far I have been directed to IPL from CMF(thanks ARGO) and AM (thanks Dr. ED). Spbrunner gave me info on AFN. I would certainly agree that her analysis is very clear and organized as well as well researched. One always has to do their own DD so they can take full responsibility for their decisions. I got suckered into some bad choices early on because I did not how to do my own followup research. Also don't be too easily swayed by expert opinions or amateur posters. If I had been easily swayed by opinion I would never have bought LIQ which I currently have a 30+% paper profit in less than a year.

Good luck out there Pucki. The more you learn the more you can apply. That being said, experience is the greatest teacher(or maybe its certain members on CMF). There are a ton of helpful people here on CMF that have increased my knowledge, inspired me or decreased my learning time. (early sailors, modest pastry chefs, arachnid superheros, anyone who's name ends in gal,tropic of cancer foliage,tea drinkers, and our local town crier to name a few) This is not an inclusive list as there are many here that have imparted their wisdom upon my feeble mind to which I owe much gratitude but do not have the attention span to remember with my ADHD rattled brain. If I can only apply 1/10th of what has been given to me here I will be highly succesful.

Cheers


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## PuckiTwo (Oct 26, 2011)

londoncalling said:


> ...... that her analysis gives me a starting point by listing the mean and average P/Es yields ROE etc. It is a good starting point(much like a screener). I myself look to that site for ideas for further research as well as FWR and CMF. Once I have a short list I go to the balance sheets and quarterlies.
> ........So far I have been directed to IPL from CMF(thanks ARGO) and AM (thanks Dr. ED). Spbrunner gave me info on AFN.
> ..... The more you learn the more you can apply. That being said, experience is the greatest teacher(or maybe its certain members on CMF).
> .......There are a ton of helpful people here on CMF that have increased my knowledge, inspired me or decreased my learning time. (early sailors, modest pastry chefs, arachnid superheros, anyone who's name ends in gal,tropic of cancer foliage,tea drinkers, and our local town crier to name a few)


London, thks for your encouragement and sharing with me your how-to-research. I can only say CMF is amazing. Your list of ingenious CMF experts made me smile, though "tropic of cancer foliage" took me a little bit longer. All of those mentioned by you are on my regular reading list. Thks again. Pookie


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## humble_pie (Jun 7, 2009)

londoncalling said:


> One must be aware that most of the members [in CMF forum] are in the withdrawal phase so the advice is geared towards people in that stage of their investing cycle.



london i love you but don't you think this is going a bit too far.


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## Lephturn (Aug 31, 2009)

PuckiTwo said:


> ﻿I own 2000 VSN (former Fort Chicago Energy) since 2009 as a “buy and hold”. Stk dropped since May about 20%. Present profit 70%.
> Trades presently at $12.50
> 
> Dividend 8.7%. No dividend increase since 2008. P/E ratio 40, EPS 0.31.
> ...


I would be more concerned that they could simply turn around at any time and dilute me 20% like they just did! Ouch. They must have announced it in May as they immediately pulled back and then came in a bit over 22% from their high before starting back up the hill. You should dig into why they issued 20% more shares and diluted all the existing shareholders - what did they need that money for? Did it go straight into the pockets of insiders, or was it to finance something? If it was to finance something, rates are so low why didn't they borrow? I'm not sure I trust management not to steal 20% of my shares again like they just did.

Interesting - they actually have some decent options open interest on the call side, although the volume is very thin.


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## londoncalling (Sep 17, 2011)

*My deepest apologies*



humble_pie said:


> london i love you but don't you think this is going a bit too far.


I was refering to FWR in regards to the withdrawal phase...
To clarify, CMF has a very diverse membership in all phases of the investment cycle(time horizon).

Cheers!


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## blin10 (Jun 27, 2011)

looks interesting right now, thinking of jumping in... anyone bought recently ?


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## OurBigFatWallet (Jan 20, 2014)

I bought last year at $12.25 and sold at $16. No particular reason I just thought I'd take some profits. I'd buy again if it drops


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## dubmac (Jan 9, 2011)

VSN was discussed in the Report on Business today http://www.theglobeandmail.com/glob...tock-has-potential-to-double/article18667640/
The guy says he expects it to double..blah blah blah...
But the P/E is 62! rather high.
Do many on CMF consider VSN.TO to be a good way to play the LNG market - and some of the reasons the author suggests? IS anyone buying/watching this one?


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## warp (Sep 4, 2010)

I've owned VSN for several years...and added more last year.

That Globe article was good PR for Veresen, and if it all adds up as the author expects, I will be quite happy, though one can never know, That gentleman was a money manager, and they use ethese articles the write to try and drum up business for themselves, Still he had some valid points on the future prospects for VSN.

All that being said,,,the div is solid...and I allow it to drip , and it has been a solid performer, though nowhere near as good as IPL, or PPL. Hopefully it will "catch-up" in the future, and I would buy more and hold for the ride.


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## blin10 (Jun 27, 2011)

keeps going up, I have a feeling it'll crack $20... should of picked up more when I did, damn


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## PuckiTwo (Oct 26, 2011)

blin10 said:


> .... should of picked up more when I did, damn


Me too! Dumb enough to let my (at that time) broker convince me to sell my 2000 shares at $13 after long arguments. Then VSN dropped for almost a year until the announcement of their involvement in the LNG terminal in Oregon. When the price started to rise I bought back a very small amount at $12.32, sitting now on a 53% increase. I could have harvested a very stable dividend on 2000 shares - probably the decision I regret most in my short investing life as I wasn't convinced at all that I should sell but gave in to some pressure. Since then I have watched that stock but didn't buy more.

Success may largely depend if VSN gets approval from the US and Canadian governments. A TDW FACTBox article from June 12 mentioned the VSN - Jordan Cove as well as the Leucadia project, saying ...."the Jordan Cove Energy (VSN.To) and Oregon LNG projects are both in Oregon, but will use Canadian natural gas and *therefore needs approval from Canadian regulators.* 

TDW has a target of 17.50 on it. Posters on Stockhouse mentioned a target of 17 by BMO and seem to expect a decision by US authorities soon. and referred to an earlier TDD research report (Sep 13) ...." that JORDAN COVE could be providing 2/3 of VSN's future income and thats why VSN is now at all time hi's".... (couldn't find the report). 

Motley Fool mentions VSN in the same breath as Enbridge and Encana (June 2) http://www.fool.ca/2014/06/02/these-3-companies-are-a-gas-for-investors/?source=c75yhocs0040001

Interesting stock seems to be also Leucadia (was also mentioned in the G&M article Dubmac posted upthread; stk has also been pushed by Motley Fool.


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## Beaver101 (Nov 14, 2011)

And now for some good stock news in a dedicated VSN.TO thread:

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/calgarys-pembina-pipeline-to-buy-veresen-in-97-billion-deal/article34862445/



> ... Pembina is offering either 0.4287 of one of its shares or $18.65 in cash for each Veresen share, subject to limitations on both. The offer represents a premium of 22.5 per cent from Veresen’s closing price on Friday.


And further details from VSN's website news:



> Pembina is offering to acquire all of the outstanding Veresen common shares in exchange for either (i) 0.4287 of a common share of Pembina or (ii) $18.65 in cash, subject to pro-ration based on maximum share consideration of approximately 99.5 million Pembina common shares and maximum cash consideration of approximately $1.523 billion. Assuming full pro-ration, each Veresen shareholder would receive $4.8494 in cash and 0.3172 of a common share of Pembina for each Veresen common share. This offer represents a 21.8 percent premium to Veresen's 20 day weighted average price of $15.31 and a 22.5 percent premium to Veresen's closing share price of $15.23 on April 28, 2017.


 ... are VSN shareholders getting an option of Pembina's share or the cash or what does the pro-ration means?


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## AltaRed (Jun 8, 2009)

Beaver101 said:


> ... are VSN shareholders getting an option of Pembina's share or the cash or what does the pro-ration means?


They decide most likely depending on what shares are tendered versus taking out the last stubborn holdouts at the end of the process (my guess). If you don't like that, sell your VSN shares into the market before closing.


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## spdr1812 (Apr 8, 2016)

This will only be my second M&A since starting to trade/invest in equties and I would like the payout of $ 18.65 , will there be an option/vote at a specific time or how does that work . I would rather re-invest in another lower priced, dividend paying stock instead of the .4 shares of Pembina .

If the share price goes past that there is the option to sell but depending on price, I'd like to collect the dividend until the bitter end if possible as well. I'm happy with the premium I've made but after many nights of searching and research I'm a little sad VSN will be no more .


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## AltaRed (Jun 8, 2009)

You will likely be asked what you prefer but it doesn't mean you will get it, i.e.that is what prorationing is about. If the majority asked for cash, your request will be pro-rated with everyone else.

Example. The number of shareholders asking for cash adds to $3.046 Billion. That is twice the amount of cash Pembina is willing to pay out....so you will only get half of what you asked for. The rest comes in Pembina shares.

If you want to control what you get, e.g. especially cash, stay in control by selling your VSN into the open market before closing.

Added: I suspect most shareholders will want shares, especially if they have large unrealized cap gains and this becomes a tax free rollover. If so, you may be lucky enough to get all cash, but you may not... and be stuck with a few Pembina shares you then have to sell in the open market post-closing.


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## spdr1812 (Apr 8, 2016)

AltaRed said:


> You will likely be asked what you prefer but it doesn't mean you will get it, i.e.that is what prorationing is about. If the majority asked for cash, your request will be pro-rated with everyone else.
> 
> Example. The number of shareholders asking for cash adds to $3.046 Billion. That is twice the amount of cash Pembina is willing to pay out....so you will only get half of what you asked for. The rest comes in Pembina shares.
> 
> ...


Thank you very much , easy to understand  Will there be any early indicators as to which way people are going , cash/shares ?


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## AltaRed (Jun 8, 2009)

spdr1812 said:


> Thank you very much , easy to understand  Will there be any early indicators as to which way people are going , cash/shares ?


Most likely not. Remember most shares are held by big money management funds, mutual funds, ETFs, pension funds, and institutional funds. Most (even registered funds) should want the rollover into Pembina stock, especially true of mutual funds and ETFs (to avoid a bunch of realized gains that would have to be paid as 2017 distributions at T3 time). ETFs also have an obligation to follow an index....hence they will need to beef up their Pembina share count as Pembina becomes a bigger portion of their respective indices. 

There may be some press from time to time on which way some of them are leaning but likely not enough to make an informed opinion. The retail investor portion of shares is the tail of the dog, i.e. likely mere noise in the overall scheme of things.


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## spdr1812 (Apr 8, 2016)

Again , thank you very much .. I guess wait for $18.50 and sell , or hold out to collect some more dividends and hope for the best . I've learned in the beginning the company acquired jumps and the acquirer drops .

What ( obviously not all ) do the 2 companies most likely look like near the date in a " friendly " merger . Can we all expect VSN to stay over $18 or will it most likely drop down ( since I'm not concerned with Pembina price ) ? 

Thanks , 
Chris .


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## AltaRed (Jun 8, 2009)

Put your best guesses on each surface on a dice and roll it. 

FWIW, VSN's trading price going forward from here to closing will be influenced by Pembina's trading price given the formula for conversion. The biggest risk, in my opinion, maybe that it trades lower (to where it was pre-announcement) if it looks like the deal could fall through. Without knowing anything more about either company other than their 5 day trading pattern which I just looked up (and I don't follow them), I'd probably take my cash now and run.


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## Beaver101 (Nov 14, 2011)

spdr1812 said:


> Again , thank you very much .. I guess wait for $18.50 and sell , or hold out to collect some more dividends and hope for the best . I've learned in the beginning the company acquired jumps and the acquirer drops .
> 
> What ( obviously not all ) do the 2 companies most likely look like near the date in a " friendly " merger . Can we all expect VSN to stay over $18 or will it most likely drop down ( since I'm not concerned with Pembina price ) ?
> 
> ...


 ... my guess is that the price will remain over $18 or close to the "valuated" $18.65 given it is a friendly takeover (subject to regulatory and shareholders' consent still). Actually a number of my (friendly take over) stocks (one eg. CML way back) behaved this way - I got the valuated price (cash) without doing anything. It is a chance you take too.


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## jerryhung (Mar 28, 2011)

If I owned VSN (I considered $15 entries last week, sigh), I'd sell already, $18.3-$18.4 today

After going through some M&A and failed M&A (famously WBA buying RAD), my motto going forward is to sell on news (especially if it's within 5% of BO price) b/c chance of going DOWN is greater than UP
BCE buying out MBT for $41 took forever too and MBT stayed flat or lower ($37-$38) while TSX had a +30% year run


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## madmoney (Jan 17, 2015)

I bought at 14.00 late feb, sold today for 18.42. 

My thought was the potential upside was far slimmer than the potential downside. YMMV....


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## spdr1812 (Apr 8, 2016)

Thanks to all ... Alta , Beaver , Jerry & Mad , I'm out ... 20c missed on the upside or potentially $1 ( or more ) on the way down , a no brainer . Now a Div paying stock under $20 to replace it with .. ?


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## AltaRed (Jun 8, 2009)

Why under $20? It doesn't matter what the stock price is.. Yield on X is still comparable dividend..


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## spdr1812 (Apr 8, 2016)

Ya , I know its close but at the moment most of my capital is tied up , so I would rather have more shares at a lower price with " some " potential upside rather than 4 shares of Apple .

Its a mental ( literally ) thing for me too , i would rather have a block of 50/100/500/1000 then have 43 ... ridiculous I'm sure


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## kelaa (Apr 5, 2016)

I like the combined company less than I like Veresen individually. But on the other hand there is the reinvestment risk on what to invest in next. And I do want to see the Jordan Cove project through. I think I'd aim take 40% cash. Will probably sell 40% and then elect to take 100% stock option.


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## Beaver101 (Nov 14, 2011)

kelaa said:


> I like the combined company less than I like Veresen individually. *But on the other hand there is the reinvestment risk on what to invest in next. And I do want to see the Jordan Cove project through. * I think I'd aim take 40% cash. Will probably sell 40% and then elect to take 100% stock option.


 ... same here. And I see the stock price climbing closer to $18.65 ... currently atm $18.55 high.


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## Beaver101 (Nov 14, 2011)

$18.71 @ 2:55 pm ... broke the merger valuation price.


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