# SPB Superior Plus- opinions?



## daddybigbucks (Jan 30, 2011)

Currently $11.60 with a monthly dividend of 10c.
Recent dividend cut from .135 to 10c about a month ago.
I do currently have a strong position from buying on dips.

Before i gave my views, i was wondering what others think?
Buy/sell/hold?


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## Echo (Apr 1, 2011)

Just my opinion but I would stay away from this one. The writing was on the wall for a dividend cut after a brutal year last year. Are they even making any money?

This company's best years were pre-2005 when they basically just distributed propane. How do you even describe their business model now?

SPB is a true dog, so maybe it has some value as a contrarian play but only if you have the stomach for it.


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## gibor365 (Apr 1, 2011)

IMHO, this stock is a pure casino, all values are negative, I don't know why they are taking money to pay dividends...
I was looking at PBS several months ago, but was scared to buy... for high yield portion of portfolio, bought instead AGNC - they have at least normal Payout ratio 80% and yield 20%


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## daddybigbucks (Jan 30, 2011)

only 2 replies so far but im suprised so negative.

yes, their diversification was bitter sweet. ERCO turned out great but their construction materials was a disaster.

pure casino? without even looking at the financial numbers, they are pulling in alot of money on steady propane contracts.
Also being the biggest propane supplier in the Canada (along with huge propane margins), its not like they are just going to disappear.

if they got rid of the dividend, i bet they would be a profitable company. With the huge 10% dividend, i feel they just have their nose above water.

Interesting opinions, 
Thanks


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## HaroldCrump (Jun 10, 2009)

daddybigbucks said:


> only 2 replies so far but im suprised so negative.


It is hard not to be negative.
Consistently increasing debt, increasing equity issuance, terrible cash flow position, what else?



> pure casino? without even looking at the financial numbers, they are pulling in alot of money on steady propane contracts.


Maybe, but I'm sure they are "pulling in" a lot of money by issuing debt and shares as well.
Refer:










Cash flow position, already bad, took a turn for the worse in 2010.












> if they got rid of the dividend, i bet they would be a profitable company


No, if they got rid of the dividend, the stock will crash and the party will be over.
The manager dudes will have to go find a real job somewhere.
If their cash position were so great, why can't they do a share buy-back and reduce the balooning equity base, and give their investors more tax advantaged returns as well as reduce their cost of capital?

I stopped looking after this...it's possible I'm missing some hidden gems.
But my question is...why.
What is so great about this business that endears you so?
Is it just the 10% yield?

Since you posed the question first, why don't you tell us what you see that the others missed.
I am genuinely curious.


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## gibor365 (Apr 1, 2011)

HaroldCrump said:


> No, if they got rid of the dividend, the stock will crash and the party will be over.
> .


Exactly  who needs this stock w/o dividends?! Even YLO more promissing with similar dividends.


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## daddybigbucks (Jan 30, 2011)

gibor said:


> Exactly  who needs this stock w/o dividends?! Even YLO more promissing with similar dividends.


well hopefully i can explain my reasoning. I am not contrarian, i'm just a kook that has my own way of looking at numbers. 
*First off*, SPB is propane. Propane will always be around. Natural gas is a much better fuel but it needs infrastructure. Anyone, anywhere can use propane.
SPB is the biggest propane distrubutor in Canada.
Propane will always be around for heat where there is no infrastructure.
So this stock is going to be around for 40-50 years, that is worth alot in my books.

*second*, SPB pays around 10% dividends every year. In seven years, this stock will double. (ie $1x1.1x1.1x1.1.......)
The stock can stay at $11 for 7 years and your investment will double. Also you can get out anytime and all the dividends are yours to keep.
That is worth alot.

*third*, if you look at the chart for last 5 years.
SPB was $11 back in 2006 and went up, down,up down, up down and ended up at $11 in 2011.
if you follow the chart, and corelate that to equity. You see a similairity.
Sure it is not a growing company but it is damn resilent. that is worth something too.

If you add those three items up, you get $12.01 value for this company as it stands.

you dont even have to look at the financials.
But if you did, you would see they make 1 billion dollars gross profit each year. They are in the process of streamlining their process which will increase the net profit. But as they learn the ropes to streamline, you will get a fat juicy dividend.

Make cents?


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## gibor365 (Apr 1, 2011)

daddybigbucks said:


> well hopefully i can explain my reasoning. .....Make cents?


I don't want to convince you. I just tell my opinion. I checked this stock some time ago and didn't like it...
For high-yield , as I mentioned, I hold AGNC with 20%, ZWB with 10% and HEX with 10+%


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## daddybigbucks (Jan 30, 2011)

d'oh, my reply was actually for Harold Crump.



> I stopped looking after this...it's possible I'm missing some hidden gems.
> But my question is...why.
> What is so great about this business that endears you so?
> Is it just the 10% yield?
> ...


And no worries about convincing here. Everytime i taken another person advice to my stock account, its always lost me money.
I just like to hear and see stocks from other's views,positive or negative.
I am getting less bullish on SPB but still holding long.


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## HaroldCrump (Jun 10, 2009)

Thanks, gibor, for explaining your thoughts.
So, it appears the primary attractions are the 10% yield (i.e. double your money in ~ 7 yrs.) and the steady, reliable nature of the company/yield.
And that's a fair reason to hold a stock.

My only concern would be if their business and industry is so stable, predictable and reliable, why are they losing money?
If you look at a 10 year snapshot, their top line has been steadily increasing but their bottom line has been choppy to say the least.
Given their gross profit of $1B as you say (it's actually $787M), they still didn't manage to make a +ve net profit.

Also, their cash flows should be more stable and predictable given the nature of their business - but it's not.
Their cash from operations has been steadily declining in the past 3 years, when it should have been the strongest.

Anyhow as you say we shouldn't buy/sell on each other's opinions.
I hope this works out for you in the long run, and maybe you'll get lucky and some bigger fish will buy these guys out and you can get a handsome return!


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## Echo (Apr 1, 2011)

@HaroldCrump
I think that propane is making up less and less of their business since they decided to become a conglomerate. Propane contracts are keeping the dividends flowing but their failed attempt at expanding their other businesses is diluting net profits.


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## bigbear4511 (Oct 6, 2011)

You are absolutely correct. One of superiors plus big contributor to profits is their chloroalkali business. They have a plant in michigan that they just refited from a mercury polluting plant to a membrane that dosen't use mercury. it cost 100 millioin to do so and is good for another 30 years. (it is a big employer for michigan). This produces a lot of chlorine that is used for detergents as well as treating drinking water for a big chunk of the states. This plant is quite profitable. 

Superior also has a small refinery in the states that they bought in recent years. It just made 300% more for year ago levels. Yes their debt is growing, but their profitablity is going up faster than their debt. 




Echo said:


> @HaroldCrump
> I think that propane is making up less and less of their business since they decided to become a conglomerate. Propane contracts are keeping the dividends flowing but their failed attempt at expanding their other businesses is diluting net profits.


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## phrenk (Mar 14, 2011)

Just bumping this thread since the company announced recently a 50% dividend cut. Share price also decreased by 50% approximately ... a good case study on what to look out for, even if dividend yield looks great.

http://www.theglobeandmail.com/glob...20111102&archive=ccnm&slug=201111020741095001


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## daddybigbucks (Jan 30, 2011)

phrenk said:


> Just bumping this thread since the company announced recently a 50% dividend cut. Share price also decreased by 50% approximately ... a good case study on what to look out for, even if dividend yield looks great.
> 
> http://www.theglobeandmail.com/glob...20111102&archive=ccnm&slug=201111020741095001


i definately took a hair cut on this. Good thing i was able to sell half before the bottom fell out.

If you want a good case study, i would suggest looking at a comparison between SPB and GEI. The companies are eerily similar. Same earnings, same outstanding shares, same assets, same debt load.
But SPB is $6 and GEI is at $19. 
All i can see is market sentiment making the difference.


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## al42 (Mar 5, 2011)

I took a small position in this when it touched $5.50 a few weeks ago.
Just hoping what management said in their 3rd QTR. release is in fact doable.
At $5.50 it will pay a nice 10.9% dividend and if they get their debt in line the share price should appreciate.

The reduction of Superior's monthly dividend to $0.05 per share enhances the stability of the dividend by reducing the estimated 2012 payout ratio to approximately 45% of AOCF less maintenance capital expenditures. The reduced payout ratio benefits all of Superior's stakeholders by ensuring that Superior will maintain the required financial flexibility to prudently manage its debt maturities and total debt leverage levels. Based on Superior's 2011 and 2012 financial outlook, Superior's total debt to EBITDA is anticipated to be between 4.4X to 4.6X as at December 31, 2012, a significant reduction from 5.2X at September 30, 2011. Further improvement is expected on an on-going basis. Details are further highlighted in the "Debt Management Summary" table below.


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## skiwest (Oct 24, 2011)

At 6 or less I think this is a buy. The div was way too high compared to earnings. Not sure how when div is very high comapered to earnings it comes as a shock when the div is cut. I guess the high div keeps the stock above where it should be and then when cut its over sold.


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## skiwest (Oct 24, 2011)

Now that over 13 a sell? Can't see it going much higher. But it keeps on hitting new highs.


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## AGHFX (Aug 31, 2012)

I hope it doesn't go any higher any time soon. I've been watching this one for a while now waiting for a pullback to start a position in the stock. I'm hoping it has a bit of a tumble over the summer.


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## skiwest (Oct 24, 2011)

I've sold 1/2 and will sell rest at these levels, above $13. Doesn't seem like compelling reason to hold. Was risky at $6 , but now at $13 don't see big upside, unless EPS really recover and div can go back up to old level. Then it could be a $20 stock.


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## daddybigbucks (Jan 30, 2011)

Using the case scenerio with GEI. I think this stock can make it to $23 under good management.


PS. Sometimes a tough pill to swallow reading your insight from 2 years ago.


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## skiwest (Oct 24, 2011)

I'm out now as part of a general lightening. I would buy back 1/2 at $11. My average cost was just below $7 so I'm happy with result.


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## Fraser19 (Aug 23, 2013)

I am wondering what people feel about this stock today.
It has caught my attention for sure. It appears they have done an excellent job reducing debt, P/E is a little on the higher side, but not outrageous, a reasonable payout ratio looks like a pretty safe while still big dividend, and they are making acquisitions.
I have not really had time to do any deep research but it does look intriguing.


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