# CML HealthCare Inc. ( clc -to)



## lakota (Apr 3, 2009)

why it is 17% down today? is there any news of Div. cut today?
The 3Q results were not so bad
any thoughts.:frown:


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## HaroldCrump (Jun 10, 2009)

The CEO said in the conference call that they will be reviewing their dividend policy over the next few days/weeks.
I suppose the market took that to mean only 1 thing...

Disclosure : I have no position in this company at this time.


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## Canuck (Mar 13, 2012)

http://www.canadianbusiness.com/art...re-down-near-15-despite-improved-net-earnings


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## PMREdmonton (Apr 6, 2009)

They sold off their Alta. imaging business.

They have got involved in some new lab businesses.

Their cash flow from ongoing earnings and earnings from ongoing earnings are down somewhere in the neighbourhood of 30%.

This is a poorly managed company as far as I can tell and they may be getting squeezed over time by the Ontario government and other cash strapped provincial governments in jurisdictions where they work. 

I don't think this one is a value until they are punished some more by the market and they demonstrated stability in their earnings.


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## Sherlock (Apr 18, 2010)

This is a screaming buy at this price if you can handle the volatility. As the population ages there will only be more and more medical tests.

I have 100 shares of it now but I think I will add more.


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## Andrew (May 22, 2009)

As Harold mentioned the dividend is under review. It will be cut, the big question is by how much. 

Additionally, CML is currently negotiating with the Ontario government for a new service contract that expires in March 2013. It doesn't sound like the negotiation is going to well for CML, which has investors spooked. +90% of their revenue is from Government contracts, with the majority of that coming from Ontario. 


CML hired a new CEO in early 2012. It will be interesting to see if he can turn it around long term.


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## PuckiTwo (Oct 26, 2011)

There is already a thread called CML Healthcare (CLC.To). http://canadianmoneyforum.com/showthread.php/9829-CML-Healthcare-(CLC-TO)?highlight=CML+Healthcare. Maybe the moderators can merge the two threads?

Edit: Last dividend cut was Dec 2010/Jan 2011. http://quote.morningstar.ca/Quicktakes/Stock/DivAndSplit.aspx?t=XTSE:CLC&region=CAN&culture=en-CA. I sold the stk in August w 40% loss.


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## My Own Advisor (Sep 24, 2012)

Down another 6% today. Geez.


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## PMREdmonton (Apr 6, 2009)

My Own Advisor said:


> Down another 6% today. Geez.


It is starting to get interesting at this price point with what should be stable and low-risk earnings.

There is also potential for growth as more and more DNA tests start to come to market.

This should be a reasonable growth opportunity with the age structure of our population.

If you can stand the volatility this is probably a decent entry price to buy a tranche with some more money to buy if it falls further. You do have to be the type who can stand "falling knives". If you are inclined to quickly sell on weakness you're probably better off waiting until the next quarter results are out to ensure the business has stabilized and they have managed to push through into some new areas.


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## My Own Advisor (Sep 24, 2012)

I continue to hold my small position. Painful to see the plunge though. I suspect they can't go under (based on their services) but never say never.


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## Andrew (May 22, 2009)

I tried to value CLC today using a valuation model I created in Excel. I factored in some deteriorating prospects for the company and still came out to *$7.14/share*. 

*My Assumptions:*
Revenue declines 10% in 2013, 7% in 2014, 5% in 2015
Operating margins contract to 23%
6% Discount rate

Take a look through my assumptions and let me know if you agree with my assessment. 

*Link: *CLC Analysis


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## Potato (Apr 3, 2009)

Really the only thing I'd disagree with is the discount rate. What's your expectation for equity investments in general? I expect something like 6-7% from the index, so if I'm going to chase an individual stock on the active side, I plug in 8 or 9% for the discount rate. That puts your purchase price down to ~$4-5, which is about what I came up with...


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## Andrew (May 22, 2009)

Potato said:


> Really the only thing I'd disagree with is the discount rate. What's your expectation for equity investments in general? I expect something like 6-7% from the index, so if I'm going to chase an individual stock on the active side, I plug in 8 or 9% for the discount rate. That puts your purchase price down to ~$4-5, which is about what I came up with...


The discount rate that I used is based on both cost of debt & equity. My expectation for return on equity for this type of investment is ~10.5%, which I assumed in the model. CML is financed primarily by debt (~90%), which is a lot cheaper than my equity return expectation so it drags the discount rate down to that 6% level that I assumed. 

You're right though that the overall value of CML is very sensitive to that discount rate assumption.


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## webber22 (Mar 6, 2011)

There was insider buying when the stock hit it's low point. The next dividend should be announced this week, I doubt the insiders would have bought if a cut was coming

http://www.canadianinsider.com/node/7?menu_tickersearch=CML+Healthcare+Inc.+|+CLC


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## My Own Advisor (Sep 24, 2012)

"CML is financed primarily by debt (~90%)...."

Just like most of our province (Ontario). 

@Andrew - great analysis. Do you expect revenue to decline based on smaller, more focused operations, or payments from Ontario and BC Ministries of Health?


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## Andrew (May 22, 2009)

My Own Advisor said:


> "CML is financed primarily by debt (~90%)...."
> 
> Just like most of our province (Ontario).
> 
> @Andrew - great analysis. Do you expect revenue to decline based on smaller, more focused operations, or payments from Ontario and BC Ministries of Health?


From everything I've read in CML's financial reports and heard on their conference calls I would expect the majority of revenue decline to come from Governments (Ontario + BC) cutting back on healthcare spending. 


@webber22: Good catch on the insider buying activity.


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## webber22 (Mar 6, 2011)

Dividend was confirmed to be the same for November, plus some other tidbit of news on their site

http://cmlhealthcare.com/cml-healthcare-investors/cml-healthcare-news-releases/


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