| Roger Conrad: ChemTrade Logistic |
| Tuesday, January 12, 2010 |
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"ChemTrade Logistics is a major producer of specialty chemicals, particularly sulphuric acid. It's also a Canadian income trust yielding over 12% with most of its operations overseas. That adds up to a unique triple play for investors in 2010. "First, is the high yield, paid monthly. Even with the market for specialty chemicals chronically weak in 2009, Chemtrade was able to generate cash flow to cover its distribution by a healthy margin. ":Second, cash flow is set to surge as demand from industry rebounds for sulphuric acid. Second half results already show improvement and that trend is set to continue into the new year. "Third, Chemtrade management expects to pay the same level of distribution in 2011, when Canada's trust tax kicks in. If it succeeds, investors will receive a windfall capital gain, since a big cut is already priced in. "At a recent conference call, CEO Mark Davis stated 'the effect of the new tax would not be significant' since 'Chemtrade receives a large portion of its earnings from non-Canadian sources. "Accordingly, in 2011 we believe that the new SIFT tax will apply to less than one-third of the Fund's income, resulting in an effective tax rate of less than 10 percent.' Buy ChemTrade up to $11." |
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