AutoCanada Income Fund (Symbol-ACQ.UN)

[retireat50]

Auto Income is at a 12 month low right now. The thing that is appealing to me is the 14% yield that appears to be stable. Anyone looking at this thing?

[m1ax]

Is there anybody on this board still following this stock?

I believe that it would be a good CDN proxy on a revival of the auto industry. A similar stock, AutoNation (AN), in the U.S., has rebounded sharply from its low.

http://finance.yahoo.com/echarts?s=AN#c ... =undefined

ACQ.un posted a profitable first quarter and the debt level is conservative. The units used to pay a sizeable distribution.

This definitely is a special situation and it carries a substantial level of risk, but the rewards would also be handsome.

Any opinion out there?

[m1ax]

AN and ACQ.un used to be somewhat correlated to each other on a trading pattern. It's no longer the case, but it could change.

Just have a look at the following link:


http://www.google.ca/finance?chdnp=1&ch ... :AN&ntsp=0

[Mike Schimek]

Well this a knee jerk look at it, with a 15 minute analysis



market cap is 18 million, shareholder equity is 25 million (68 mil less 43 mil in intangibles), so from a book value perspective that looks alright.

I guess for 18 million dollars you are buying 22 auto dealerships, so you are paying 818 000 per auto dealership.

From a business model standpoint, I suspect there are some reasons auto dealerships are franchise operations instead of directly owned by auto manufacturers... I suspect one of the reasons is that each franchisee is a form of owner, which gives them a lot of incentive to work hard, think, etc.

I'm not sure to what degree the effectiveness or value of that is diminished under this trust structure. This would worry me; the structure might not be ideal for this type of business. Maybe there's a reason they are the only one of their type in Canada... maybe the reason is that long term the structure doesn't work.

That's a 15 minute 2 cent opinion

[m1ax]

The trust structure can be terminated any time, and IMO it will be before the 2012 deadline.

Anyhow, I see the company as perfectly legitimate as a corporation. The profitability is interesting. They make money with new cars, used cars (better margins) and even with the service and repairs part of the business.

They have real cash flow and can buy back shares if they want.

Chrysler getting out of bankruptcy I see a lot of their problems resolved, particularly if the governement goes ahead with a cash-for-clunker policy.

JMHO

[m1ax]

The Supreme Court has ruled in favor of Chrysler to be sold to Fiat. The news should help ACQ.un tomorrow.

http://finance.yahoo.com/news/Supreme-C ... et=&ccode=

[Mike Schimek]

Looks like you called that right, up 11.8% so far today!

[m1ax]

Up again today. I waited more than eight months to add to a small position. I hope I will be rewarded.

[Taggart]

Symbol - ACQ

Of course it's no longer an income fund, but globeinvestor had an interesting column on this the other day. The dividend and growth thereof are interesting, but after reading the article, I'm not all that sure I'd want to buy into this company. I question whether this management's long term interests coincide with shareholders or their own back pockets.

Why AutoCanada is a (cautious) buy

The company's stock has surged, but its attractive outlook is marred by the industry's tangled web of interests

DAVID MILSTEAD
From Tuesday's Globe and Mail
Published Monday, May. 14, 2012 6:41PM EDT
Last updated Tuesday, May. 15, 2012 7:03AM EDT

[Michael D]

It was a fun ride up from $4.00 per share. I admit to not knowing about the ownership structures. But it is easy to see that management can make money by flipping dealerships in a confusing web of non-arms length transactions.

It doesn't pass the smell test. There is risk that the public corporate structure can implode as high performing dealerships pass into management's private holdings. Yuck.

If you own, vote your shares!