Business Description:
Catalysts:
● Recovery from pandemic and recession with expected higher inflation
● Massive infrastructure investment from the Federal Government, especially in cleaner mode of transportation such as railroads
● Deal with Canadian National Railroad could open business in Canada, along with existing businesses in the US and Mexico → big winner of USMCA Deal
● Initial offer from Canadian Pacific Railroad turned down after a better offer from CN
● Each KSU share to be converted into 1.129 shares of CN and $200 in cash
● Arbitrage spread of about 10%
Risks:
● Will need approval from regulators in 3 countries
● Higher than expected synergy costs
Financial Analysis:
● Revenues of $2.62 Billion in FY20 down from $2.86 Billion in FY19
● Operating income of $1.03 Billion in FY20 vs $1.05 Billion in FY19
● Net income of $617 million in FY20 vs $359 million in FY19
● Free Cash flow of $590 million in FY20 vs $478 million for FY19
● Balance Sheet
○ Total assets: $10.2 Billion ; total liabilities: $5.63 Billion; book value: $4.24 Billion
○ Cash: $260 million, debts: $3.81 Billion, current assets: $723 million, current liabilities: $483 million
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