S Penalties And Pardons

President Trump went ahead and raised the steel and aluminum tariffs on Canada and Mexico and European countries despite the fact that they are our allies. He alleges that they are acting as conduits for underpriced Chinese metals.

Meanwhile he granted a pardon to right-wing blogger Dinesh D'Souza who illegally funded a political campaign and was prosecuted by Prett Bharara, the NY US Attorney who Trump fired last year. 

Earlier this year Trump pardoned Lewis Libby who had been an aide to VP Dick Cheney and Sheriff Joe Arpaio, who called Obama's Hawaii birth certificate a fake. He also pardoned boxer Jack Johnson who was convicted for transporting a white woman across state lines, who died in jail in 1946.

The White House is also considering a pardon for Martha Stewart, the household-cookery writer, who was prosecuted by Trump's nemesis for insider trading, James B. Comey. And he is also considering one for Democrat Rod Blagojevich,the former Illinois governor, for campaign funding violations. Both Ms Stewart and Mr Blagojevich are celebrities with links to The Apprentice, Mr Trump's former TV vehicle. And Blagojevich makes it bipartisan.

Meanwhile complicated talks are going on with the North Korean dictator Kim Jong-un via his deputy. Does the president know how to tell friends from foes, whom to penalize and whom to pardon?

More today from Israel, Ireland, Sweden, India, Spain, Brazil, Finland, Britain, Switzerland, Equatorial Guinea, Sri Lanka, the Netherlands Antilles, India, and Canada. We have a stock sale and a withdrawn stock sale with a sell price target for our paid subscribers and also news about our funds. We cover two Investor Day's for two companies. 

Reports from Israel, Ireland

Delek Group reported on its Q1 Thursday and the Israeli conglomerate showed that it is a moving target, with assets and revenue streams acquired and divested vs prior Q1. Operating profits came in lower than in prior year, at NIS 328 million vs 346 million, but its net profit hit NIS 243 million in Q1 2018 vs NIS 220 in the prior first quarter. But the companies were not the same. Its sales were up 16% to NIS 1.8 billion from prior Q1's 1.5 bbillion, boosted by its now owning and consolidating the entire Ithaca North Sea production company. It divested non-core oil and gas assets for NIS 1.8 billion.

Meanwhile it hived off Delek Energy royalties into a new potential spinoff in Tel Aviv called Delek Royalties, which raised NIS 426 million subject to approval by the authorities and the TASE. It also sold leased for offshore fields Tanin and Karish to Energean of Britain for initial royalties of $109 million. It also sold 9.25% of the Israeli offshore Tamar field under anti-trust rules. It also in April sold out its 15% stake in Faroe Energy to an unnamed “third party” for NIS 350 million (£70 million).

Delek also invested in a project in US Gulf waters with Texas Southern Energy and Gulfslope Energy which are developing 12 sites, 9 exploratory, and 7 of those deep-water. Delek is financing 90% of the exploration budget for this up to $50 million and will be paid off with 75% of the stock of the operator companies.

Delek closed the quarter with NIS 20 billion in cash including unutilized credt lines and the proceeds of a Feb. issue of debentures for NIS 500 million. It continues to sell fuel and cars in Israel but I expect some of this business may also be headed for the chopper. It booked capital gains from oil and gas assets sales of NIS 132 million vs 6 million, and financed gains of 63 million vs a cost loss Q1 of 47 million.

The main piece of good news was that about half (actually 45%) of the Leviathan project has been completed and gas will start being produced next year, according to CEO Asaf Bartfield. The other good news is the regional contracts, with Dolphinus for 64 billion cubic meters to be exported via the Egyptian Delta (and to Egypt), for $15 billion; the take or pay deal for .38 billion cubic meters with an Israeli power company for $65 million; and the sale of 45 billion cubic meters to Jordan for $7.5 million.

DGRLY stock rose nearly 9% today on Wall Street. It currently yileds 11%.

More on Greencore which reported last week. The UK ready meals business is being dismantled along with part of its original US operations in Rhode Island so it can focus on its main US line acquired last year by buying Peacock. While revenues did well, profits lagged in a challenging half year, but the company raised its dividend by 0.10 p to 2.20 p and also reiterated its forecasts. Its earnings per share in the half was down 12.7% to 5.5 pence.

However its US convenience food revenues hit £504 million vs 325 million the prior Q2, on which GNCGY's operating profit came in at £12,6 million vs 8.5 million. No less than 82% of its US revenues were from the former Peacock. Meanwhile in Britain and Ireland, revenues rose 10% to £735 million, on which adjusted operating profit was barely up, and operating margins were down 4 basis points to 6.4%.

The US lead is not the result of currency factors which impacted the numbers negatively by 1%. Instead they came from one-off charges for rationalization (£25.8 million); exiting from cakes and desserts (£15 million), and integration, reorganization and start up costs (£12.3 million), a total of £53.1 million. Then our company took an exceptional tax credit of £4.3 million; and £20.6 million credit for the US interest rate change and other matters, a total of £28.2 million. Moreover there is another £5.9 million in the pi​p​eline. The resul​t​ of these maneuvers was to boost the balanced sheet by cutting net debt to £522.2 million, down £34.4 million, and also to cut the pension deficit to £89 million from 110 million. I revis​i​ted the Greencore results because the share rose. The basic numbers did not explain why its stock went up.


Pembina Pipeline's Investors' Day featured making its current holding pay off rather than new deals, according to A.M. Kuskey of Credit Suisse who covered this. She cited derisking and improved metrics as the message of the meeting, along with expanded (higher) margins in natural gas liquids. However CS still rates PBA a hold rather than a buy, but has a target price of C$46, well above current levels because of commodity price weakness. She figures the dividend will remain at last year's 4.7% and puts the EV/cashflow at 13.4x.

Autoliv's Investor Day was more upbeat. It said its backlog at the ALV side already has hit the 2018 full year target while spin-off candidate Veoneer electronics is at 70% of its 2022 sales target level of $2 bn before independence. Moreover the partent ALV capex will be “normalized” next year at 4-5% of sales post spin out. The Swedish company also said that CevianAlecta, and AMF are providing capital support for the spinoff of electronics, not just Cevian. It will give 30% of its cash, $1 billio, to Veoneer.

Irish CRH is combining its Americas and European building products divisions possible for a divestiture, which will be completed next year. It predicts that its margins will rise 3% with this. It also is “reviewing its retail arm for European distribution which may be spun off. CRH's got a favorable write-up by Davy Stockbrokers and the share rose ~3%.

Indian solar powe​r​ firm Azure collected $135 million for its rooftop power business from the International Finance Corp, the World Bank's private investment arm, plus development banks from France, Austria, and The Netherlands. AZRE will use it to fund 200 megaawatts of rooftop projects across India.

Equatorial Guinea​ was unable to raise funding for the Golar floating LNG plant and Schlumberger withdrew from the partnership, which hurt Golar a lot more than SLB. SLB also agreed to undertake a $50 million survey of offshore waters east of Sri Lanka prior to the opening of bidding for concessions there. The initial survey will be funded by Total and Eastern Echo DMC. Total was an earlier concessionaire but the exploration never proceeded so it will pay $3.2-10 million of the SLB bill now.


Tencent is again under attack from Beijing for perverting young Chinese with video games, as the country prepares to celebrate youth day. The attack came a day after CEO Pony Ma commented that China is lagging in chip-making as he an his rivals rushed to fill the gap with an investment under orders. It came in the form of news and Internet attacks by Xinhua, the official Chinese news agency. Writing in Asia Times, Ben Kwok says this is politics.

This cast a shadow over the plans by TCEHY to IPO Tencent Music & Entertainment in the US. TME is to lau​nch in NY with a valuation of about $25-30 billion according to the Financial Times, with Morgan Stanley, Goldman Sachs, and BofAMerrill are among the possible underwriters. It chose NY because Hong Kong is blocking future dual-class listings where voting power is not given to shareholders, and because its Spotify arm will also be listed here. The IPO is planned for later in 2018. TCEHY rose 2.5%.

Nokia spun off its digital health arm to Whithings and lost Gregory Lee who went with it. He will be replaced by Maria Varsellona who is now NOK chief legal officer. It also got State Grid Corp of China (Chian Bell) designation as the optical transport network provider there. NOK shares fell 2%.

Canada Advice

Martin Ferera writes not to sell Zymeworks until the stock, which institutional investors are buying into, hits $30. I sold only 12.5% of my stake last week after ZYME went higher after I exited a first round lot. He spotted that there is a heavy rise in volume almost every day in the last to weeks. I stopped selling but failed to tell you why and the details in my rush to catch up with London, Iceland, and Cambridge Mass.

However, Martin has put a sell on Input, not willing to wait until the end of the canola season. “Originally it was canola streaming but when that wasn't enough they added marketing streams and now mortgages. I don't like that they are using their most precious resource, their capital, for stock buybacks. Now from the conference call I know why.

“When the price is high farmers don't need their help to sell or finance. But when the price is low they are paid in canola and it hurts INPCF's bottom line, not the farmers'. I don't think the business is at any risk of going under but demand for their services is not as robust as I expected. Take a loss and move on.”


The FDA is seeking comments on a plan to waive the Single Shared System REMS Requirement which lets patent holders block access to the existing drugs used by generic makers to test their version. The new standard would allow the generic to fill the REMS requirement and could speed up copycat versions of pricey drugs. This would help Teva, TEVA, a generics maker, and Novartis, NVS, which controls Sandoz.

In addition to the weight loss I have already reported on, Novo Nordisk also reported that Phase III trials showed that smilglutide, the daily pill for type 2 diabetes, also controlled blood sugar better than the current standard treatment Jardiance's (empagliflozin)


Advent Claymore Global Convertible Fund, AGC, is merging with its domestic counterpart AVK, the Advent Convertibles Fund, subject to shareholder approval. The Guggenheim fund managers want to add founder Tracy Martland IV as a trustee until 2021, along with Ronald Nybard, whom I don't know.

Eaton-Vance Tax Managed Global Income Fund, EXG, designated its last distribution as 12.7% from investment income and the remaining 87,3% as return of capital which is not taxed.

One of our Aurora Investment Trust's key holdings, woman-friendly pub chain Wetherspoon's, was upgraded to buy by HSBC today to buy. Its stock rose to $87.85. a new high.

Korea Fund cut its shares outstanding so its NAV per share this year hit $47.12 vs $41.53 last. Its market price remains discounted now by 13.4% vs last year's 11.2%. It reversed its investment loss of $154 thousand I the Mar. quarter to a gain of $301 thousand but its realized and unrealized gains fell from $36 million to $1.7 million, or from $5.40/sh to 29 cents/sh. Korea is a tough call.

Disclosure: None.

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