The Trading Floor

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CANADIAN EQUITIES OF INTEREST
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Bioscrypt (BYT : TSX : $2.37), Net Change: 0.04, % Change: 1.72%, Volume: 336,900
Show me the money! That was the message sent loud and clear through yesterday's trading action in Bioscrypt shares. A producer of fingerprint readers used for identity verification announced that its product has been selected for a trial by the Personal Records and Travel Documents agency at the Dutch Ministry of the Interior. The Agency plans to test biometric technology on up to 15,000 people to determine if using biometrics is feasible for use in the application and issuance of passports. Initially the shares picked up on this news, but drifted lower through the day as investors realized that while this is a positive step, it is unlikely to generate significant revenues in the near term. With the company having generated revenues of only $2.3 million in Q1F04, recent trading action indicates that the company will need to demonstrate that recent contract wins are generating significant revenue and earnings growth in order to support further gains in the share price.

Descartes Systems Group (DSG : TSX : $1.49), Net Change: -0.10, % Change: -6.29%, Volume: 182,000
Not good, but not getting worse. Provider of collaborative logistics solutions, including integrated software applications and network services reported Q1F05 results in line with pre-release, with no major surprises. The company reported an EPS loss of $0.71, and included an $18 million non-cash charge related to the value of goodwill on the balance sheet. Revenue was down eight percent sequentially, and down seven percent y/y. New customers sign ups were up slightly over last quarter, which was the worst out their last six. Restructuring included the reduction of far-flung regional operations and a chop to the headcount, most notably; half the quota carrying sales reps got a pink slip. The vast restructuring rocked the boat, but now new customers might be cautious to sign because of service and quality concerns. The following months should reveal if this is a phoenix, rising from the ashes of restructuring, or a dodo bird doomed to extinction. Some street analysts see a break-even to slightly positive scenario in Q4F05. Griffiths McBurney reiterates a BUY rating and 12-month target price of $2.45.

Forzani Group (FGL : TSX : $13.68), Net Change: -0.12, % Change: -0.87%, Volume: 553,600
Forzani revenue growth equivalent to a bunt in a baseball. Unimpressive, but gets the job done. Canada’s largest retailer of sporting goods released first quarter results for F05, which consisted of small growth in revenue, yet declining same store sales. Combined revenues from the corporate and franchise divisions increased by 3.3 percent or $7.3 million over the quarter. Same store sales declined 1.7 percent versus strong first quarter results of 11.1 percent of the preceding year. A more price competitive marketplace and price deflation were noted as being the leading factors for the unimpressive results. The company did however open two new stores that increased the number to 395 locations across Canada. National Bank Financial maintains a SECTOR PERFORM rating and a 12-month target price of $15.75.

Metallica Resources (MR : TSX : $1.28), Net Change: -0.39, % Change: -23.35%, Volume: 996,900
Heap-leach, heap-of-trouble? Shares of Metallica sold off after the company provided an update to its Cerro San Pedro gold-silver heap-leach project in Mexico. Yesterday, an Agrarian Court issued a temporary stay of execution allowing Metallica legal access to the project pending the ruling of its appeal in the federal court - no date for the hearing of the appeal has been set, but a ruling is expected no later than October. Adding to the concerns relating to the decision by the Agrarian court, the company has also announced significant delays in obtaining an explosives operating permit for the project. Metallica indicated it cannot predict when or if the permit will be issued. If the permit is not received within the next two weeks, Metallica will suspend construction activities. Metallica also reports that a resident of the city of San Luis of Potosi, who obtained status as an Ejido member in 2001, has filed criminal charges against several senior executives of the company stating that the original lease was obtained under fraudulent conditions in 1997. Canaccord Capital has placed Metallica's recommendation and price target UNDER REVIEW.

Mitec Telecom (MTM : TSX : $2.28), Net Change: 0.21, % Change: 10.14%, Volume: 1,672,400
Divorcing Nortel. Mitec shares picked up on volume as the producer of wireless communications equipment announced its second contract win in two weeks. Yesterday, Mitec announced that it has won a "multimillion dollar" contract to provide a major systems integrator with high power block up converters to be used in VSAT applications. This continued a series of positive announcements. Last week, Mitec announced that it received an order to provide a specialized ultra high frequency subsystem for a defence communications application. In the early part of this year, trading in MTM shares had been driven primarily by sentiment towards Nortel Networks (NT), a major customer. Recent trading action suggests, that the shares are starting to go in their own direction as Mitec continues to generate new business and investors anticipate better results, supported by recent increases in revenue guidance.

Methanex (MX : TSX : $16.93), Net Change: 0.03, % Change: 0.18%, Volume: 1,795,200
New interest in New Zealand. Methanex announced Wednesday that it has reached a deal that will allow the company to source up to 40 petajoules of natural gas from the Maui gas field, located offshore New Zealand (Background: Natural gas is needed in Methanol production). In February of 2003, Methanex lost most of its gas entitlements from the field and had written down the carrying value of its methanol production assets in that country in Q4F03. This new agreement will allow Methanex to produce one million tonnes of methanol from its New Zealand plant in 2004 and an additional half million tonnes in 2005, which will help the company to meet demand from its Asia Pacific customers. Methanex noted that it continues to look into ways to source additional gas for the facility at reasonable prices. The shares broke out to a new high on this news, but the advance was not as strong as in recent days, indicating this news had been at least partially priced into the stock. The shares can continue to advance on anticipation that the currently strong methanol market conditions will continue.

Nortel Networks (NT : TSX : $5.23), Net Change: -0.34, % Change: -6.10%, Volume: 29,417,000
Happy Halloween! Last week, NT shares had started to recover on news that the company added the Hon. John Manley to its board and received an extension on its debt covenants from Export Development Canada. Yesterday, however, the shares started to decline once again after the telecommunications equipment company updated investors on the status of its auditing process. Nortel announced Wednesday that its restatement process is continuing, but that final results of the process will not be released in the second quarter. At this point, Nortel maintained that preliminary work indicates that 2003 net income will be reduced by 50%, and a loss will be reported for the first half of last year, while prior period revenues and the December 31, 2003 cash balance will remain unaffected. What this means for investors is that the uncertainty surrounding this review will continue to overhang the stock for at least another month, making any sustained recovery difficult in the near term.

PBB Global Logistics (PBB.UN : TSX : $16.20), Net Change: 0.80, % Change: 5.19%, Volume: 119,100
A win-win situation. Yesterday morning, PBB announced that it has agreed to purchase the logistics business of Clarke Inc. (CKI) for $40 million in cash, and the assumption of $7 million in working capital. PBB noted that this move will help to diversify its business mix from a focus on customs brokerage services to being an international third-party logistics service provider. For the year ended March 31, the combined company generated $109.9 million in revenues and $19.5 million in EBITDA on a pro-forma basis. Once the transaction closes, PBB expects to increase its distributions by 11.1% from the current run rate to $1.75 per unit per year. Clarke noted that this deal will allow it to focus on further investment in its core asset-based trucking businesses. Both PBB units and CKI shares rallied on this news, indicating that investors view this transaction favourably for both companies.

Reitmans (Canada) (RET.A : TSX : $14.95), Net Change: 1.20, % Change: 8.73%, Volume: 71,100
Spring sales bounce. The Montreal-based retailer reported higher first quarter earnings yesterday crediting strong spring sales and more store locations for increased revenues. Sales for the first quarter rose nine percent to $193 million, up from $177 million from the same quarter last year. Same store sales gained four percent of the company’s 854 stores, which also increased from 830 stores from one year ago. The 854 stores consist of 350 Reitmans, 163 Smart Set, 133 Penningtons, 28 RW & Co, 66 Addition Elle, 49 Elle Outlet and 65 Thyme Maternity stores. The company opened 16 stores over the quarter, and plans to open an additional 35 this year and also close down 10 weak locations.