Pacific Trader: Little-loved Westshore Terminals keeps delivering the cash flow

Could coal port operator Westshore Terminals branch out into other commodities?

Credit: Westshore Terminals

One of three stacker reclaimers being replaced as part of Westshore’s terminal infrastructure reinvestment project

Could the coal port operator branch out into other commodities?

The stock: How can one buy into this market when everything is so expensive? Well, there’s still the odd value stock out there quietly delivering sweet dividends and capital gains without getting much love from investors. Take Westshore Terminals Investment Corp. (TSX:WTE), operator of Canada’s largest coal export facility at Roberts Bank in Delta and one-third owned by ubiquitous local billionaire Jim Pattison.

This remnant of the old B.C. Resources Investment Corp.—if you’re like me, you still have one of those paper share certificates given to every citizen by Premier Bill Bennett in 1979—has been loading coal onto ships and a more than 4-percent dividend yield into shareholders’ accounts for years. A bonus: at around $19, its stock is up 43 percent from a low of $13.30 last October.

The drivers: Many will tell you that coal has no place in a carbon-constrained world, but Westshore handles almost entirely metallurgical coal bound for Asian steel mills. So far, there’s no scalable alternative to coking coal as an ingredient in steelmaking. And you might have noticed that there’s something of a commodity boom going on. Earlier this month, Westshore raised its guidance to 28 megatonnes of throughput in 2021, from 25 Mt. (Back in December, the projection was 21 Mt.)

The company has also been buying back shares, which should support its stock price. And it hinted at diversification in its Q1 earnings release, saying: “Westshore is well positioned to handle other bulk commodities in addition to coal. We continue to attract the interest of producers of other products, and we evaluate the feasibility of these opportunities as they arise.”

Word on the street: Analysts are torn, with Scotiabank’s Konark Gupta seeing nowhere to go from here and RBC’s Walter Spracklin notching a $28 target in the expectation that Westshore branches out into potash handling.

Coming and going: Paper Excellence, the privately held, Richmond-based owner of the former Catalyst Paper mills in B.C., has made a friendly bid to take out Montreal-headquartered Domtar Corp. (TSX:UFS), which mostly operates in the U.S. The US$3-billion offer works out to US$55.50 per Domtar share, a 37-percent premium over the last closing price before the deal was announced. Paper Excellence is controlled by Jackson Widjaja, scion of an Indonesian pulp and paper dynasty.