Diverse Portfolio and Strong Quarterly Results: Gendis Inc.

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Gendis, Inc
James Cohen, CEO and President, and Ernest Reinfort, CFO


WSR: Good day from Wall Street. This is Juan Costello, Senior Analyst with The Wall Street Reporter, and joining us today is James Cohen, CEO and President of Gendis, Inc. as well as Ernest Reinfort, the company’s CFO. Gendis trades on the Toronto Stock Exchange and their ticker symbol is GDS. Thanks for joining us today gentlemen.

James Cohen: Thank you.

WSR: Now getting right into it, what were some of the drivers behind your Q1 results, which saw an increase in revenue as well as net earnings?

James Cohen: Primarily it would be our real estate portfolio, which we’re happy to say is now 100% leased. The real estate market in Canada, especially Western Canada, has been very strong for the last couple of years and hasn’t felt the effects of the recession that have been felt in other markets. So, that would be primarily the reason as well as our investment in Fort Chicago Energy Partners, which is a Calgary based energy and pipeline company. Their results were also quite positive and we’re large shareholders in that so that helped as well.

WSR: Since we have Ernest on the interview, can you just briefly go over some of the numbers?

Ernest Reinfort: First quarter, our revenue for the quarter was $1.083 million compared to $945,000 for last year and some of our retail tenants actually enjoyed a prosperous year and were paying participating rents in excess of base rents, which is the primary increase year-over-year on that. Our earnings similarly jumped to $235,000 or $0.02 a share compared to $108,000 and $0.01 a share in the same quarter last year.

WSR: As mentioned you guys have a real estate portfolio, you also have an investment in Osum Oil Sands Corp. Can you talk to us a little bit about the company’s portfolio, some of your main products, and where to find them?

James Cohen: The two major investments besides the real estate we have are in Fort Chicago Energy Partners, which is also listed on the Toronto Stock Exchange, the ticker symbol is FCE.UN. It’s a large company that is actually under the radar for a lot of people, but it’s got a market cap of about $1.4 billion Canadian and they’ve got a very large investment in a pipeline that goes from Northern British Columbia down into the Chicago area moving natural gas, they’ve got an ethane gathering system in Alberta, power plants in different communities in Canada and a couple in the United States. Then we’re also investors in Osum Oil Sands Corporation, which is a start-up company based in Alberta. They have sort of a different type of technology for extracting the oil sands up in Northern Alberta and they actually have a couple of very large investors in the form of the Blackstone Group and Warburg Pinkus who have invested a very large amount of money in the company. So, we have some very good partners in that and long term, it looks like it could be a very interesting story and Gendis has a pretty good investment in it. We first invested in August of 2006 so just about four years ago.

WSR: How well positioned do you guys believe the company to be to capitalize on some of the market trends in the two sectors?

James Cohen: We’re buy and hold, we tend to hold things long term. In Fort Chicago, Gendis actually provided a lot of the seed capital back in about 1997, which helped Fort Chicago form and we’ve pretty well held on to most of our shares. We did issue a dividend to Gendis shareholders in 2001, actually twice. In 2001, we issued a dividend in the form of Fort Chicago shares to Gendis shareholders. So, if you take the price of Fort Chicago, which is roughly a little over $10 and add the price of Gendis, which is currently around $1.60, that sort of is the underlying price of what Gendis was prior to the dividend of the Fort Chicago shares that Gendis had. We kept roughly 2 million shares of Fort Chicago in Gendis and that provides good income.

WSR: What are some of the factors that makes Gendis unique from some of the other players in your sectors?

James Cohen: We’re a unique company in the sense that we’re obviously much smaller than we once were. We were a true conglomerate at one time. We had an investment, we were basically 51% owners of Sony of Canada Limited and Sony Tokyo bought back the Canadian rights from us back in 1995. We had some large investments in an oil company here in Canada, which we sold and we also had a retail chain, which we sold about six years. So, we’ve had experience for a lot of different sectors. We’ve sort of stuck to the real estate sector as well as energy investments and our goal is to slowly rebuild the investment portfolio of the company and sort of stick to what we know and we feel real estate and energy are the two areas that we have some expertise in.

WSR: Perhaps you guys can walk us through your background and experience as well as that of some of the strength of the management team over at Gendis.

James Cohen: My father who is actually also co-CEO and President of the company with me, he’s the founder of the company and he and his brothers over the years built the company up. I started working for Gendis just about 20 years ago and worked my way up through the retail stores as well as here in the head office.

Ernest Reinfort: I’m in charge of accounts and I’ve been with the company for 25 years, started as the Group Controller and progressed up to the Vice President of Finance. I’ve seen a lot of the changes the company has gone through and I think we’re well positioned to go forward on that.

WSR: What are some of the goals and milestones and objectives that the team hopes to accomplish here over the course of the next 12 months?

James Cohen: First and foremost, we’re very enthused about the investment in Osum. We want to see where that goes and it’s as I said a long-term investment. I guess several years from now, the company can go public and if that happens, Gendis would have a very good base in that company. We also look forward to continuing strong results from Fort Chicago, they’ve weathered the storm very well over the last few years and it’s a very well run company out of Calgary. We’re always looking at real estate opportunities as long as they make sense. In some of the markets, the prices are quite high and we’ve looked at some opportunities, but in the end we haven’t acted on them in the last couple of years just because the prices seemed too high.

WSR: When it comes to investors and the investment community, do you two believe that the company’s story and your upside potential is completely understood and appreciated?

James Cohen: We’ve tried to through our press releases give an indication of what we feel are some of the potential benefits to buying the stock, but we feel that the current stock price doesn’t quite accurately reflect the underlying value of our real estate portfolio. But I think as the results come out, more and more people will recognize that. From late 2008 when the market collapsed, our stock got as low as $0.54; it had been around a little over $2 and it got as low as $0.54, we’re back up to $1.60. So, I think slowly investors are realizing that there is some value and hopefully it’ll keep moving up.

WSR: What do you think that investors are missing from the Gendis story or what do you wish that they better understood, which if they did would result in a higher valuation of the stock?

James Cohen: I think probably one of the main things is our investment in Osum, it’s a private company so obviously the shares don’t trade. There is a great market for them, but it’s not a public company so that makes it a little bit tricky especially with all the new accounting rules, I guess our average cost is around $2.25 roughly. The last major raising of cash they did was actually very good timing, it was July of 2008 just before the market collapsed and they raised close to $300 million at about $10.50, but the stock doesn’t trade publicly. So, we know what we paid and the last time they raised money was significantly higher than that. So, there is some underlying value there, but it’s hard to get it recognized in our stock price. Again our real estate portfolio is very solid, we have very good tenants and I think there is some underlying value there as well.

WSR: Once again joining us today is James Cohen, CEO and President of Gendis, Inc. as well as Ernest Reinfort, the company’s Chief Financial officer. The company trades on the Toronto Stock Exchange, ticker symbol is GDS as mentioned trading at $1.60 a share, market cap is north of $22 million. Before we conclude gentlemen, just to rehash some of the key points. Why do you believe that investors should consider GDS, Gendis Inc. today?

James Cohen: I think there is underlying value in the stock and I think if investors are patient, our investment in the oil sands should provide some upside over the coming years. Canada is a very stable peaceful country and we have obviously a very close relationship with the United States and the United States needs to get their oil from a reliable stable source and we are just north of you guys. So, I think there is some good opportunities there and Gendis through its investment in Osum should be able to participate in that.

WSR: We certainly do look forward to continuing to track the company’s growth as well as report on your upcoming progress and I’d like to thank you both for taking the time to join us today and to update our investors.

James Cohen: Thank you.

Ernest Reinfort: Bye for now.

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