Bombardier (TSX:BBD) & Genworth MI Canada (TSX:MIC): Two Trending TSX Stocks

Summary

• Bombardier is selling off its aerostructures business to Spirit AeroSystems Holding for a cash consideration of US$275 million under revised deal terms.
• Brookfield, which already owns a 57 per cent stake in residential mortgage insurance company Genworth MI Canada Inc (TSX:MIC), will acquire the remaining 43 per cent stake at US$43.50 per share.
• Genworth MI Canada’s brand name changed to Sagen MI Canada from October 13, 2020.

With the economic rebound, Canadian companies are strategizing business recovery through consolidation moves, mergers and acquisitions, and selling off few of their business units to strengthen the liquidity position. Two such stocks trending on TSX on account of recent business developments are Bombardier Inc. (TSX:BBD) and Genworth MI Canada Inc. (TSX:MIC).

Bombardier Inc reported entering into an amended agreement with Spirit AeroSystems Holding, Inc on Monday. As per the revised deal, the company to sell off its aerostructures business to Spirits for a cash consideration of US$275 million as Covid-19 weighed heavily on the aerospace sector. The deal is expected to close on October 30. As this news broke out, the stock climbed up 2.3 per cent higher in midday trading yesterday.

Brookfield Business Partners L.P. (TSX:BBU.UN), that already owns a 57 per cent stake in residential mortgage insurance company Genworth MI Canada Inc (TSX:MIC), will now acquire the remaining 43 per cent and outstanding shares at US$43.50 per share. The transaction is subject to approvals and expected to close in the first half of 2021.

Let us delve deeper to understand the stock performances of Bombardier Inc. (TSX:BBD) and Genworth MI Canada Inc. (TSX:MIC) post these strategic business announcements. What can investors expect?

Bombardier Inc. (TSX: BBD.B)

Current Stock Price: C$0.33

Aviation and transportation have been worst hit sectors in the pandemic and, consequently, the Bombardier stock witnessed a steep decline of 82 per cent year-to-date.

Headquartered in Montréal, Canada, Bombardier is a manufacturer of transportation solutions ranging from business jets, commercial aircrafts to rail transportation equipment and other related services. The company has business presence in more than 25 countries in aviation and transportation business segments. The company obtained approval from European Commission regulator in July for sale of Bombardier Transportation to Alstom.

Current market capitalization of the company stands at C$702 million.

The stock holds profit-to-cash flow (P/CF) ratio of 12.4 and positive return on equity (RoE) at 32.53 per cent.

BBD FINANCIALS

Consolidated revenue of the company was down 37 per cent year-over-year (YoY) due to pandemic -related disruption at US$2.7 billion in the second quarter of 2020 (ended June 30). Last year same quarter, the revenue was US$4.31 billion. The net loss widened by 519 per cent in Q2 2020 to US$223 million from a loss of US$36 million in Q2 2019.

In Q2 2020, Bombardier posted an adjusted EBITDA loss of US$319 million as compared to adjusted EBITDA profit of US$312 million in Q2 2019. 

However, the industrial stock improved its liquidity position this quarter with approximately US$3.5 billion at the beginning of Q3 2020, which includes US$1.7billion cash on hand, US$738 million on revolving credit facility, plus the new US$1 billion senior secured credit facility on July 22, 2020.

Genworth MI Canada Inc. (TSX:MIC)

Current Stock Price:C$44.18

Genworth MI Canada, which changed its brand name to Sagen™ MI Canada from 13 October 2020, is one of the largest private sector residential mortgage insurers in Canada, operating through its subsidiary Genworth Financial Mortgage Insurance Company. As of September 30, 2020, the company had US$7.1 billion in total assets and US$3.8 billion in shareholders’ equity. The company will release its Q3 2020 financial results on November 3.

Current market capitalization of the company is C$3.81 billion and earnings-per-share (EPS) is C$4.78. The stock holds profit-to-equity (P/E) ratio of 7.40, profit-to-book (P/B) ratio of 1.049, profit-to-cash flow (P/CF) ratio of 5.20. The company offers positive return on equity (RoE) and return on assets (ROA) of 10.53 per cent and 5.87 per cent, as per data on TMX.

With the latest quarterly dividend payout of C$0.54 and currently yields 4.89 per cent. Dividend growth continues to remain positive over the last five years.

MIC FINANCIALS    

In the second quarter of 2020 (for the period ended June 30), the company reported net income of C$98 million, 11 per cent decline from C$110 million in the same period last year. Net operating income saw 16 per cent decline YoY, lower by C$19 million from C$120 million in Q2 2019 to C$101 million in Q2 2020.

The company’s investment portfolio had a market value of C$6.5 billion in Q2 2020. Its operating investment income declined by C$9 million from C$57 million in Q2 2019 to C$48 million in Q2 2020. This decline can be attributed to decrease in amount of invested assets and lower income realized from the company’s interest rate hedging program.

The expenses saw C$2 million or six per cent decline at C$32 million in Q2 2020 as compared to C$34 million in the same period last year.