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Colin StewartMaple Leaf FoodsMFI.TOTOP PICKAug 17, 2016

A nice steady company for what could be a rocky market environment. The dominant company in Canada for branded protein products, pork, bacon, etc. Has gone through a massive transformation over the last 5-6 years. They’ve gone from 20 some odd manufacturing facilities, down to 6, which has helped margins increase substantially. In an enviable position with a very strong balance sheet. Sold their stake in Canada Bread a few years ago, and as a result have $300 million in cash on their balance sheet, and no debt. This gives them the ability to probably deploy $800-$900 million of capital through acquisitions, share purchases and dividend increases. If they do that, the valuation discount, versus some of its US peers, will close. This is a business that is going to continue to see margin expansion. Dividend yield of 1.6%.

Colin Stewart

Owned

Unlock Rating

$28.88

Stock price when the opinion was issued

$31.54

As of Jun 19, 2026. Market Open.

food processing

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DON'T BUY

Meat processing business that relied on M&A in the past. Experiencing additional costs with inflation etc. People trading down to lower cost proteins. Does not own shares. Plant based protein business also suffering.

BUY

Holds it in high regard. Divested and modernized. Expansion into non-meat protein. Earnings are cyclically depressed. Not a barn burner of a growth stock. GDP-esque growth rate. Put in your RRSP. Will do well in the long-term.

PAST TOP PICK

(A Top Pick Mar 17/20, Down 6%) Plant-based area has earned a lot of attention. Unfairly penalized for the slower ramp up of meat alternatives. Trades at only 7x EBITDA, without the plant-based component. If the plant-based sector was spun out, share price would easily be over $40. Be patient, a ton of value, core business is strong.

DON'T BUY

Market didn't like its earnings, and so it's down today. Stumbling. Right sector, but not producing results fast enough for investors. Took on huge debt to expand. Sometimes it's better not to buy a company at the beginning of huge capex. Stay away right now.

TOP PICK

Meat segment has been doing well. Plant segment is a new and emerging area, and is #2 in NA. Trades at a significant discount to peers. Could easily be worth more than $40 a share. Yield is 2.62%. (Analysts’ price target is $35.19)

BUY ON WEAKNESS

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The stock has shown some weakness recently, but there has been no negative news. The stock is still up year to date and ahead of the tsx average. Unlock Premium - Try 5i Free

BUY

A solid long term hold. You might need to have patience, as they are investing their cashflow into plant based alternative foods that have good long term potential. However, short-term it does not lead to the profitability investors are looking for. Long term dynamics look good once they realize their investment benefits. A defensive stock since people need to eat regardless of the pandemic.

BUY ON WEAKNESS

He has a $24.78 model price -- about 20% downward price risk. He is recommending going into the US. He would need to see a sizable pullback in price to consider buying.

COMMENT

vs. Loblaw Has exposure to commodity prices so it is a little cyclical. Loblaw is slow growth but stable. MFI is probably getting hit by the coronavirus, but investing in plant-based protein which is promising. He wants to see how this plays out before investing.

PAST TOP PICK

(A Top Pick Feb 05/19, Down 12%) It dropped this past fall over one issue. They have been aggressively expanding into plant based protein. He still holds it and thinks it is very miss-priced. He added to his position last fall. He thinks it will take time for investors to re-price this stock.

BUY

3-year hold? Pays a good yield. They're trying to grow through technology and shifting from animal protein to plant--but all this costs a lot of money. They doubled their EBITDA margins from 2006-on, but are trying to reduce those margins. With their strong brand, they could develop some fine plant-based products. A good opportunity here.

WATCH

They bought a fake meat investment. They were also hurt on the Chinese tariffs on pork and beef. Investors hopes in fake meat seem to be disappearing. Like cannabis, this is the first inning of new market forming. We just don't know who will be the winners. China has made positive moves on taking more Canadian pork.

COMMENT

IPL vs MFI? Maple Leaf foods dividend is 2.2%, well below that of IPL. He has not assessed the MFI earnings miss announced today. He would want to see how things settle out -- three days to let it rebalance. IPL had a big jump about an month ago about a potential takeout bid. IPL has a solid dividend and they are diversifying into other activities and into new pipeline projects, which should allow dividend increases. He would favour IPL.

DON'T BUY

The last number of months these food companies have been talking about plant-based proteins. Their traditional business has been under pressure for the last couple of years. It is hard to see where growth comes from. They still have an unresolved issue related to bread pricing. Short sellers are coming out against the company.

WATCH

If it breaks above $35, he would add exposure, and it should continue upward. Their recent plant-based protein announcement pushed up the stock.

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Colin StewartMaple Leaf FoodsMFI.TOTOP PICKAug 17, 2016

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