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  • kevin.grygiel kevin.grygiel May 6, 2013 11:01 AM Flag

    Fort McMurray Oil Sands Exposure

    I found this stock by running a stock screen looking for small PEG ratio stocks that were profitable. To my surprise, this stock came up - I actually know of this company through work up here in in the Fort McMurray oil sands.

    I just wanted to give a bit of background on this company to those that want it as I have actually visited a lot of their lodges and camps. A lot of them are constructed out of pre-fab trailers, but put together in such a way that walls are taken out once 50+ trailers are joined. Some have marble floors. They DO NOT look like trailers. And they are always full.

    They are located close to oil sands projects, and workers catch buses to and from the work site. They also provide meals. They are basically make shift camps/prisons/hotels, whatever you want to call them.

    This is how business is done in the oil sands. Fort McMurray is the city that is closest to the sites, but the sites are up to 3 hours away from Fort Mac. That is why these camps are necessary. They are the equivalent of small towns in the middle of nowhere. Exxon Mobile is not in the business of providing lodging to workers, but companies like HNL are.

    It is an essential part of the functioning of the oil sands. It will not go away.

    HNL is not even close to the largest lodging player up here. There are several others, and HNL would be medium sized by comparison. That means HNL can continue to grow by either organic oil sands growth, or by winning contracts and increasing market share. However, the way the oil sands work, increasing market share is not that likely. Once a camp is constructed, since the oil companies do not care about small amounts of money for such things as camps, they will tend to stay. As far as I know, there has never actually been a lodging establishment that has been torn down, because another company can do it cheaper.

    That said, HNL.TO is here to stay. Their existing business will not go away.

7.04-0.04(-0.56%)Jul 25 3:59 PMEDT

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