Q: Just to build on the question from Allan today (Nov. 8th) and your answer, can you re-visit your most recent report on SJ and make some comments on what what might change if you were updating that report today? I consider your reports a fundamental and valuable component of your service, and when I re-read your report with the information that we now have there are few things that don’t seem to track. Based on the ratings criteria is this now a B+ (or even B) company? I know “post-mortem” is too dramatic, but maybe a report “de-brief” is in order?
5i Research Answer:
We try to not be reactionary in our ratings adjustments and SJ has historically been a very strong name that we have covered. However, this quarter did highlight some issues that could affect future growth. If utility pole demand continues to slow and the housing market continues to lag then we think a rating change could be warranted, but we will need to assess all information at the time of publishing an updated report. Additionally, the company's debt has been increasing while revenue growth has slowed. It has still historically done a good job of returning capital to shareholders and growing the bottom line while the business cash generative. We will want to give it another quarter at least before updating our opinion.