Green payoff in layoffs?

Bob Dhillon, founding chief executive of Calgary- headquartered Mainstreet Equity Corp., has some free advice for Alberta’s premier Rachel Notley.

Use the slowdown in the overall economy but particularly in the oil patch — a slowdown that’s caused many well- qualified and well- educated workers to be laid off — to kick- start a new industry based on green technology. “Tax breaks would be given to new start-ups that are focused on green technology. It has to be significant enough to start them up instantaneously,” said Dhillon, who reported his company’s annual financial statements this week.

Dhillon said the downturn and the resulting availability of a talent pool, “represents a great opportunity” for the Alberta government to take steps to transform the economy.

“With the right tax credit we can transform (the laid-off engineers) into a green revolution, green technology that would help the Alberta economy diversify away from oil and gas,” said Dhillon, who noted the process would also be helped by the availability of office space and the willingness of the province’s financial sector to match up those wanting capital with those that have it. “This is a golden opportunity,” he declared.

Back at his day job, Dhillon has been transforming Mainstreet, which specializes in offering rental accommodation in Western Canadian cities. This week it posted its fifth-consecutive year of annual double- digit growth in two key measures, funds from operations and net operating income. And for the first time it recorded more than $ 100 million in revenue from continuing operations.

“Mainstreet has established a disciplined business model as a midmarket, value- added consolidator of apartments in western Canada,” said Dhillon who will be providing at least 200 of those units, at a substantial discount, to Syrian refugees.

But Dhillon is not resting on the laurels of what Mainstreet has achieved. Indeed he sees a number of parallels with the slowdown in 200809 suggesting there may be a repeat of the playbook Mainstreet used then.

He has indicated he will continue to be active on a number of fronts, adding the company’s “substantial” liquidity (around $160 million) places it is in “a particularly favourable position to capitalize on current conditions.” When low interest rates are added to the mix, Mainstreet has access to additional capital for acquisitions.

And given that Mainstreet’s share price has tumbled — it hit a sixmonth low this week of $ 28.07, or levels not seen for about three years — he will continue to be active with the company’s normal course issuer bid that was announced last April.

Five analysts, all of whom rate it as a buy, and all of whom have written reports since Mainstreet reported its financials, follow the company. Targets range from $ 45 to $ 48, though two of the analysts, Jonathon Kelcher ( TD) and Jimmy Shan ( GMP), have lowered their targets.

Euro- Pacific’s Robert Sutherland said he was “surprised” with the strength of Mainstreet’s numbers. Sutherland, who maintained his $ 45 target, “continues to look at the Alberta and Saskatchewan markets with concern and expect those economies to be worse off in 2016,” though he thinks the numbers from Mainstreet will likely be “flattish” as opposed to “significant declines.”

But Sutherland noted that periods of general economic weakness in the West “have always been a prime period for Mainstreet to acquire assets at valuations it would not otherwise see.”